Is a TransferWise exchange a 'Remittance'?
 

Many of you are probably familiar with the online money exchange service named 'Wise'. This company was previously name 'TransferWise' but they recently dropped the 'Transfer' part of the name.
I've used them for years and found them to be 100% reliable and trouble-free. Their exchange rates beat the banks by a good margin, and they are fast. Nice simple web interface makes the process easy. I intend to continue using them.
But a thought has just struck me.
They operate by maintaining bank accounts all around the world, and when you make a transaction they don't actually 'send' money from A to B (through the SWIFT system for example), but rather they make a local transfer in the country of destination, from their local bank (in the requested local currency) to your local bank in that same country.
So - technically - it seems to me there is no actual 'remittance' involved! Lets say you want to send GBP from your UK bank account to your Malaysian bank, exchanging to Ringgit. With 'Wise' you are transferring your GBP to THEIR UK GBP bank account. They then deposit the pre-agreed amount of Ringgit from THEIR Malaysian bank account to YOUR local Malaysian account, in Ringgit.
As you can see - no money has crossed any borders! There has been no 'remittance', at least not by you!

I actually wonder if this could be the reason they dropped 'Transfer' out of their name. Technically (and practically) I see NO (cross border) TRANSFER in this transaction.

What do you think folks? Is this the answer to our tax issue?

Re: Is a TransferWise exchange a 'Remittance'?
 

Is there any reason to think that a remittance of savings or capital gains arising in a foreign country brought in via Wise or any other means would be counted as income with the new tax regime?

Re: Is a TransferWise exchange a 'Remittance'?
 

They dropped the "transfer" from their company name as they are expanding into other financial services. International money transfers was their core activity, but has meanwhile become only one of several activities. Unfortunately are those other services not yet available to customers in Malaysia.

The funds which are being transferred by them are formally not in their possession, but remain your possession. So technically speaking it is still you who is doing a remittance.

Re: Is a TransferWise exchange a 'Remittance'?
 

Maybe I haven't read the new rules closely enough yet - does it actually specify INCOME remitted, rather than ALL monies remitted?

Well they just introduced the Wise Debit Card to Malaysia this month, and that will definitely help with the spending of my foreign currency. I'm in the process of getting mine.

I'm not sure how you figure that SushiFan. Their own website blog explains the process. It's actually nothing revolutionary (in spite of their claims). It's the very same principle the Rothschilds started with and built into an international banking empire. Money was held in multiple cities in local currency. When a Rothschild client deposited in country A, an 'IOU' was sent to the partner branch in country B. That credit note was just a message, it had no actual monetary value. A highwayman might steal it from the messenger en-route, but it would be worthless to him. There was no money transferred.

When I send money to the Wise bank in Europe it IS in THEIR possession, certainly not in mine. It in fact remains in THEIR POSSESSION in Europe. I get a payment from their partner bank in Malaysia, in recognition of a deposit I made in Europe. They send an IOU message to the partner bank here to pay me the funds I am due.
It doesn't go through the normal banking system.
The only question I have is how does Wise fund the payouts in Malaysia. But that's their problem, not mine.

Re: Is a TransferWise exchange a 'Remittance'?
 

Although the initial announcement talked about all remitted monies, later clarifications specified which categories will be taxed and which not. Income (including salaries, pensions, dividends, rental income, ..) will be subject to tax, whereas savings, capital gains and some others are not.

Re: Is a TransferWise exchange a 'Remittance'?
 

I haven't had the time to check that myself, but it seems somewhat akin to the Thai Elite Visa exemption, which states that income IN THE CURRENT YEAR will be taxed (but not that of the previous year).
I'm not sure how they make the differentiation, but basically, I guess if you make no remittance in a year but save up the money money and remit in the next year it is tax free (defined as Savings)?
Could be nothing of the sort.
This has all got to be clarified.

Typical Malaysian style meantime - make pronouncements, but do no actual diligence on the details. No clarity.
Sometimes this countries Government really pisses me off.
Happy Christmas!

Re: Is a TransferWise exchange a 'Remittance'?
 

There is no way for anyone to know from what source the money is being transferred, from income or savings. E.g. there is the same system to tax the foreigners in a similar program in Malta. When we asked a tax attorney there how would a tax office know from what source a remittance comes, we were told that every year we would talk to the gov taxation office and they will determine your pay. How much have you got?
Needless to say, we didn't like it at all.

We have a debit card and we can take cash out of an ATM here without a fee. The limit is USD1K per day. Not bad.

Re: Is a TransferWise exchange a 'Remittance'?
 

As Malaysia has decided to postpone the plan to tax foreign income remitted to Malaysia by five years, we can postpone this discussion as well. :thumbsup:

Re: Is a TransferWise exchange a 'Remittance'?
 

No, you cannot.

It has happened. The order has been gazetted and all foreign-source income remitted to Malaysia that has not been taxed by the source country will now be taxed by Malaysia effective immediately.

See the other thread titled "August 2022: Malaysia now taxes foreign-sourced income not taxed at source"

In other words, it is no longer possible to live a tax-free life in Malaysia.

Re: Is a TransferWise exchange a 'Remittance'?
 

