ey.com/globaltaxguides
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EY Street address: Mail address: Level 23A, Menara Milenium P.O. Box 11040 Pusat Bandar Damansara 50734 Kuala Lumpur 50490 Kuala Lumpur Malaysia Malaysia
Executive contacts
Lay Keng Tan +60 (3) 7495-8283
Fax: +60 (3) 2095-7043 Email: lay-keng.tan@my.ey.com
Irene Ang +60 (3) 7495-8306
Fax: +60 (3) 2095-7043 Email: irene.ang@my.ey.com
Christopher Lim
Immigration contacts
+60 (3) 7495-8378
Fax: +60 (3) 2095-7043 Email: christopher.lim@my.ey.com
Christopher Lim +60 (3) 7495-8378
Fax: +60 (3) 2095-7043 Email: christopher.lim@my.ey.com
Eunice Look +60 (3) 7495-8225
Fax: +60 (3) 2095-7043 Email: eunice.look@my.ey.com
Private Client Services contacts
Bernard Yap
+60 (3) 7495-8291
Fax: +60 (3) 2095-7043 Email: bernard.yap@my.ey.com
Chow Yang Wong +60 (3) 7495-8349
Fax: +60 (3) 2095-7043 Email: chow-yang.wong@my.ey.com
A. Income tax
Who is liable. Residents and nonresidents are subject to tax on Malaysian-source income only.
Individuals are considered resident in any of the following circumstances:
• They are physically present in Malaysia for 182 days or more during the calendar year.
• They are physically present in Malaysia for less than 182 days during the calendar year, but are physically present in Malaysia for at least 182 consecutive days in the second half of the imme diate preceding calendar year or in the first half of the immedi ate following calendar year. Periods of temporary absence are considered part of a period of consecutive presence if the absence is related to the individual’s service in Malaysia, per sonal illness, illness of an immediate family member or social visits not exceeding 14 days.
• They are present in Malaysia during the calendar year for at least 90 days and have been resident or present in Malaysia for at least 90 days in any three of the four preceding years.
• They have been resident for the three preceding calendar years and will be resident in the following calendar year. This is the only case in which an individual may qualify as a resident even though he or she is not physically present in Malaysia during a particular calendar year.
For the purposes of determining residence, presence during part of a day is counted as a whole day.
Exceptions apply for COVID-19 pandemic-related situations for which travel restrictions were imposed.
Income subject to tax. The taxation of various types of income is described below.
Employment income. Gross income from employment includes wages, salary, remuneration, leave pay, fees, commissions, bonus es, gratuities, perquisites or allowances (in money or otherwise) arising from employment. An individual employed in Malaysia is subject to tax on income arising from Malaysia, regardless of where the employment contract is signed or the remuneration is paid. Gross income also includes income for any period of leave attributable to employment in Malaysia and income for any period during which the employee performs duties outside Malaysia incidental to the employment in Malaysia.
Education allowances provided by employers to their employees’ children are taxable for income tax purposes.
Employee benefits and amenities not convertible into money are included in employment income. The cost of leave passages for an employee and the employee’s immediate family are also tax able, but the following items are exempt:
• Leave passage within Malaysia, up to three times in a calendar year
• One leave passage in a calendar year from Malaysia to any place outside Malaysia, up to a maximum of MYR3,000
Certain allowances, perquisites and benefits-in-kind are exempt from tax, including, among others, the following:
• Petrol/traveling allowances with respect to travel for official duties, up to MYR6,000 a year
• Meal allowances
• Parking
• Telephone, including mobile phone (effective from 1 July 2020, expanded to include mobile phones, notebooks or tablets, up to MYR5,000)
• Allowances or subsidies for childcare, up to MYR2,400 a year
• Medical benefits (including maternity expenses and traditional medicines such as Ayurvedic medicine and acupuncture) and dental benefits
The above list is not exhaustive and some other tax-exempt ben efits may apply if certain circumstances exist or if certain conditions are met.
The cost of moving expenses, approved pension contributions, and the cost of any medical or dental treatment borne by an employer are not taxable to an employee.
Short-term visitors to Malaysia enjoy a tax exemption on income derived from employment in Malaysia if their employment does not exceed any of the following periods:
• A period totaling 60 days in a calendar year
• A continuous period or periods totaling 60 days spanning 2 calendar years
• A continuous period spanning two calendar years, plus other periods in either of the calendar years, totaling 60 days
Non-citizen individuals working in Operational Headquarters (OHQs), Regional Offices, International Procurement Centres (IPCs) and Regional Distribution Centres (RDCs) are taxed only on that portion of income attributable to the number of days that they were in Malaysia until the expiration of the incentive (generally 10 years) granted by the Malaysian Investment Development Authority. The incentive is granted to the company and begins with the year of assessment stipulated in the approval letter issued by the Malaysian Investment Development Authority.
