Salary Cap & Allowances

Jwchoi wrote:

Hi

My family and myself are planning to move to KL in early 2019. 
I will be required a working VISA and two children will need to attend school (at kindy level). 
In terms of school enrolments I assume there will be no restrictions so long as I hold a valid working VISA ?
 
CORRECT. ONLY EMPLOYERS CAN APPLY FOR EMPLOYMENT PASSES SO A JOB OFFER IS ESSENTIAL. IMMIGRATION ONLY APPROVES EP IF THE JOB CANNOT BE DONE BY A MALAYSIAN. THERE ARE VERY FEW SECTORS WHERE FOREIGNERS GET APPROVED.

Also, There will be some allowances for school fees an motor vehicles etc.  But we are unsure of  how tax system applies in Malaysia including EFP  & other Reasonable Allowances.   Could anyone please help clarifying the below ? 

YOU LIKED AN EARLIER POST OF MINE AND IT HAD A LINK TO THE PWC TAX GUIDE WHICH SHOULD BE USEFUL

https://www.pwc.com/my/en/assets/public … ooklet.pdf

Q1.
It seems there will be a flat rate Tax 28% for the first 182 days and I assume it will be reduced to certain rate expending on income level.  Am I understanding it correctly in terms of tax rate ? 
Is there any website I car refer to know about applicable income tax rate in Malaysia?

NON RESIDENT RATE IS A FLAT RATE OF 28% AND NO TAX FREE ALLOWANCES ARE GIVEN. HOWEVER ITS APPLIED AFTER STATUTORY DEDUCTIONS SUCH AS SOCSO AND HEALTH INSURANCE ETC.

ONLY THE TAX RESIDENT RATES ARE GRADUATED ACCORDING TO INCOME LEVEL. LOWER PORTIONS OF SALARY ARE TAXED AT LOW RATES. ONLY HIGHER PORTIONS ARE TAXED MORE HEAVILY.

Q2     
In terms of EPF, I believe contribution towards EPF has to be made by both Employee (at 11%)  and Employer (at 12%). 
Is there any mandatory % requirement that Employee must contribute toward EPF ?  or are they optional for a foreign national employees?     

IF THE EMPLOYER AGREES TO CONTRIBUTE FULL AMOUNT THEN EMPLOYEE IS BOUND TO THE STATUTORY DEDUCTION. OTHERWISE ITS BY AGREEMENT. MANY COMPANIES DON'T OFFER FOREIGNERS EPF BUT ITS STILL POSSIBLE FOR THE EMPLOYEE TO JOIN EPF WITHOUT ANY EMPLOYER CONTRIBUTION

Q3
I have also read from other topics that income tax (24~28%) will be calculated after EPF portion being deducted.
So, assuming my gross salary (before tax) is at 25,000 pcm. 
Will my income tax apply after 23% (11% Employee  + 12%Employer ) of EPF  contributions? 

ONLY YOUR 11% CONTRIBUTION IS DEDUCTED FROM SALARY BEFORE TAX. THE EMPLOYER DEPOSITS ITS CONTRIBUTION INTO YOUR EPF ACCOUNT DIRECTLY. TAXABLE INCOME IS THEREFORE YOUR NETT INCOME AFTER STATUTORY AND OTHER DEDUCTIONS BUT NOT INCLUDING EMPLOYERS CONTRIBUTION.

i.e. Gross Monthly Income. 25,000  -  EPF (23%) -5,750 =$19,250. 
      Income Tax 28% of $19,250  = 5,390.   
      Net Income after Tax = $13,860?
       
Is this how it should be calculated ? Otherwise,  could you please advise the way it should be calculated ?

ITS NECESSARY TO BE IN MALAYSIA FOR 182 DAYS IN EVERY TAX YEAR (JANUARY TO DECEMBER) TO BECOME AND REMAIN TAX RESIDENT.

TO UNDERSTAND THE TAX STEPS THEY ARE WORKED OUT ON ANNUAL INCOME. EASY WAY IS TO FIND THE LINE NEAREST ANNUAL SALARY OF PAGE 7 TAX TABLE IN PWC GUIDE AND THE TAX DUE IS IN THE RIGHT HAND COLUMN. IF THE SALARY IS BETWEEN STEPS THEN TAKE RESIDUAL INCOME @ % SHOWN IN TABLE AND ADD THE TWO TAX AMOUNTS TO FIND TOTAL DUE. DIVIDE BY 12 TO FIND MONTHLY DEDUCTION. IF YOU REREAD THE POST YOU 'LIKED' IT EXPLAINS THIS. TAX IS APPLIED AFTER ANNUAL ALLOWANCES HAVE BEEN DEDUCTED.

Q4. 
We do require some assist in terms of school fees / rental house / motor vehicle allowances, but we are unsure how tax system works interns of these allowances. Are these allowance also considered as taxable income? or will they be exempted from income tax?   

CHECK THE PWC GUIDE IN-KIND ALLOWANCES ARE TAXED DIFFERENTLY FROM SALARY AND BONUSES ARE TAXED AT 30%

Q5. I assume Health Insurances are optional and it can be selected by an individual or company provided depending on how employment Contract set up. 

ALL EMPLOYERS ARE MANDATED TO OFFER SOME SORT OF HEALTH INSURANCE. COVERAGE MAY JUST BE FOR HOSPITALIZATIONS WHICH IS HOW LOCAL INSURANCE POLICIES WORK. IT'S UP TO INDIVIDUAL COMPANY TO DECIDE WHAT THEY OFFER.


Any clarification  would be much appreciated.
Thanks

JW

Hi Gravitas,

Thank you for the information and links provided.  PWC Tax Booklet seems to be a very useful tool.  It seems most of allowances are taxable income to the total amount paid by employer, with few applicable exemptions (i.e meals, car parks petrols). 

Would you know little bit about Double Tax Treaties ? 
PWC Booklet also states list of countries and applicable tax withholding rates.
It states Interest, Royalties, Technical Fees but doesn't states Individual incomes.   
I presume this means that an Individual's incomes are not applicable for double tax treaties ?

Any comment would be much appreciated.
Thanks
JW

Basically Malaysia does not tax income earned offshore, but some tax regimes do.

http://www.hasil.gov.my/bt_goindex.php? … p;bt_lgv=2

A DT wont assist with earnings and taxation while working in Malaysia, but may avert being taxed where you are Resident for tax purposes or subject to worldwide taxation.