NeonHippy

Malaysia is set to start taxing foreign income from 1st January.
https://www.malaysiakini.com/news/597210

stepen

It says received in Malaysia, so there might be workarounds.

It's the same rules as Thailand currently. Doesn't seem to be enforced very strict there.

SushiFan

I noticed that also. But not many details are published yet. I don't know how wide/narrow "foreign income" will be defined. And don't know what tax percentage will be levied.

stepen

Percentage will probably be the same as domestic income.

RedApe

This not only hammers MM2H (but if retirement income is waived fewer) but also many Malaysians who work or who have invested abroad. There are definitely myriad questions.

What is defined as income? Salary, rental income, capital gains?

Are already taxed savings that are transferred to a Malaysian bank "income"? You earned this years ago and paid taxes on it then. It's merely being transfered into Malaysia.

Is bank interest earned abroad taxed? It's not in Malaysia, so if you remit that in Malaysia is it taxable?

Pensions are not generally taxable in Malaysia from Malaysian government or most businesses...so are they taxable when the come from abroad?

Is income taxed already in the source country waived? This would be double taxation. What about the tax treaties that have been negotiated? Is Malaysia recanting those?

stepen

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The definition of income is probably the same as for domestic income. This is how it works in most other countries. The exception with this new rule is that only income received in Malaysia will be taxable.
A bank transfer is not income. Salary is income, as well as interest, royalties and dividends. However dividends are not taxed in Malaysia. Capital gains are not taxed in Malaysia.
Rental income that are paid into a Malaysia bank account could be taxable, however most tax treaties will say that this should only be taxed in the country where the property is.

This change will affect businesses that receive foreign source royalties and interest. And individuals that works offshore and receive a salary paid to their Malaysian Bank account, that has previously not been taxed in Malaysia.

We will see further clarification about the received in Malaysia condition. Maybe it will be similar to in Thailand where they say its taxable only if transferred to Thailand during the same year that it's earned.

SushiFan

Fixed that for you. There is political discussion ongoing to start taxing capital gains.

stepen

The foreign income tax is probably because of EU pressure. And because of the "received in Malaysia" condition it might not make much difference for most.

https://www.malaymail.com/amp/news/m...h-list/2011787

RedApe

So do you think that by remitting the income in the Home (or working) country and then transferring it by the bank-bank or third party (Wise) system it will essentially not be recorded as "income received/remitted"?

stepen

Would have to wait for further details to determine that. However in other countries that has this rules, like UK (for non domiciled), Malta etc, it would be taxable if you transfer it yourself from another account.
I believe the same in Thailand, however there it's only if transferred the same year as earned.

Flyguy

I'll lay a pound to a penny that ALL your remitted income (from ANY source) will be taxed in Malaysia. Why? Because they don't have the will or the whit to differentiate. It's too complicated.
However I do really doubt it will be at local income tax rates (at least initially). They may feel obliged to be seen to 'do the right thing' internationally given the push is on to tax everybody everywhere (vis the new global standard for corporate taxation proposals), but equally I'm sure they see the damage this could do if they go overboard. I think the absolute tops will be 15% (the proposed global corporate tax minimum), but starting out at nearer to 5% for individuals. I'm sure it would later creep up, as all such taxes do.

The other angle here is - What Do You Get For Your Money? It's a pretty universal understanding that your Taxation gives you some benefits. Like - Social Services, Free Education, Free Healthcare, and (errrrm) a VOTE!

No Taxation Without Representation!!

stepen

You don't pay tax on all local transfers you receive today, same principle with foreign transfers. Almost all countries in the world taxes foreign income, so it's not like it's very unusual that Malaysia are implementing it now.

Having another rate rate for foreign company could possible get them in more trouble with the EU and OECD grey lists, so I don't think that there will be another tax rate for foreign income.

Flyguy

Don’t get what you mean by that.

The MM2H Visa specifically states an assessed tax rate of ZERO on foreign remittances. That’s what I signed up to. That’s my reason for staying here in spite of the growing nastiness I’m trying to ignore. Other countries do other things - so what? This country made a deal with me and yet again they’re trying to go back on it.

Nope. Ireland maintained a 12% corporate tax rate for decades while the EU standard was 20%, and besides some occasional moaning the EU did nothing about it. Equally, the EU dictates that tariffs must not exist between member states, but Ireland continued to apply a crippling VRT on car imports from the rest of the EU. The EU did …..drum roll……NOTHING!
Yes I’m a cynic when it comes to ‘International Rules’ on tax. They are ignored all the time. Check out airline subsidy rules in the EU too. Good for a laugh. It’s all just window dressing.

oh, and Malaysia refused to sign ICERD - the International Commitment to Eliminate Racial Discrimination. Do you really think they give a damn what the rest of the world thinks of them? Not a lot I’d say.

Flyguy

My solution to avoid paying tax on remittances - get a foreign credit card and pay for everything with it. Pay the bill with your overseas cash.
Just be smart about the card charges and exchange rates.

Flyguy

There's another solution to this ruling - if it is actually applied to individual MM2H holders. It now becomes more attractive (potentially - and depending on personal circumstances) to come to Malaysia for just 90 days per year, and that gets you your Malaysian Tax Residency and complies with the new Minimum Stay regulation. You then have the benefit of Tax Residency in Malaysia to shelter your home country income (pension?) from home country taxation, and you only need to arrange cash/credit card spending to tide you over the 90 days in Malaysia.
Then you bugger off out of here, to wherever you fancy living - tax free, thanks to Malaysia.
The snag for Malaysia is - they get NOTHING. HaHa.
I certainly will never go ahead with any large capital expenditures here again (Cars, Apartments etc) if they aim to TAX every cent I remit to pay for it all. They'll have lost all my cash investments.
See - this is how stupid rules backfire.
Why pay 1st World Tax rates to live in a 3rd World country? That's just dumb.