Effective 1 May 2015, the new Principal Hub incentive scheme has been implemented to replace these OHQ, IPC and RDC incentives. This new scheme allows multinational companies to enjoy several benefits including hiring expatriates based on their business requirements.
Self-employment and business income. All profits accruing in Malaysia are subject to tax. Remittances of foreign-source income into Malaysia by tax residents of Malaysia are not subject to Malaysian income tax.
Income from any business source is subject to tax. A business includes a profession, a vocation or a trade, as well as any associ ated manufacture, venture or concern.
Contract payments to nonresident contractors are subject to a total withholding tax of 13% (10% for tax payable by the nonresident contractor and 3% for tax payable by the contractor’s employees).
Income derived in Malaysia by a nonresident public entertainer is subject to a final withholding tax at a rate of 15%.
Investment income. Interest income received by individuals from monies deposited in approved institutions is exempt from tax.
Withdrawals of contributions from an approved Private Retirement Scheme (PRS) by an individual before the age of 55 (other than by reason of death or permanent departure from Malaysia or for the purpose of health care or housing) are taxed at a flat rate of 8%. For other withdrawals made from 30 April 2020 to 31 December 2020, an exemption applies up to a maxi mum of MYR1,500 withdrawn from each PRS provider.
Other interest, dividends, royalties and rental income are aggre gated with other income and taxed at the rates set forth in Rates.
As a result of the introduction of the single-tier tax system, divi dends received by individuals are exempt from tax, effective from the 2008 year of assessment. For the 2018 year of assessment, a
50% exemption applied to rental income received from residen tial homes if the following conditions are met:
• Rental income does not exceed MYR2,000 per month for each residential home.
• The residential home must be rented under a legal tenancy agreement between owner and tenant.
For the 2020 and 2021 years of assessment, property owners who offer at least 30% rental discounts to small- and medium-enterprise tenants from April 2020 to June 2021 are entitled to a special deduction for the rental reduction.
Certain types of income derived in Malaysia by nonresidents are subject to final withholding tax at the following rates.
Type of income Rate (%)
Special classes of income Use of movable property 10 Technical advice, assistance or services 10 Installation services on the supply of plant, machinery and similar assets 10 Personal services associated with the use of intangible property 10 Royalties for the use or conveyance of intangible property 10 Interest 15
Directors’ fees. Directors’ fees are considered employment income; therefore, fees derived from Malaysia are taxable. Fees are deemed to be derived from Malaysia if the company is resident in Malaysia for the year of assessment. If the fees are derived from a country other than Malaysia, they are not taxed. Remittances of foreign-source income into Malaysia by tax residents of Malaysia are not subject to Malaysian income tax.
Employer-provided stock options. Tax legislation governs the taxation of employer-provided stock options. Under the tax legislation, employer-provided stock options are subject to tax as employment income. The taxable income is calculated based on the difference between the fair market value of the underlying stock at the exercise date or exercisable date, whichever is lower, and the option price. This amount is recognized at the time the option is exercised, and is taxed as current-year income (that is, it is no longer related back to the year of grant).
Capital gains. In general, capital gains are not taxable. However, gains derived from the disposal of real property located in Malaysia and gains derived from the sale of shares in closely controlled companies with substantial real property interests are subject to real property gains tax (RPGT).
Effective from 1 January 2014, capital gains derived from disposals of chargeable assets by individuals who are Malaysian citi zens and permanent residents are subject to tax at the following rates:
• 30% for a holding period up to three years
• 20% for a holding period exceeding three years and up to four years
• 15% for a holding period exceeding four years and up to five years
• 5% for a holding period exceeding five years
Malaysian citizens and permanent residents are entitled to elect a one-time RPGT exemption on the disposal of a private residence.
Effective from 1 January 2020, individuals who are not Malaysian citizens are subject to RPGT at a rate of 30% for a holding period up to five years and 10% for a holding period exceeding five years.
Deductions
Deductible expenses. Although provisions are made for the deduction of all expenditures incurred wholly and exclusively to produce income, the terms of the provisions tend to limit deduct ibility in practice. Deductions for employees usually cover specific travel and entertainment costs as well as professional subscrip tions. The cost of traveling from home to work is not deductible.
No general deduction is allowed for interest costs, but interest on borrowings used to finance the purchase of income-producing property or investments may be deducted from the income received.
Donations of cash to the government, a local authority, a social enterprise or an institution or organization approved by the tax authorities are deductible. From the 2020 year of assessment, the cap on the tax deduction for donations is 10% of aggregate income.
Personal deductions and allowances. In determining taxable income, an individual resident in Malaysia may subtract from total income the following personal deductions. These deductions are not available to nonresidents.
