Help Center Home Malaysian Payroll General Payroll Information What is the difference between a foreigner and a non-resident for payroll purposes?

What is the difference between a foreigner and a non-resident for payroll purposes?

Note: this article applies to non-Malaysians who are not permanent residents of Malaysia. 


SOCSO

Foreign employees contribute under the Employment Injury Scheme. Only employer contributions are payable. This is independent of tax residency.


EPF

Foreign employees are not required to contribute, but may choose to do so. This is also independent of tax residency. For contribution rates, please click here.


EIS

Foreign employees do not contribute to the Employment Insurance Scheme.


HRDF

No HRDF contributions are due for foreign employees and they are not included in the employee count to determine the applicable contribution rate.


Income Tax (PCB)

For income tax purposes, the rate of tax will depend on the employee's residence status.

Tax residence is based on time spent in Malaysia and not nationality - a Malaysian who lives and works overseas can be considered a non-resident.

The current tax structure is as follows:

Exemption

  • If the time spent in Malaysia is as follows:
    • 60 days or less in a single year; or
    • a continuous period (not exceeding 60 days) that overlaps two years; or
    • a continuous period (not exceeding 60 days) which overlaps two years along with a period or periods which together with that continuous period do not exceed 60 days;

Then, any income, fees, commissions or bonuses received will not be taxed in Malaysia.

This does not apply to:

  • Non-resident directors of Malaysian companies
  • Public entertainers


Rates

  • If you are considered a non-resident, you will be taxed at a flat rate of 30% and you will not be entitled to any of the tax reliefs enjoyed by residents, though you can claim the same tax exemptions on certain allowances, perquisites and benefits-in-kind as residents.
  • If you are considered a resident, you will be taxed at a graduated rate of 0% to 30% depending on your income. You will be able to claim several tax reliefs (personal and family deductions, rebates, etc) which will reduce your taxable income.


PCB should be deducted for both residents and non-residents provided their income exceeds the minimum threshold for PCB.

For a full list of the income tax rates imposed by LHDN, please click here.

For more details on who qualifies as a resident, see here.

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