Contact : +604 611 0771

Email : enquiry@mywave.biz

Individual Tax Residence Status During Covid-19 Travel Restrictions

Individual Tax Residence Status During Covid-19 Travel Restrictions

SCENARIO 1:

Temporary Absence From Malaysia

Question:

  •  I am currently outside of Malaysia because of COVID-19 travel restrictions.
  • How would my absence from Malaysia affect my residence status in Malaysia?

Answer :

  • It will not affect your residence status in Malaysia.
  • The period of temporary absence from Malaysia because of COVID-19 travel restrictions shall be taken to form part of your period or periods in Malaysia for the purpose of tax residence.

IMPORTANT NOTE:

  • You will need to keep relevant documents/records and information as evidence if requested by LHDNM.
  • Examples: travel documents, local and foreign authority travel restrictions and the like that may prove your temporary absence in Malaysia is due to COVID-19 travel restrictions.

 

SCENARIO 2:

Temporary Presence In Malaysia

Question:

  • I am not a resident in Malaysia.
  • Currently, I am in Malaysia because of COVID-19 travel restrictions.
  • Would my temporary presence in Malaysia affect my residence status in Malaysia?

Answer :

  • The period of temporary presence in Malaysia because of COVID-19 travel restrictions shall NOT be taken to form part of your period or periods in Malaysia for the purpose of residence status.
  • You will need to keep relevant documents/records and information as evidence if requested by LHDNM.

 

SCENARIO 3:

Cross Border Employment Income (In Malaysia)

Question:

  • I commute daily to Singapore from my home in Johor Bahru for work.
  • Due to the MCO, I am temporarily working from home in Johor Bahru.
  • Is my income taxable in Malaysia?

Answer :

  • There is no change in the contractual terms governing your employment overseas before and after your return to Malaysia;
  • This is a temporary work arrangement due to COVID-19 travel restrictions.
  • Your employment income for temporary work in Malaysia will NOT be taxable in Malaysia.
  • If any of the conditions are not met, normal tax rules will apply
  • This scenario applies to all cross-border employment situations.

 

SCENARIO 4:

Cross Border Employment Income (Overseas)

Question:

  • I am currently temporarily working from overseas due to COVID-19 travel restrictions.
  • Is my income taxable in the current location?

Answer :

  • Exercise employment in Malaysia and is forced to work temporarily outside of Malaysia because of COVID-19 travel restrictions.
  • You are regarded to be exercising your employment in Malaysia. The income is deemed derived from Malaysia.
  • The income is still taxable in Malaysia.
  • You may be subject to taxation in the locality where you are temporarily present if no special tax measures for COVID-19 are provided by that locality's tax authority. 
  • If you are in a state that has a tax treaty with Malaysia, you will not be taxable if you are present for less than 183 days.
  • If you are in a state that has no tax treaty with Malaysia, you might be subject to taxation. In such case, you may apply for credit relief under the ITA 1967.

 

SCENARIO 5:

Unable to commence Employment in Malaysia

Question:

  • I am a non-resident individual and have been offered to work in Malaysia during the movement control period.
  • I am unable to enter Malaysia to start work
  • Therefore, I am currently working from overseas.
  • Am I considered to be exercising an employment in Malaysia?

Answer:

  • Employment period is not exercised in Malaysia as no “temporary absence period due to travel restrictions” issue
  • Employment income can be taxed under domestic tax law in the country where the employment is exercised.

 

SCENARIO 6:

Temporarily working from Malaysia after vacation

Question:

  • I am a non-resident individual.
  • I arrived in Malaysia on vacation.
  • I am currently working from Malaysia due to COVID-19 travel restrictions.
  • Am I considered to be exercising an employment in Malaysia?

Answer :

If the following conditions are met:

  • temporary presence due to COVID-19 travel restrictions;
  • work is performed outside Malaysia if not for travel restrictions;
  • employment with the same overseas employer prior to COVID-19 travel restrictions
  • left Malaysia immediately after the travel restrictions  ends in Malaysia.

 

  • You are NOT consider as not exercising an employment in Malaysia for the period of your temporary presence due to COVID-19 travel restrictions.
  • You should keep records and relevant documents: passport information, travel schedule, work order/instructions from your employer and any information proving compliance with criteria (a) to (d), providing relevant information to LHDNM upon request.

 

SCENARIO 7:

Temporarily working from Malaysia after a Short-term Assignment

Question:

  • I am a non-resident individual.
  • I arrived in Malaysia for a company assignment before the travel restriction was implemented.
  • I am currently working from Malaysia
  • Am I considered to be exercising an employment in Malaysia?

Answer :

If the following conditions are met:

  • temporary presence due to COVID-19 travel restrictions;
  • work is performed outside Malaysia if not for travel restrictions;
  • employment with the same overseas employer prior to COVID-19 travel restrictions
  • left Malaysia immediately after the travel restrictions  ends in Malaysia.

 

  • You are NOT consider as not exercising an employment in Malaysia for the period of your temporary presence due to COVID-19 travel restrictions.
  • You should keep records and relevant documents: passport information, travel schedule, work order/instructions from your employer and any information proving compliance with criteria (a) to (d), providing relevant information to LHDNM upon request.

 

SCENARIO 8:

Working for foreign employer and Thereafter Employed in Malaysia

Question:

  • I am a non-resident individual.
  • I arrived in Malaysia for a vacation before travel restriction
  • I had to work from Malaysia due to travel restrictions.
  • Before the movement control period ended, I ceased employment with my foreign employers and accepted an offer to work with a company in Malaysia.
  • What is the tax treatment of my employment income from my foreign employers?

Answer :

  • You are considered to be present in Malaysia permanently since you did not return to your home country
  • You considers the employment to be exercised in Malaysia as there is no "Temporary absence period due to COVID-19 travel restrictions” issue.
  • Employment income with the foreign employer is considered to be exercised in Malaysia and will be taxed in accordance with Malaysian tax law under the Income Tax Act 1967.

 

Source from: 

http://phl.hasil.gov.my/pdf/pdfam/FAQ_on_International_Tax_Issues.pdf  

Like / follow our Facebook Page / LinkedIn for any statutory / HR updates. 

Facebook: https://www.facebook.com/MYwaveMalaysia/    or    https://www.facebook.com/emplx/

LinkedIn: Company: MYwave Sdn Bhd

Copyright © MYwave Sdn. Bhd. All Rights Reserved. Privacy Statement.