Type of allowance
Amount of allowance
MYR
Self 9,000
Additional relief for personal disability 6,000 Spouse (if has no source of income or is jointly assessed) 4,000
Additional relief for spouse’s disability 5,000 Child
Younger than 18 years of age or, if 18 years of age or older, receiving full-time education or serving under articles 2,000
For each child 18 years of age or older, receiving full-time tertiary education or serving under articles in or outside Malaysia 8,000
For each disabled child studying in a recognized institution of higher learning in or outside Malaysia 8,000
Disabled child (in addition to child deductions) 6,000
Medical expenses for parents
Up to 8,000 Parental care (can be shared equally with other siblings and may not exceed MYR1,500 per parent)
Up to 1,500 (An allowance can be claimed for either medical expenses for parents or parental care but not both.)
Amount of allowance
Type of allowance MYR
Purchase of basic support equipment for self, spouse, child or parent who is disabled
Study fees incurred for courses of study (including post-graduate studies) at recognized institutions or professional bodies in Malaysia for the purpose of acquiring any skill or qualification or for courses for up-skilling or self-enhancement that are recognized by the Director General of Skills Development (up to MYR1,000)
Life insurance premiums paid for self or spouse (up to MYR3,000), and provident fund contributions (up to MYR4,000)
Up to 6,000
Up to 7,000
Up to 7,000 Contribution to private retirement scheme and deferred annuity
Up to 3,000 Contribution to Social Security Organisation (SOCSO) under the Employees’ Social Security Act 1969
Medical and educational insurance premiums paid for self, spouse or child
Up to 250
Up to 3,000 Medical expenses for self, wife or child with serious disease, including fertility treatment, up to MYR1,000 for complete medical examination and up to MYR1,000 for COVID-19 screening tests and vaccination expenses for self, spouse or child
Up to 8,000 Child saving deposits, which are deposits paid into Skim Simpanan Pendidikan Nasional for children’s education
Up to 8,000 Lifestyle expenses (internet, newspapers, books, smartphones, tablets and computers, sports equipment, and gymnasium membership fees)
Up to 2,500 Special tax relief (personal computer, smartphone or tablet not being used for business purchased from 1 June 2020 to 31 December 2021)
Up to 2,500
Up to 1,000 Fees paid to childcare centers and kindergartens for children 6 years old and younger
Purchase of breastfeeding equipment
Up to 3,000 Purchase of handphones, notebooks or tablets
Up to 2,500
Qualifying domestic travel expenses
Up to 500
Up to 1,000 Purchase of sports equipment, rental and entry fees for sports facilities, and registration fees in sports competition
Business deductions. The deductions and expenditure allowable against business income are those incurred wholly and exclu sively in the production of gross income from the same source. Depreciation charged in the financial accounts is not a deductible expense. However, straight-line capital allowances based on cost may be claimed on qualifying assets used in a business. In
addition, an initial allowance of 20% of the cost of the asset is granted in the year of acquisition.
Rates. Income tax is payable on the taxable income of residents at the following graduated rates from the 2021 year of assess ment.
Taxable income Tax rate Tax due Cumulative tax due MYR % MYR MYR
First 5,000 0 0 0
Next 15,000 1 150 150
Next 15,000 3 450 600
Next 15,000 8 1,200 1,800
Next 20,000 13 2,800 4,400
Next 30,000 21 6,300 10,700
Next 150,000 24 36,000 46,700
Next 150,000 24.5 36,750 83,450
Next 200,000 25 50,000 133,450
Next 400,000 26 104,000 237,450
Next 1,000,000 28 280,000 517,450
Above 2,000,000 30 —
Nonresidents are subject to withholding taxes on certain types of income. Other income is taxed at a rate of 30%.
If a Malaysian or foreign national “knowledge worker” resides in the Iskandar Development Region and is employed in certain qualifying activities by a designated company and if his or her employment commences on or after 24 October 2009 but not later than 31 December 2015, the worker may apply to be subject to tax at a reduced rate of 15%. The employee must not have derived any employment income in Malaysia for at least three years before the date of the application.
Malaysian professionals returning from abroad to work in Malaysia would be taxed at a rate of 15% for the first five con secutive years following the professional’s return to Malaysia under the Returning Expert Programme (REP).
Employment income received by women who return to the work force after being unemployed for at least two years as of 27 October 2017 may be exempted from tax for up to 12 con secutive months. An application for the tax exemption can be submitted to Talent Corporation Malaysia Berhad from 1 January 2018 to 31 December 2023.
Preferential tax treatment at a flat rate of 15% is available for up to five non-citizens who are employed by a company and hold key positions or C-suite positions for five consecutive years. The company must be granted a relocation tax incentive under the Pelan Jana Semula Ekonomi Negara (PENJANA) initiative, while the employees must be receiving monthly salary of not less than MYR25,000 and qualify as Malaysian tax residents for the years throughout the preferential tax treatment period. Applications can be submitted to the Malaysian Investment and Development Authority from 7 November 2020 until 31 December 2021.
