Taxation of international executives
Are there social security1/social insurance taxes in Malaysia? If so, what are the rates for employers and employees?
The Social Security Organization (SOCSO) is a scheme to provide certain benefits to the employees in cases of employment injury including occupational diseases and invalidity and for certain other matters in relation to the employment. Contributions are capped at the monthly wage of MYR4,000. All local employees are to contribute irrespective of their amount of wages. However, expatriate employees are excluded. The current rates of contribution vary from MYR0.10 to MYR19.75 for the employee and from MYR0.40 to MYR69.05 for the employer.2
EPF is a national social security organization operating through a provident fund scheme in Malaysia. Its primary aim is to provide retirement benefits to Malaysian employees through the management of their savings in an efficient and reliable manner.
Malaysian employees are required to be contributors to the EPF. The employee and employer’s contribution are at the rate of 11 percent and 12 percent of the employee’s wages. Non-Malaysian employees have the option of becoming members. The minimum statutory contribution by the expatriate employee and the employer will be 11 percent and MYR5 of the expatriate employee’s wages.3
The employee and employer’s contribution for employees who have attained the age of 60 years old and above (up to age of 75 years) is 5.5 percent and 6 percent of the employee’s wages. For expatriate employee, the employee’s contribution has been revised to 5.5 percent of the expatriate employee’s wages and the employer’s contribution remain the same as MYR5.
For employees earning a monthly wage not exceeding RM 5,000, the employers’ statutory contribution rate is 13 percent. Similarly, for employees who are 60 years and above and earning wages not exceeding RM 5,000, the employers’ statutory contribution rate is 6.5 percent.
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* The employer pays 1.77 percent of the employee’s monthly wages for the Employment Injury Insurance Scheme and the Invalidity Pension Scheme. An employee’s share of 0.51 percent would be paid for coverage under Invalidity Pension Scheme. The same prescribed contribution schedule provides for the amount of employee’s share up to wages which exceed MYR3,900.
Are there any gift, wealth, estate, and/or inheritance taxes in Malaysia?
No, other than real property gains tax on gains arising from disposal of real property or shares in a real property company.
Are there sales and/or value-added taxes in Malaysia?
Goods and Services Tax (“GST”) is a multi-stage tax on domestic consumption. It is charged on any taxable supply of goods and services made in the course or furtherance of business by a taxable person in Malaysia. GST at 6% is charged on all standard-rated supply of goods and services (which includes imported goods and imported services into Malaysia) other than those specifically exempted, zero-rated or given relief. The payment of taxes are levied on all stages throughout the production and distribution process and it is ultimately passed on to the final consumer.
Are there unemployment taxes in Malaysia?
Employment Insurance System (EIS)
With effect from January 2018, SOCSO implemented EIS nationwide. The EIS has two components which includes financial assistance and employment services to help workers who have lost their employment. Besides enabling laid-off employees to claim a percentage of the insured salary for a period of between three and six months, the training programmes and other components assist the laid-off employees to obtain suitable jobs and return to work as soon as possible.
All employees in the private sector aged between 18 years to 60 years old must contribute to this scheme, unless they are aged 57 years and above and no contributions have been paid before reaching 57 years.
Employees need to make a 0.2% contribution of their salary to EIS. On top of 0.2% contribution from employees, employers must also make another 0.2% contribution for each of their employees. The contributions are capped at RM7.90 each per month.
Are there additional taxes in Malaysia that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.
Not applicable for assignee.
In general, stamp duty4 is payable on instruments executed in Malaysia.
Foreigners can only buy properties in which the value is RM1,000,000 and above. There is no stamp duty exemption on the sale and purchase agreement and loan agreement.
Is there a requirement to declare/report offshore assets (e.g., foreign financial accounts, securities) to the country’s fiscal or banking authorities?
Pursuant to Income Tax (Automatic Exchange of Financial Account Information) (Amendment) Rules 2017, Malaysia has comitted to exchange information with respect to different types of accounts opened and maintained by financial institutions in Malaysia. The financial institutions are required to furnish information to the tax authorities. As such, individual tax payers should be aware that the tax authorities will receive financial information relating to bank accounts maintained overseas.
1 Employees Social Security Act, 1969.
2 Social Security Organization Act.
3 First Schedule (Section 2) and Third Schedule (Section 43) of the Employees Provident Fund Act, 1991.
4 Stamp Act, 1949.
5 Stamp Duty (Remission) (No.3) Order 2012.
6 Stamp Duty (Exemption) (No.10) (Para 3) Order 2007.
7 Stamp Duty (Remission) (No.4) Order 2012.
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