On 16 November 2011, Inland Revenue Board Malaysia issued Public Ruling No 8/2011, “Foreign Nationals Working in Malaysia – Tax Treatment”, which explains the tax treatment of employment income derived by foreign nationals exercising employment in Malaysia.
Generally, income from employment is taxed in the country where the services are actually performed, irrespective of the place where the contract is entered into or where the remuneration is paid. In other words, a foreign national working in Malaysia is liable to tax under Malaysian domestic law in respect of his employment income derived in Malaysia.
The Public Ruling also explains the basis of assessment of employment income, tax residence status, applicable tax rates and short term employment in Malaysia.
The Public Ruling also gives some guidance on tax treatment of foreign nationals from treaty and non-treaty countries seconded to Malaysia, bilateral credit as well as filing of income tax return forms by foreign nationals.
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