Separately, non-citizen resident employees in a company that car ries on a business with respect to a qualifying activity under an incentive scheme is subject to tax at a rate of not more than 20%
from the 2021 year of assessment. Qualifying activities include any high-technology activity in the manufacturing and services sector and any other activities that would benefit Malaysia’s economy.
Relief for losses. Individuals may carry forward business losses indefinitely.
B. Other taxes
Malaysia does not impose estate, gift or net worth taxes.
C. Social security
Employer and employee contributions to the SOCSO of Malaysia are compulsory for Malaysian citizens only. Various rates are specified for these contributions. Effective from 1 January 2019, employers that hire foreign workers (excluding domestic ser vants) are required to register their employees with SOCSO and contribute to the Employment Injury Scheme. The employer incurs a 1.25% charge calculated on the worker’s salary and other compensation, capped at MYR49.40 for wages exceeding MYR4,000. The contributions for a month are due by the 15th day of the following calendar month.
The Employment Injury Scheme provides protection to an employee against an accident or an occupational disease arising out of and in the course of their employment as well as accidents that occur when commuting to and from work.
Employees who are Malaysian citizens are required to contribute to the Employees’ Provident Fund (EPF). The EPF is a statutory savings scheme to provide for employees’ old-age retirement in Malaysia.
Under the Employees’ Provident Fund Act 1951, all employers and employees are required to make monthly contributions to the EPF. The statutory contribution rate is 23% or 24% of monthly wages. Employers pay at a rate of 12% if the employee’s monthly wages are above MYR5,000 per month or 13% if the employee’s monthly wages are below MYR5,000 per month. Employees contribute at a rate of 11% of monthly wages. As announced in the 2021 Malaysian Tax Budget and the Third Schedule for 2021 of the EPF Act 1991, the employee contribution rate is changed to 9% for salaries and wages from January 2021 to December 2021. For employees aged 60 years and above, employers are required to contribute at a rate of 4% of the employee’s monthly wages while no contribution is required from the employee.
Employers may increase their contributions up to 19% without restrictions by the Malaysian tax authorities, and still deduct the amounts for corporate tax purposes. Employees’ contributions are deducted at source. No ceiling applies to the amount of wages subject to EPF contributions. Non-Malaysian citizens and nonMalaysian permanent residents are not required to contribute to the EPF, but may elect to contribute to take advantage of the available tax relief.
Self-employed persons may elect to contribute to the EPF. The individual may make voluntary contributions at a fixed monthly rate of any amount from up to MYR5,000.
EPF contributions and interest credited are not subject to Malay sian tax on withdrawal. The contributions may be withdrawn by an employee on reaching 55 years of age or at an earlier time if the employee leaves Malaysia permanently with no intention of re turning. Contributions may also be withdrawn on the death of an employee or if he or she is physically or mentally incapacitated and is prevented from further employment. Employees may make partial withdrawals to purchase a house or to finance medical treatment or education, or when they attain 50 years of age. Employees may also apply for partial withdrawals to tide over the economic impact from the COVID-19 pandemic if conditions are met.
D. Tax filing and payment procedures
The year of assessment in Malaysia is the calendar year. The base year for assessing tax is the calendar year coinciding with the year of assessment. An individual carrying on a business in Malaysia is assessed tax on the business income for the calendar year coin ciding with the year of assessment, regardless of the accounting period adopted by the business.
A self-assessment system of taxation for individuals is in effect in Malaysia. Under the self-assessment system, an individual must submit his or her tax return to the tax authorities and settle any balance of tax payable by 30 April in the year following the year of assessment if he or she has employment and/or passive income only or by 30 June in the year following the year of assessment if he or she has business income. A notice of assess ment is deemed served on the submission of the tax return to the tax authorities. An appeal must be filed within 30 days from the date of the deemed notice of assessment (that is, within 30 days of the date of submission of the tax return).
An individual arriving in Malaysia who is subject to tax in the following year of assessment must notify the tax authorities of chargeability within one month after arrival. Nonresidents who are subject to final withholding taxes do not need to file tax returns unless required to do so by the tax authorities.
For employees, tax payment is made through mandatory monthly withholdings under the Monthly Tax Deduction Scheme (MTDS). All employers must deduct tax from cash remuneration, which includes wages, salaries, overtime payments, commissions, tips, allowances, bonuses and gratuities, based on tax tables provided by the Inland Revenue authorities. Effective from 1 January 2015, benefits-in-kind (BIK) and the value of living accommoda tion (VOLA) are subject to the MTDS. The date for payment of the taxes withheld to the tax authorities is the 15th day of the following calendar month. Employers must withhold tax at a rate of 30% from wages, BIK and VOLA paid to nonresident employ ees.
