stepen

However you could already get tax residency certificate after staying 90 days in Malaysia previously (from the 4th year of staying 90 days)

Flyguy

Yeah, there's an option to completely miss a year in the Tax Regs, but if they apply the 'new' 90 Day Residency Requirement retrospectively to ALL MM2H'ers (as they have said they'll do) then you need the 90 days per year anyhow. No problem - gets me out of the northern winter.

As I said - why would I pay 1st World Tax Rates to live in a 3rd World nation - and get NOTHING for it?
In Europe, if I'm taxed, at least I can get nearly free healthcare, nearly free university education for my kids, a social welfare system and support - and a VOTE.
It would be utter madness for Malaysia to suggest taxing me at local income tax rates (28% ?) but giving me nothing in return. Except the right to exist here??
I'm not that stuck. I have other places to go.
If they put a 5% tax on remittances I might just swallow that, for the sake of convenience. But anything higher - then I'm reviewing the situation.

RedApe

Becoming a "Tax Resident" requires 182 days (not 90). You become subject to taxation after being employed in Malaysia after 60 days, though.

Gaining "Tax Residency" status allows the individual to be taxed at the graduated income rates.
0-5000Rp Tax 0 RP on first 5000Rp;
5001-20,000Rp. (1% on the amount 5001-20,000Rp). Tax = 0-150 Rp.
20,001-35,000 Rp. (3% on the amount 20,001-35,000 Rp.). Tax = 150-450Rp.
35,001-50,000 Rp. (8% on the amount 35,001-50,000 Rp.). Tax = 600-1200 Rp.
50,001-70,000 Rp. (14% on the amount 50,001-70,000 Rp.). Tax = 1800-2,800 Rp.
.....and so on....
1,000,001-2,000,000 Rp. (28% on the amount 1million-2 million Rp.). Tax = 237,650 Rp.-280,000Rp.
Exceeding 2 million Rp. (30% on income over Rp. 2 million). Tax = Rp. 517,650 and up.
https://www.hasil.gov.my/bt_goindex....sequ=11&cariw=
***********
Non-Tax Residents are taxed at the following rates for the following sources of Income
The FLAT RATES (either 30%, 15% or 10%) rates from those who are here 60 days -181 days WAS restricted to taxable income gained in Malaysia.

"You are non-resident under Malaysian tax law if you stay less than 182 days in Malaysia in a year, regardless of your citizenship or nationality.
Non-resident individual is taxed at a different tax rate on income earned/received from Malaysia."

Employment (e.g. salary, stipend, etc.), Business, trade, or Profession, Dividends, Rents. ~Taxed at 30% with effect of tax year 2020
Public Entertainer, Interest ~ 15%
Royalties ~ 10%
Rents or other payments for use of any moveable property ~ 10%
Payments for technical advice, assistance, or services rendered in connection w/ technical management or administration of any scientific, industrial, or commercial undertaking, venture, project, or scheme ~ 10%

You will not be taxable if :
~You are employed in Malaysia for less than 60 days
~Employed aboard a Malaysian ship
~Age > 55 years old and receiving pension from Malaysian employment
~Receiving interest from banks
~Receiving tax exempt dividends
*************

I honestly do not know how they will apply and assess income earned abroad during a tax year...and how it will be taxed if remitted to a Malaysian Bank. If I transfer $10,000 from a US account of $100,000 how would they determine what are earnings vs. non-earnings during THAT tax year as it is admixed with previous earnings. If I have no earnings from the above then how would they know this? If I had $200 from royalties or consulting in another country and remitted that $10K but maintain $80K in my account did the $200 get placed in the home account or was it part of the transferred amount?

And if I get a government pension from abroad is that the same as a Malaysian government pension?

https://www.hasil.gov.my/bt_goindex....it=1&bt_sequ=1

stepen

You also become tax resident after spending 90 days yearly from the 4th year on.

Flyguy

The way I got Tax Residency was I came down and spent 182 days in country in my first year. According to Section 7 of the Income Tax Act (1967) - an individual is deemed Tax Resident if he spends 182 days in Malaysia in any Tax Year.
After that I spent a lot f time outside, but always made sure I did 90 days every year in Malaysia. That MAINTAINED my Tax Resident status.
That crucial sentence in the rules gives Tax Residence to anyone who has spent their first 182 day period in country, and it is maintained by just spending 90 days in country after that.
Furthermore, if you don't spend a single day in Malaysia in a given year, but were Tax Resident for the 3 previous years - you are still deemed Tax Resident, as long as you spend enough time in country the following year to earn residency again. That's a handy ace in the hole.

