Malaysia Tax for Foreigners Explained: What Expats Need to Know

gpmarketing7
Sep 3, 2025
3 min read

Relocating to Malaysia can be rewarding both professionally and personally, but it’s important for expatriates to understand how personal income tax works here. Below is a breakdown of the key points every expat should know.

Tax Residency Status

In Malaysia, your tax residency status determines both the tax rate you pay and your eligibility for reliefs. An individual is considered a tax resident if they stay in the country for 182 days or more within a calendar year. Residents enjoy progressive tax rates, starting from 0% for income below RM5,000 and gradually increasing up to 30% for income exceeding RM2 million. They are also entitled to deductions and reliefs that can significantly reduce taxable income.
On the other hand, those who stay for less than 182 days are classified as non-residents. Non-resident income is taxed at a flat rate of 30%, with no access to deductions or reliefs. As a result, non-residents often face higher tax costs even if their income is comparatively lower.

Tax Rates

Residents: The tax rates are progressive, starting from 0% for income below RM5,000 and increasing gradually up to 30% for income exceeding RM2 million. This means the more you earn, the higher your effective tax rate, but residents still benefit from deductions that can bring taxable income down.
Non-Residents: All income is subject to a flat 30% rate, regardless of how much you earn. Without deductions or exemptions, this often makes non-resident taxation less favorable compared to resident taxation.

Taxable Income

Malaysia taxes income from a wide range of sources. This includes employment income such as salaries, bonuses, and allowances, as well as business or professional income if you are self-employed or running a business locally.
Other forms of taxable income include rental income from properties in Malaysia, as well as certain dividends, royalties, and interest earnings. While some of these may be exempt depending on tax treaties, it’s important for expats to check how their income streams are classified.

Deductions and Reliefs

Tax residents are eligible for personal reliefs which reduce taxable income. Examples include reliefs for a spouse, children, and lifestyle expenses such as books, sports equipment, and medical checkups.
Contributions to Malaysia’s Employees Provident Fund (EPF) and life insurance premiums can also be deducted, providing both immediate tax savings and long-term retirement benefits.
Non-residents are not entitled to any of these reliefs, which often makes a significant difference in overall tax payable.

Double Taxation Agreements (DTA)

Malaysia has signed DTA treaties with more than 70 countries, including major economies like the US, UK, China, India, and Australia. These agreements are designed to prevent the same income from being taxed twice—once in Malaysia and again in the expatriate’s home country.
DTAs typically allow tax credits, exemptions, or reduced withholding tax rates, making them a vital consideration for expats with international income sources.

Filing and Compliance

Malaysia’s tax year runs from 1 January to 31 December. Individual tax returns must be filed by 30 April of the following year for non-business income, while individuals with business income have until 30 June.
Tax returns can be filed online through the Inland Revenue Board’s e-Filing system, which simplifies the process. However, many expatriates choose to engage tax professionals to avoid errors and ensure they make use of all available reliefs and treaty benefits.

Key Takeaways for Expats

Residency status matters: Staying 182 days or more gives you access to lower rates and reliefs.
Residents benefit from progressive rates while non-residents face a flat 30% with no reliefs.
DTAs are your friend: They help minimize double taxation if you earn income abroad.
Plan ahead: Keep track of your days in Malaysia, know your deadlines, and consider professional advice.

How EOR Can Help

Malaysia’s personal income tax regime becomes much clearer once you understand the distinction between residents and non-residents. However, navigating compliance, deductions, and long-term planning can still feel overwhelming for expatriates. That’s where an Employer of Record (EOR) partner like GP Outsourcing Asia comes in. Beyond managing employment formalities, our EOR service guides you through tax obligations step by step, ensuring you remain compliant while maximizing benefits. With us handling the complexities, you can focus fully on your career or business journey in Malaysia — with peace of mind