Flyguy

Update to the above; I've never heard of that ruling mentioned by RedApe before, so went Googling.

The PWC website says the following:

"Income Exempt From Tax: Pensions, which is derived from an employment exercised in Malaysia where the recipient has reached the age of 55, or the compulsory retirement age or retire due to ill health."

https://www.pwc.com/my/en/publicatio...-from-tax.html

So the exemption only applies to Pensions received from WITHIN Malaysia.
No other exemption for Pensions is mentioned, and the page has the update on Remittances now being taxable (under Foreign Income).

Here is a link to the best description I've read yet about this ruling and its impact. Read it and weep:
https://www.crowe.com/my/insights/ta...sourced-income

Pilki

Actually, Flyguy your link https://www.crowe.com/my/insights/ta...sourced-income contains some very good news (if it is to be believed), I quote:-

Due to concerns raised by various parties on the possible ramifications of removing the exemption for FSI remitted to Malaysia, the Ministry of Finance (“MoF”) had, on 30 December 2021, announced that this exemption from income tax will be given, by concession, for a period of five (5) years from 1 January 2022 to 31 December 2026 on certain categories of FSI received by the following groups of tax residents:

• Individuals – All categories of foreign sourced income are exempted.
• Companies – Foreign sourced dividend income is exempted.

The MoF is expected to give effect to the above income tax exemption vide the issuance of a Ministerial exemption order in due course. It is noted that the above income tax exemption will be subject to a set of eligibility requirements which will be detailed out in the guidelines to be issued by the Inland Revenue Board of Malaysia (“IRBM”).

The concern is that this opinion was written on 7th April 2022 whereas the new rules were gazetted on 19 July 2022. Is there still going to be a Ministerial exemption order, as suggested, or does the tax guidance take this into account. It really is a most unsatisfactory state of affairs.

SushiFan

Today PwC Malaysia issued an update and further clarification on the new tax rules in Malaysia: https://www.pwc.com/my/en/publicatio...y-issue19.html
I'm not sure if this really clarifies anything though.

Pilki

I think this provides much more clarification, thank you SushiFan !

Flyguy

Pilki, I think you're referring to the following quote from the article above: "Individuals – All categories of foreign sourced income are exempted.".
But unfortunately that isn't the whole story. Elsewhere it explains that the individuals FSI must have been subject to Tax in the source country to qualify for that relief in Malaysia. The PWC update that Sushifan posted goes into a lot more detail about that, including clarification of the foreign Tax Rate that they'll accept here when judging if the remittance qualifies.It's 15% according to that document.

There's one quote in the Sushifan document that makes me wonder though - on Pg 6 it says:
(b) no foreign tax is paid or payable by reason of:

● Taxation system of the source (foreign) jurisdiction. (and goes on to give the example of Brunei, exempted as a tax free State).

So - if a foreign country has a Dual Tax Agreement (DTA) with Malaysia, and under the terms of that DTA your Pension is not taxable in that jurisdiction (because you are not tax resident there) then isn't that a loophole allowing tax free remittance? Probably they'd argue that one, but it could be an interesting angle to pursue.

I actually had a phone chat today with the chap from Crowe's who wrote that guide. He confirmed that a lot remains to be clarified by the Malaysian Gov, some of it has been in fact clarified by that new PWC doc. But as regards things like 'how to report remittances' when current tax returns forms don't include such fields - he said they are coming, in time for the next tax year filings.
It could be next year before we get to see how they really will apply and assess these new rules, so there's no rush. But Crowe's chap did confirm that I'll be having to file a Tax Return from now on, deadline April 1st.

PS Still reading through that PWC Document.
On Pg8 it defines Remittances.
Meaning of “income received in Malaysia from outside Malaysia”
Received in Malaysia means transferred or brought into Malaysia through either the following:
Cash
● Bank notes
● Coins
● Cheques
Electronic funds
transfer (EFT)
● Bank transfer (e.g. credit / debit transfer)
● Payment card (debit card, credit card and charge card)
● Electronic money (e-money)
● Privately-issued digital asset (e.g. crypto-assets, stablecoins)
● Central bank digital currency

So they even closed off the angle of using your foreign funded/settled C Card for purchases in Malaysia.
Nasty.

Epicurious

Good info above, but it's a great shame that it's been posted in a thread with a different subject. MODS, could you please move post #10 onwards into the correct thread: August 2022: Malaysia now taxes foreign-sourced income not taxed at source

SushiFan

I second this. The thread has gradually deviated from its title, and moved to a subject which was already covered, albeit under another title.
The reason why I posted my message yesterday in this thread is because this seems to be the active thread, whereas the other thread seems dormant.

Pilki

Yes - could ADMIN please sort this thread out? Thank you.

