Residence Status for Expatriate in Malaysia due to Travel Restriction

Determination of your tax residency in Malaysia is utterly important as tax resident is being taxed based on scale rate (refer Chapter D) and gets to enjoy relief and rebate (refer Chapter F); whereas non tax resident is taxed based on flat rate of 30% (refer Chapter E), and are not entitled to any reliefs and rebates. For instance, an individual having an income of RM100,000; being a tax resident, the tax payable is RM9,010 or lesser, but as a non tax resident, the tax payable is RM30,000. Tax residency in Malaysia ignores nationality but follows its own sets of rules under Income Tax Act 1967. You can refer to our post on How to be a Tax Resident in Malaysia.

Tax Residency for the Year of Assessment 2020 (Covid-19 and Travel Restrictions)
The COVID-19 unprecedented event has caused multiple complications in determining the residence status. For instance, an expatriate who has gone out of Malaysia to attend meetings was trapped in a foreign country, due to travel restrictions. He was forced to return to his home country and work from home. Although his services rendered is directly contributed to Malaysian entity, in view of the fact that he is out of Malaysia, the one hundred and eighty-two (182) physical presence days in Malaysia remained questionable.

Fortunately, IRB provides relaxation to allow period of temporary absence to be taken to form part of your period or periods in Malaysia for the purpose of determining tax residency. However, such period of temporary absence must be supported by proper documentations and information. These documentations and information must be kept and submitted to the IRB upon request. For instance, travel documents, local or foreign authority travel restrictions guidelines and similar relevant documents that may prove your temporary absence or presence in Malaysia is due to COVID-19 travel restrictions, and documents that prove your effort to return to Malaysia during the Movement Control Order period.
The Movement Control Order period starts from 18 March 2020 as prescribed and extended by the Ministerial Order made under Section 11 of the Prevention and Control of Infectious Diseases Act 1988 as gazetted from time to time.
Any application for the above-mentioned tax treatment must be referred to the branch that handles your income tax file. Every application of the case will be reviewed according to the merit of the case. Confirmation of taxability from foreign tax authorities may be requested if such a need arises.