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Malaysia - Special considerations for short-term assignments

Special considerations for short-term assignments

Taxation of international executives

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Residency rules
Payroll considerations
Taxable income
Additional considerations

For the purposes of this publication, a short-term assignment is defined as an assignment that lasts for less than 1 year but more than 60 days. Hence, the 60 day exemption rule will not be commented on below.

Residency rules

Are there special residency considerations for short-term assignments?

In order for the short-term assignments to qualify for the double taxation treaty exemption the individual’s presence in Malaysia must be for a period or periods not exceeding in the aggregate 183 days in the calendar year/tax year or 12 months period concerned.

Payroll considerations

Are there special payroll considerations for short-term assignments?

To ensure an expatriate employee enjoy tax treaty exemption, in addition to the presence of the individual as mentioned earlier, their remuneration has to be paid by, or on behalf of, an employer who is not a resident of Malaysia and the remuneration is not borne by a permanent establishment or fixed base which the employer has in Malaysia. The local entity in Malaysia must not provide any allowance, perquisites or benefits to the individual.

Taxable income

What income will be taxed during short-term assignments? 

If the individual fulfills all the conditions as stipulated in the Article under dependent personal services of the double taxation treaty, the employment income during the short-term assignments can be considered for exemption. Otherwise, their remuneration (regardless of where it is paid) and any benefits-in-kind and accommodation provided in Malaysia would be subjected to Malaysian tax.

Additional considerations

Are there any additional considerations that should be considered before initiating a short-term assignment in Malaysia?

  • The nature of services to be provided by the employee in Malaysia and whether there is a permanent establishment risk for the overseas entity.
  • The duration of the assignment and whether it is for a fixed period or on intermittent basis for tax exemption purposes.
  • The type of work permit to apply and the validity period for tax exemption purposes.
  • The information or documents to be submitted for work permit application.

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