Under Part II, Section 7 of the Income Tax Act 1967, Malaysia government consider an individual as tax resident regardless of nationality. Generally, employer will notify JTKSM (Ministry of Human Resources) upon arrival of new foreign workers. However, many of them ignore the importance of notifying LHDN (Inland Revenue Board of Malaysia).
Here’s what you should do upon arrival of new foreign workers.
- Arrange FOMEMA medical test for the workers before working visa (PLKS) endorsement at Immigration Malaysia.
- Notify JTKSM with form, Borang PA 1/13 within 14 days once the workers get the PLKS. Click here to download the form.
- Notify LHDN with form, Form CP22 within 30 days from the arrival day. Click here to download the form.
Next you should know, foreigners who work in Malaysia for more than 60 days, but less than 182 days are considered as non-residents and they are taxed at flat rate based on type of income. Click here for the non residents tax rate table. So, foreign workers who work in Malaysia for more than 182 days are considered as residents will follow the same tax guidelines as Malaysian. Click here for the progressive tax rate table.
Now you may question why should I notify LHDN if the foreign workers net salary are less than RM25,501.
- If employer fail to notify LHDN, you can be fined not less than RM200 and not more than RM2,000 or imprisoned not more than six(6) months or both.
- Employer are responsible for any tax due for the related workers. Do you have foreign workers earn more than RM25,501 due to overtime and allowance? So, please take note and call your tax consultant for more info.
Last thing you should do before the foreign workers leave the country.
- Notify LHDN with form, Form CP21 at least 30 days before the expected departure date from Malaysia.
- Apply the Check Out Memo (COM) at Immigration Malaysia at least 7 days before the departure date. Without COM, you have to pay guaranteed bond. Click here for the guaranteed bond rate table.
- Notify JTKSM with form, Lampiran A and Borang PA 2/13 within 30 days from the departure date. Click here to download the form.
Last but not least, what if employer fail to notify JTKSM. You can be fined not more than RM10,000 under section 60K(1) of the Employment Act 1955. Just follow our advice to manage your foreign workers and you wouldn’t get in trouble. If you need assist , please feel free to contact us by clicking here.