Effective from 2014, taxpayers have the option to treat the amount of the monthly tax deduction as the final tax paid. If they exercise this option, they are not required to submit their annual income tax returns. However, this applies only if certain condi tions are fulfilled.
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Married persons are taxed as separate individuals. Each spouse is assessed on his or her own income and is given tax relief through his or her own tax deductions and allowances. An individual may elect to have his or her income aggregated with the income of the spouse and to be jointly assessed in the spouse’s name. This elec tion enables the individual to utilize all allowances if his or her own income is insufficient to make full use of the available deductions and allowances.
E. Tax treaties
Malaysia has entered into double tax treaties with the following jurisdictions.
Albania Ireland Russian Argentina (a) Italy Federation
Australia Japan San Marino
Austria Jordan Saudi Arabia (a)
Bahrain Kazakhstan Senegal (b) Bangladesh Korea (South) Seychelles
Belgium Kuwait Singapore Bosnia and Kyrgyzstan Slovak Republic Herzegovina Laos South Africa
Brunei Darussalam Lebanon Spain Cambodia Luxembourg Sri Lanka Canada Malta Sudan Chile Mauritius Sweden China Mainland Mongolia Switzerland Croatia Morocco Syria
Czech Republic Myanmar Thailand Denmark Namibia Turkey Egypt Netherlands Turkmenistan Fiji New Zealand United Arab Finland Norway Emirates France Pakistan United Kingdom Germany Papua New United States (a) Hong Kong SAR Guinea Uzbekistan Hungary Philippines Venezuela India Poland Vietnam Indonesia Qatar Zimbabwe Iran Romania
(a) This is a limited agreement. (b) The treaty has been gazetted, but it is not yet in force.
Under the above treaties, a foreign tax credit is available for the lesser of Malaysian tax payable on the foreign income or the amount of foreign taxes paid. For non-treaty countries, the for eign tax credit available is limited to one-half of the foreign tax paid.
Under most of Malaysia’s tax treaties, a business visitor to Malaysia for varying periods of up to 183 days is exempt from Malaysian income tax if the services performed are for, or on behalf of, a nonresident person and if the remuneration paid for the services is not directly deductible from the income of a permanent establish ment in Malaysia.
Agreements with some countries provide for reduced withhold ing taxes under certain conditions.
F. Visas
A visa is defined as the document issued (in the form of a stamp or endorsement sticker) that allows entry into Malaysia for cer tain nationalities. Applications for visas may be made to Malaysian foreign missions abroad (subject to conditions) with or without supporting documents from the Malaysian immigra tion authorities.
The Malaysian government issues the following three types of visas:
• Single Entry Visa
• Multiple Entry Visa
• Transit Visa
These visas are described below.
Single Entry Visa. A Single Entry Visa (SEV), which is only valid for one entry, is issued for one of the following purposes to for eign visitors who require a visa to enter Malaysia:
• Social visit: for a stay period of up to 90 days (depending on nationality of visitor) at the discretion of immigration officers at the entry checkpoint.
• Short-term business: for a stay period of up to 90 days (depend ing on nationality of visitor) at the discretion of immigration officers at the entry checkpoint.
• On obtaining approval for a long-term pass application: for a stay period of up to 90 days (depending on nationality of visi tor) at the discretion of immigration officers at the entry check point. The visitor must proceed with endorsement of approved long-term pass as soon as possible on entry into Malaysia.
Multiple Entry Visa. A Multiple Entry Visa (MEV) is issued to foreign nationals who require a visa to enter Malaysia multiple times for purposes of social, business or government matters. The validity period of the MEV ranges from 3 months to 12 months. The MEV must be activated within its validity period after issuance, for a stay period of up to 90 days per entry (depending on the nationality of visitor) at the discretion of immigration officers at the entry checkpoint.
Transit Visa. A Transit Visa is issued for foreign visitors who are passing through Malaysia before continuing their flight route to the next destination. This visa is valid for a maximum duration of 120 hours. Foreign visitors who do not leave the airport vicinity do not need a visa.
Recently introduced facilities. Effective from 1 March 2016, the Malaysian government introduced the following facilities for nationals of selected countries traveling to Malaysia:
• e-Visa
• Electronic Travel Registration and Information (eNTRI)
e-Visa. Selected foreign nationals may apply for the SEV online and are not required to personally visit a Malaysian foreign mis sion abroad. This facility is only available for selected nationali ties approved by the Ministry of Home Affairs. The e-Visa is valid for 3 months, and holders are entitled to a stay period of up to 30 days (at the discretion of the immigration officers at the entry checkpoint) for each visit into Malaysia. A foreign national
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can apply for the visa from anywhere around the world, except from Malaysia and Singapore.
