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For details of the determination of Malaysian residence status under domestic law, see 1.1.

Under domestic law, effective from 1 January 2022, foreign income can no longer be sheltered by tax residents by simply not remitting it to Malaysia (see 1.1). For the period 1 January 2022 to 30 June 2022, foreign income received in Malaysia is taxed at a rate of 3% under ITA 1967, Sch 1, Pt XX. From 1 July 2022, foreign income received in Malaysia is subject to the prevailing tax rate (Guidelines for foreign income, 20 June 24).

Impact for payroll

Claims for double tax relief whether through a double tax treaty, or through domestic law on foreign tax credits, are usually dealt with by the individual through the filing of their tax return and any necessary claim forms. They therefore do not impact payroll. PCB Withholding applies to all payments made to the employee.

Double tax treaties

Malaysia has entered into double tax agreements (DTAs) with several countries. Double taxation is avoided by allocating taxing rights over bilateral income flows between