Of course all this becomes moot if they start taxing income derived overseas!

At some point you then have to ask yourself - what's the actual point of MM2H? What are the Benefits?
The Tax Free car thing was always of limited benefit - and I think it's gone now, am I right?
The 10 year Visa - maybe only 5 now, and so what about it anyway? You can do Visa runs every 3 months and be fine.
The Tax Benefit was the biggy - and now it's going.
I don't see the point anymore.

Another solution may be to set up a Labuan Company, gain Tax Residency through that, and pay 3% tax on 'earnings'.

stepen

You get tax residence from the 4th year on by spending 90 days a year:
https://phl.hasil.gov.my/pdf/pdfam/individual.pdf

Flyguy

You can do either.
I used the 182/90 day method. It worked best for me because it was quicker - one year to qualify instead of four.

Just realised though - the Global Minimum 15% tax rate should theoretically apply in Labuan too?
That'll kill that place!

RedApe

I think that with all the tax treaties and work-arounds it'll likely not have much of an impact even if it does apply to MM2H holders.

The one concern is if the don't distinguish between foreign assets and income....A Savings account is an asset, accrued over decades. Ditto with many stock accounts. Transfering money from that account into a Fixed Account or to buy property is NOT "Income". Suggest that folks get a end of fiscal year bank statement showing their financial condition as of December 31, 2021.

The other issue is "remission". Money from that Savings account into a Malaysian account, again, is NOT income. So taxing a Fixed Account submission like it was a salary remission is absurd.

I don't know how they will monitor this? Will they expect us to submit our homeland Inland Revenue data to them? Will they look at our MM2H applications to see what we claimed as our sources of income and assets? [BTW S-MM2H doesn't require a "proof of liquid assets...and most people don't put down their stocks, bonds and property as these are illiquid assets acc. to MM2H]. There are many ways of remitting money without it going through the a personal account Malaysian banking system (ATM debit or credit card)...direct payment to landlord, hospital, etc through Wise.

It's important to dispel the myth that one only will be subject to Malaysian income tax if you are a tax resident though. A lot of people think that you are exempt until you reach 182 days. They don't realize that tax residency is actually a benefit...lower tax schedule than the flat 30% and a slew of personal and other exemptions (computer, books, mobile phone, etc.)

Pension is exempted under the current law if one is over 55 and the pension is "approved by the government under any law". So will that exemption extend to foreign pensions?

SushiFan

Correct. The "tax free car" thing was abolished a couple of years ago.

SushiFan

Only if Labuan decides that it wants to participate in this initiative.

stepen

Note that it says received in Malaysia, and not remitted to Malaysia.

RedApe

I'd like to see your MM2H Letter. Mine says nothing of the sort. There may be some promotional material that stated this...or an agent. It would be helpful if there was a provision published in either the old program benefits or by HASIL that defines the status of MM2H as not being taxed on their foreign income/pensions.

RedApe

That depends on what the official rules say and not some news article covering the Budget session.

https://thailand.acclime.com/guides/...oreign-income/

Thai tax code seems to distib=nguish foreign income from when it is remitted into Thailand. If remitted within the year of the income being earned is taxable. But not if remitted the following year.

Flyguy

Hmmm...well yes, I'd have to look to see if it was written in the approval letter - but the fact is that this is exactly what they've done since I claimed tax residency here. They have never taken a cent off me in tax. Not only that, my accountant back home was chuffed when he read the rules for MM2H because he pointed specifically to the word ASSESSED as being crucial. He told me that my home tax authorities would have baulked at the notion of me simply being 'exempted' from tax in Malaysia, and that being ASSESSED was a lifesaver. The fact that I would be assessed at ZERO rate was immaterial - my home taxman is stymied by that single word.

Do 'they' have any choice? Labuan is part of the Federation. If the Federal Government passes a Law that the minimum Corporate Tax Rate in Malaysia is to be 15% - how does Labuan wriggle out of it? And surely that's the whole point of this international agreement? To put a stop to tax havens!

stepen

I think you misunderstand how the 15% minimum tax will work. Countries can still set the rate they want. However if say Starbucks Germany buys 1bn worth of beans from Starbucks labuan, and the labuan company have a say 900m profit from this sale, which suffers only 3% tax, then Germany can tax another 12% of those 900m from the German entity.

This only affects multinationals with high revenue.

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