Electronic Travel Registration and Information. The eNTRI facil ity is available for China Mainland and Indian nationals. It is designed to facilitate the entry of select China Mainland and India nationals visiting Malaysia for tourism purposes under the Visa-Waiver Program. The eNTRI note is only valid for a single journey to Malaysia for the purpose of tourism, with a maximum stay of 15 days.
G. Business visitors
All business travelers must apply for the necessary visa from Malaysian foreign missions abroad (if applicable) and are issued a Social Visit Pass (SVP), which has a validity of up to 90 days, at the entry point, subject to the discretion of the immigration officers at the checkpoint.
Business visitors must have a valid return ticket and may be requested to show proof of sufficient funding to support their stay period in Malaysia.
Facilities for business travelers have been introduced to ease the movement of business travelers to Malaysia during the COVID19 pandemic, subject to strict conditions. Individuals should check with immigration professionals for further information and advice.
H. Work permit for professionals
A Malaysian work permit is required for any non-Malaysian person who wishes to enter Malaysia for work purposes, regard less of duration. A work permit for these individuals can be granted for a duration from 1 month to 60 months depending on, among other factors, the applicable type of work permit, merits of the applicant and the type of role. Renewals are allowed with sufficient justification to retain the employment of an employee for a role.
Employment Pass. The Employment Pass (EP) is the work permit required for any non-Malaysian person who is taking up employment with a Malaysian company or firm. It is issued by the Malaysian Immigration Department (MID). An EP is issued with the MEV for a duration of up to five years, subject to justification and consideration by the MID.
An EP is granted on a case-by-case basis for positions that require special technical knowledge or experience not available locally or for positions that cannot be filled by Malaysian citi zens. In general, to obtain an EP, an applicant must have the fol lowing:
• Relevant academic qualifications and work experience.
• A passport with a validity of at least 15 months or ideally for the full duration of the EP.
• A contract from the Malaysian employer with a minimum monthly salary of MYR5,000. Exceptions to this condition apply if the employment is in selected industries or if certain conditions are fulfilled with the necessary support from the
authorities. Payroll can be administered by the home or host company.
• Passport (3.5 cm x 5 cm) photograph with blue background. Also, the Malaysian company applying for the EP must fulfill certain requirements including, but not limited to, the following:
• Industry-specific requirements apply because different industries are governed by different ministries from which preapprovals may need to be obtained before the application can be submitted to the MID. For certain industries, the approving authority for the initial stage of the EP application may also be a Malaysian ministry or appointed body with differing applica tion processes and requirements.
• Malaysian companies involved in selected industries are also required to provide necessary licenses in order to submit EP applications. These licenses include the Wholesale, Retail and Trade License or the Unregulated Services License from the Ministry of Domestic Trade and Consumer Affairs and the G7 Grade License issued by the Construction Industry Development Board.
• Malaysian companies that wish to apply for an EP must meet the minimum paid-up share capital requirement, which is MYR500,000 for wholly foreign-owned companies, MYR350,000 for foreign companies in a joint venture with local companies and MYR250,000 for 100% Malaysian-owned companies. The authorities for the applicable license may increase the minimum paid-up share capital requirement as a condition for the license.
• The Malaysian sponsoring company of an EP in West Malaysia must be registered with the Expatriate Services Division of the MID to which applications are submitted electronically. The only exception is for companies whose approving authority is the Malaysian Investment Development Authority or the Malaysia Digital Economy Corporation.
Under the Malaysian Immigration Act 1959/63 (amended 2002), Immigration Regulations 1963 and Employment (Restriction) Act 1968 (Revised 1988), it is illegal to work without a valid work permit endorsed in an individual’s passport. The conse quences of noncompliance include monetary fines, a jail term and caning. Other possible consequences include the blacklisting of the employee or the Malaysian company by the Malaysian government for up to five years.
To obtain an extension, individuals must submit an application for extension ideally three months before the expiration of their passes.
Individuals who have not completed their contract terms but wish to take up employment with other companies in Malaysia must shorten their current EP and obtain an official Release Letter from the current employer.
Professional Visit Pass. A person who intends to enter Malaysia for short-term assignments, such as to conduct training, attend training, or perform assembly, maintenance, repair or installation of machinery purchased from an overseas company, may apply for a Professional Visit Pass (PVP). A PVP is usually valid between 1 to 6 months and is renewable for a total maximum
period of 12 months. No extensions are granted beyond the maximum duration allowed. The maximum duration allowed for a person who intends to do a student internship or serve as a trainee is six months and is non-renewable.
To qualify for a PVP, the individual’s salary must be paid by an overseas company.
