Taxation of international executives
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-month period concerned.
Are there special payroll considerations for short-term assignments?
To ensure an individual enjoys 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.
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, the entire remuneration (regardless of where it is paid) and any benefits-in-kind and accommodation provided in Malaysia would be subjected to Malaysian tax.
Are there any additional considerations that should be considered before initiating a short- term assignment in Malaysia?
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All information contained in this publication is summarized by KPMG Tax Services Sdn Bhd., the Malaysian member firm member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Malaysian Income Tax Act, 1967 (the Act); Section 28, Schedule 6 of the Act., Schedule 1 of the Act, Section 21, Schedule 6 of the Act., Schedule 1 (Section 6) of the Act., Sections 7(1)(a) to 7(1)(d), Sections 13 of the Act., Employees Social Security Act, 1969. 2 Employees Provident Fund Act, 1991, and the Stamp Act, 1949.
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