With the current weakness of the Euro against the Ringgit (down by @ 10% in the last 12 months) and a tax rate here of around 30% - it wouldn't make much sense to continue importing money into this country.
I'll be looking at moving to Thailand and just do 90 days here to keep the home taxman off my back.
As a result, 90% of all my future spending will be in Thailand. Tax free.
Cheers Malaysia!

Re: Is a TransferWise exchange a 'Remittance'?
 

I'm not sure that will work out well, tax wise. How will you avoid becoming tax resident in Thailand if you spend the majority of the year there? It is possible to be tax resident in two countries at the same time: https://www.litrg.org.uk/tax-guides/...dual-residence
Just pointing to the fact that you are tax resident in Malaysia will not get the Thai taxman off your back!

Re: Is a TransferWise exchange a 'Remittance'?
 

I looked into this back in October last year when they first threatened this tax change in Malaysia. The Thai Elite Visa had tax benefits and exemptions which were a good solution for me and I was preparing to avail of it when Malaysia declared their changes were being deferred.
If nothing has been altered I'll be interested again. Check it out for yourself.

Re: Is a TransferWise exchange a 'Remittance'?
 

Hi All, No activity on this thread since last August. I'll update it with my latest news.
Last year I was planning to apply for the Thai Elite Visa as a second option if I had to abandon Malaysia because of this Tax on Remittances imposition. Around that time Thailand introduced a new Visa program called the 'Long Term Resident' (LTR) Visa. The 'Wealthy Pensioner' version of it was ideal for my circumstances and application was practically free. I applied and got it in about 6 weeks. Pretty stress free process with a nice easy to use website. With that in the back pocket I turned my attention back to the Malaysian tax issue.
First I talked to one of the big global accountancy firms here, but they seemed clueless about the nitty gritty of it and just wanted to charge me for things I already do for myself (like obtaining the annual tax residency cert). They stopped responding to emails when I told them I don't need that service and just need the basic facts of the remittance reporting system. (As an aside, this is a trend I notice quite a bit here lately, how vendors and service providors lose interest and just cut off comms when they don't get full acquiesence from a customer or client - it's pathetically unprofessional. If you don't want business just say so - don't slink away like a spoilt child). During the few exchanges I had with the 'tax advisors' it seemed plain that they themselves really weren't sure about the new system, or how it would work.

In January I commenced my own application for the annual Tax Residency Cert. Normally I have to photocopy every page in my passport, fill in a couple of forms, then present them in person at my local tax office. When I emailed my contact there they told me it's all done online now and sent me a link. The webform was clunky and not pretty to look at, and I had trouble getting it to recognise my TIN. But after a day or two of playing around I got in and completed the application. Submitted that, and a week later got my Cert. Well done to LHDN for upgrading the service (no more full passport photocopies either).

Having obtained the cert I again emailed my LHDN contact and asked about their procedure for reporting remittances. No reply. I really suspected they don't know the system either, it's so new.

Last week I just walked into the LHDN office and started hunting for the info. They were actually quite helpful and directed me to a lady who honestly admitted she didn't have answers because the whole thing is so new, but she made a lengthy phonecall and came back to me with much of the info I needed. There is a section on the LHDN website where you can download a form - this year it's the BE 2022 Form, and there's a long list of 'tick boxes' where you can nominate the type of report you wish to make, and a blank beside it for inserting a figure. I haven't remitted anything in 2022 and she told me I do not have to file a 'zero remittance' form. She discussed with me about remitting foreign savings, and the angle there is your saved money must have been previously taxed at source at a minimum of 15% before remitting to Malaysia. If your country of source has a Dual Tax Agreement (DTA) with Malaysia then you probably won't be taxed on such remittances. I say 'probably' because there still seems to be uncertainty about that and you'll need good documentation showing the tax you paid before they'll exempt it.
I suggested to the lady that this seems like a massive and onerous new task for LHDN, checking all remittances no matter how trivial. She smiled and said - 'we won't be digging into every remittance'. OK I said, it would only be selected 'audits'? Yes she said.

So there you have it. It's basically self-declaration, and only if you attract attention will you run into trouble.
However, this whole can of worms is just starting to open, so you can expect further surprises in the months and years ahead.

Meanwhile Thailand is NOT taxing remittances to LTR Visa holders.

Re: Is a TransferWise exchange a 'Remittance'?
 

Thanks for the interesting write-up of your experiences in Thailand and at the LHDN. But something is really puzzling me: Even remitted savings are now taxable in Malaysia?? I thought the new statute only applies to income remitted to Malaysia? What the tax office lady said doesn't make sense. Savings abroad may have accrued from several sources that are non-taxable, such as personal gifts, inheritance, capital gains from long-term holdings etc. If those monies are not taxable back in the home country, and not taxable if they had arisen in Malaysia, why should they be taxable simply because they have crossed the border?

Re: Is a TransferWise exchange a 'Remittance'?
 

See https://britishexpats.com/forum/reti.../#post13177594
That post contains the latest official documents and guidelines for the new tax on foreign income payable from tax year 2022.
There is no mention that I can find that foreign savings or capital gains brought into Malaysia are taxable, only income.