Residence Pass-Talent. The Residence Pass-Talent (RP-T) is issued to highly qualified expatriates seeking to continue living and working in Malaysia on a long-term basis. Holders of the RP-T are eligible for many benefits, including the ability to live and work in Malaysia for up to 10 years. RP-T holders may change employers without having to apply for a new work permit. The spouse and children (under 18 years old) of the recipient are also awarded the RP-T and are allowed to work (spouse) or study (children) without having to apply for an EP or Permission to Study. In general, a foreign individual who has been living and working in Malaysia for at least three years on a continuous basis with a basic monthly salary of MYR15,000 may apply for the RP-T if all of the other requirements are met. Applicants need to be approved by the RP-T panel before they are recommended for the granting of the pass. Preference is given to applicants who qualify as experts and are able to contribute to key Malaysian industries in a significant way.
I. Labor Market Testing
Labor Market Testing (LMT) is a process to understand the labor market and workforce situation in Malaysia. In West Malaysia, LMT is a mandatory requirement. It is overseen by the Ministry of Human Resources (MOHR) and involves an employer posting advertisements for a position on the national Social Security Organization (SOCSO) employment portal — MyFutureJobs — for a minimum duration of 30 calendar days, and screening and interviewing eligible candidates, before submitting applications to hire non-Malaysian employees.
LMT is performed on a specific target group to ascertain the availability of suitable talents with specific skills, who meet the criteria for a role.
From an immigration standpoint, mandatory LMT generally aims to make sure that foreign talents are only hired after employers have considered local employees for open positions.
Automatic and conditional exemptions may apply should the foreign candidate meet certain prerequisites.
J. Long-term stay
The Malaysia My Second Home Program (MM2H Program) allows people from all over the world who fulfill certain criteria to reside in Malaysia as long as possible on a Long Term Social Visit Pass (LTSVP) issued with an MEV. The LTSVP is granted for an initial period of 10 years (subject to the validity of the applicant’s passport) and is renewable. The program is open to all citizens of countries recognized by Malaysia, regardless of race, religion, gender or age. Applicants may bring along their spouse and their unmarried children below 21 years old as dependents.
To qualify for the program, individuals who are aged 50 years or older must show proof of liquid assets worth a minimum of at least MYR350,000 and an offshore income of MYR10,000 per month. Individuals who are less than 50 years old are required to show proof of liquid assets worth a minimum of MYR500,000 and offshore income of MYR10,000 per month.
The applicant must satisfy either of the following conditions:
• Individuals aged 50 years or older must open a fixed-deposit account of MYR150,000 in an approved financial institution. After a period of one year, the participant can withdraw up to MYR50,000 for approved expenses relating to a house pur chase, education for children in Malaysia and medical purpos es. A letter from the participant to the MM2H Centre, Ministry of Tourism Malaysia is required before any withdrawal is made from the fixed-deposit account. Beginning with the second year, the participant must maintain a minimum balance of MYR100,000 throughout his or her stay in Malaysia under the program. Individuals aged below 50 years must open a fixeddeposit account of MYR300,000 in an approved financial institution. After a period of one year, the applicant can withdraw up to MYR150,000 for the above approved expenses. Beginning with the second year, they must maintain a minimum balance of MYR150,000 throughout his or her stay in Malaysia under this program.
• They must show proof of monthly offshore income, such as pension income, of MYR10,000 or more. Only applicants who are drawing from government-approved funds may satisfy this condition. If the individuals are unable to meet this condition, they may submit proof of monthly offshore income from their spouses to support the applications. However, the applicants’ income should exceed the spouses’ income by a ratio of 7:3.
MM2H visa holders aged 50 years old and above (who are spe cialized in certain approved sectors) can work part-time for up to 20 hours a week. The application for part-time employment is processed by the MID and approval is at their discretion.
All participants in the MM2H Program and their dependents (spouse and children) must submit a medical report from a pri vate hospital or registered clinic in Malaysia on approval or on the receipt of the Conditional Letter of Approval. Approved par ticipants and dependents (spouse and children) must possess a valid medical insurance policy that applies in Malaysia. However, exemptions may be given for participants who face difficulty in obtaining medical insurance as a result of their age or medical condition.
Foreign citizens may apply for participation in the MM2H Program directly, without going through a third party, or they may use the services of MM2H agents licensed by the Ministry of Tourism, Malaysia.
The LTSVP described above is not a permanent residence permit.
K. Entry and re-entry exemptions due to COVID-19 situations
As a result of the COVID-19 pandemic, the Malaysian govern ment has tightened restrictions across Malaysia’s international
borders and imposed additional requirements and procedures for non-Malaysians traveling to Malaysia. Entry into Malaysia for foreigners is currently restricted to individuals who hold valid long-term passes in Malaysia, or approvals for valid long-term passes in Malaysia, subject to additional pre-travel requirements.
Travel bans, additional entry approvals, mandatory swab tests and quarantine measures have been introduced to manage the COVID-19 pandemic and are updated frequently.
The MID has also issued updates on stay rights and exit requirements. As the cross-border requirements are being updat ed regularly by the authorities, please check with immigration professionals for the latest requirements prior to any travels in or out of Malaysia.
