Tax Information

Malaysia Tax Information

Below is a brief summary of taxes in Malaysia for your reference.

Background

Malaysia is a resource-rich nation that produces and exports oil and natural gas. Due to the substantial tax revenue and dividends from the state petroleum corporation that manages these resources, taxes in Malaysia are considerably lower compared to other countries.

Resident Tax

There is no resident tax in Malaysia. Japanese residents in Malaysia enjoy the benefit of using Malaysia’s excellent infrastructure and public services without paying resident tax.

Consumption Tax

As of August 2021, there is no consumption tax. (It was temporarily introduced in April 2015 but abolished in June 2018.) The only consumption-related tax is a 6% service tax applied when using hotels, high-end restaurants, golf courses, and professional services such as accountants and lawyers.

Property Tax

Malaysia has Quit Rent (also recently called Parcel Rent), a tax on land, and Assessment, a tax on buildings. The amounts vary depending on whether the land is commercial or residential, but are generally much cheaper than property taxes in Japan.

Tax Saving Methods Using Malaysia’s Tax System

For those with substantial income from rental or securities investments in Japan who do not need to stay in Japan permanently, becoming a non-resident of Japan (basically residing overseas for more than half a year) and a resident of Malaysia (staying in Malaysia for more than half a year) can provide the following significant benefits under the current tax system:

Key Points:

• Income tax on Japanese income becomes a flat rate of only 20.42%.
• No need to pay resident tax in Japan.
• No matter how much income earned in Japan is brought into Malaysia, it is not taxed in Malaysia.
• With no resident tax in Malaysia and no income within Malaysia, a virtually tax-free lifestyle is possible (except for service tax).

Inheritance & Gift Tax

There is no inheritance or gift tax in Malaysia. This is an advantageous tax system for the wealthy. However, if a Japanese resident owns assets in Malaysia and makes a gift or bequest, those overseas assets are subject to gift/inheritance tax in Japan. (Overseas assets are not subject to inheritance only if both the deceased and heir have been non-residents of Japan for more than 10 years.)

Income Tax

If you have income within Malaysia, income tax applies. Tax rates differ depending on whether you are a Malaysian resident (staying in Malaysia for 182 days or more per year) or non-resident. For residents, tax rates are 0-30% on a progressive basis. For non-residents, a flat rate of 30% applies. Malaysian residents are not taxed on income from outside Malaysia. (Income from Japan brought into Malaysia is not taxed in Malaysia.) For rental income, expenses such as management fees, repair costs, and advertising costs can be deducted.

Corporate Tax

If annual profit is within RM500,000 (approximately 15 million yen), the tax rate is 17%; above that, it is 24%.

Note

The above information is as of October 2021 and may change in the future. Please confirm the latest information with an expert.

If you are considering the above tax-saving measures, we recommend consulting with a tax accountant specializing in international taxation. We can introduce you to international tax experts if needed.