Pilki

The scales are gradually falling from my eyes on this thanks mainly to the PWC article.

The 15% foreign tax rate you mention doesn't mean that you have to have paid 15% on your income since it may be that this income was below the tax theshold in the source country, a point which is highlighted on page 5.

As regards pensions, most DTAs provide that any government pension (and sometimes even private pensions) are taxed exclusively in the source country. Often the source countries have their own tax exemption on pensions.

It's worrying that there are tax consultants who are completely unaware of these changes, I just hope they would make themselves aware before advising a client.

As regards "closing off" the foreign funded/settled credit card loophole, I suggested this because it is not "discoverable" by Inland Revenue - it is still income, however.

christmasoompa

Will do. For future ref, please use the 'report' button, we aren't likely to see the request otherwise. I'll sort it now.

HTH.

SushiFan

Thank you for your help in moving these messages to the appropriate thread.

Epicurious

It's official, the tax return document for last year BE 2022 makes it very clear that foreign income remitted to Malaysia by tax resident individuals is taxable if not already taxed in the country of origin. See the explanatory notes for filling out BE 2022:
Explanatory Notes BE 2022
Quoting from Part E:
And here is the document LHDN.AG.600-1/7/3 (dated 29th December 2022, so I think we can assume it is the latest version): TAX TREATMENT IN RELATION TO INCOME RECEIVED FROM ABROAD (AMENDMENT)

Some good news: if the income was tax exempt in your home country, it is not taxable in Malaysia. That is my interpretation of the guidelines, DYOR.

Flyguy

Sorry folks for posting my last report in the 'Wise' thread, but I guess you read it.

That BE 2022 'Explanatory Note' posted by Epicurious is a great reference, thanks.

I'm going to quote some of the comments replying to my post on the Wise thread yesterday. I hope this doesn't create more confusion!

OK, but aren't savings most likely to have come from taxed income? If the income was untaxed, or the savings came from some other (untaxed) source wouldn't they be taxable on remittance? (Unless there's a home exemption).

I agree with that, but in my own case the thought arises - if I have been in salaried employment for a year in (lets say) Singapore, and I was holding the equivalent amount of my earned (and taxed) Singapore salary in savings accounts elsewhere (say, the UK) and I now want to remit all those UK savings to Malaysia, and I have Singapore tax documents showing I paid tax on that amount of income in Singapore, can I remit the UK savings money tax free into Malaysia?
If I had partied like mad during my year in Singapore and spent every penny I earned there, but still have the full salary equivalent held in savings in the UK, how would LHDN determine WHERE I got the money I'm remitting? Of course I'd send my UK savings to Singapore first, then transfer in to Malaysia. But since I paid tax in Singapore on that amount of money, do LHDN care if I'm not remitting the ACTUAL species I received in salary in Singapore?
I know this sounds vaguely dodgy, but if I was working in 'Singapore' and moved money in and out, back and forth, between currencies, between investment vehicles between banks - what kind of a complicated mess is that going to be to untangle!

Epicurious

I'm not sure this is an adequate response to your post, FlyGuy, but LHDN.AG.600-1/7/3 makes it very clear that if income is not taxable in your home country, or wherever it was earned, for whatever reason, then it's not taxable in Malaysia. See Example 6.

And I have to hammer the point that savings held in bank savings accounts are not income, though they may have been partly or wholly accrued from income (usually taxed) and potentially dozens of other sources both taxable and non-taxable, possibly over many decades. No one keeps receipts or payslips for decades and it would be impossible to untangle the sources of such funds and the tax rates they were subjected to originally. Utterly unworkable and unreasonable.

The bank interest on those savings is income, but not the savings themselves. If your home country taxes the savings themselves, then that would usually be called a wealth tax and such taxes tend to have quite high thresholds before they become payable.

LHDN would be living in Humpty Dumpty land if they tried to assert that long term savings from any and all sources become income purely because the funds crossed an international border. If your tax advisor is saying that is the case, I suggest you engage another advisor. Form BE 2022 and the documents I linked to in my previous post have a list of types of income to be reported; nowhere is the word 'savings' mentioned.

stepen

[QUOTE=Epicurious;13177774if income is not taxable in your home country, or wherever it was earned, for whatever reason, then it's not taxable in Malaysia. See Example 6.
[/QUOTE]
So it means that if income that's taxable in another country (for example salary income) but is not taxed, eg because you live in Malaysia and use a tax treaty to avoid paying income tax in that country, then this income is taxable in Malaysia?
But any other reason it's not taxed then it's not taxable in Malaysia?
How about a country that doesn't tax the salary of non resident, would that be taxable in Malaysia? This income is also not taxable in the source country, so also not in Malaysia?