L. Family and personal considerations
Family members
Working spouse. The spouse of an EP holder must cancel his or her Dependent Pass and obtain an EP from the MID to work legally in Malaysia. The MID does not provide a procedure for a DP holder to obtain a Permission to Work while retaining the DP.
Unmarried partner. A female unmarried partner of a male EP holder for certain nationalities are allowed to apply for the LTSVP with a maximum validity of one year if all conditions are fulfilled. The LTSVP is renewable.
Studying children. The child of an EP holder is allowed to study in Malaysia without having to change his or her Dependent Pass to a Student Pass if he or she obtains the necessary Permission to Study approval from the MID.
Children from 18 to 25 years old. The MID has set special rules regarding an application for the LTSVP for children from 18 to 25 years old only. For such children, the maximum validity of the LTSVP is one year, which is renewable. An additional document to be provided is a letter from Commissioner of Oaths to confirm that the child is single, unemployed and in the custody of the EP holder.
Accompanying parent or parent-in-law. The parent or parent-inlaw of an EP holder can be granted a LTSVP with a maximum duration of one year. The LTSVP is renewable.
Marital property regime. In Malaysia, the distribution of marital assets is administered by the courts at the time of a divorce or legal separation. No strict rules govern the distributions, and courts have considerable flexibility in adjusting the property rights of the parties. The court-adjudicated distribution applies to all married persons in or domiciled in Malaysia. However, the regime does not apply to Muslims or persons married under Muslim law.
Marriages contracted outside Malaysia are recognized as valid if carried out in accordance with the laws of the relevant country and if the parties had the capacity to marry under the laws of their country of domicile.
A distinction is made between marital property acquired during the marriage by “joint efforts” and marital property acquired
during the marriage by “the sole effort of one party.” With respect to marital property acquired by joint efforts, the courts incline toward equal division after taking into account the extent of the contributions made by each party in acquiring the property, any debts owed by either party that are for their joint benefit and the needs of minor children. For marital property acquired by the sole effort of one party, the courts may arrive at a reasonable distribution after considering the extent of contributions made by the other party to the welfare of the family; however, the distribution must give a greater proportion of the property to the person who acquired the property.
Assets acquired by one party before the marriage and assets received during the marriage by gift from third parties are not distributed under this regime. However, if during the marriage, a non-matrimonial asset is sold and another asset is purchased with the sale proceeds, the new asset may be regarded as marital prop erty subject to distribution.
Prenuptial agreements between the parties regarding property rights are irrelevant. The courts are not bound by these agree ments in adjusting the respective rights of the parties.
The regime for distribution of property for Muslims and Muslim marriages varies from state to state. In general, a divorced party is entitled to one-third of all property acquired during the mar riage.
In parts of Malaysia where the matriarchal system is followed, distribution of property follows the customary law. Under this system, at the time of divorce, property acquired by each party before the marriage is generally restored to the respective party, and property acquired during the marriage is generally divided equally.
Inheritance rules. Individuals are free to provide for the distribu tion of their property in a will. However, if a testator is domiciled in Malaysia, the courts have the power to intervene to provide adequate maintenance to dependents of the deceased. In addition, a Deed of Family Arrangement can alter the terms of a will or the application of intestacy laws by agreement among the beneficiaries.
In general, the provisions of wills regarding the disposal of immovable property located in Malaysia are construed in accor dance with Malaysian law, whether the testator is a Malaysian or a foreigner. Wills disposing of movable or immovable property located outside Malaysia are governed by the laws of the country where the property is located.
However, in the absence of a will, the law provides for the distri bution of the property of the deceased. If a non-Muslim dies without making a will, the property left behind by the individual is distributed among his or her family members according to the Distribution Act 1958. The same law applies to male and female deceased persons. In general, the estate is distributed among the deceased’s immediate family, which are his or her parents, spouse and issue (descendants). A person’s issue includes his or her children and the descendants of his or her children who died before him or her.
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Muslim persons are subject to a separate regime of distribution.
Under customs prevalent in certain areas of Malaysia, land devolves on the female issue only, and the widower and sons take nothing.
Driver’s licenses. Malaysians holding foreign driving licenses and participants in the MM2H Program can convert their foreign licenses to Malaysian driving licenses, effective from 1 November 2019.
Foreign driving license holders must use an International Driving Permit together with their respective domestic driving license to drive in Malaysia. Alternatively, it is advisable for them to apply for a Malaysia driving license via authorized driving schools based on existing procedures.
To obtain a new Malaysian driving license, the applicant must first pass a written examination on simple road signs and basic driving regulations and then apply for a temporary license, which is obtained by paying the fixed fee to the Road Transport Department of Malaysia. The relevant authority then conducts a practical test on basic driving skills.