Residency
You are a Malaysian tax resident in a calendar year if any of these apply [1]:
- you are physically present in Malaysia for 182 days or more in the year (the basic rule);
- you are present for less than 182 days but link to a 182-day period in the year before or after, with limits;
- you are present 90 days or more in the year and have been resident or present 90 days or more in three of the four preceding years;
- you were resident for the three preceding years and the year after.
The 182-day test is what most relocators rely on. Days do not need to be consecutive.
Income tax brackets, YA 2025 (resident individuals)
After the standard 9,000 MYR personal relief, chargeable income is taxed on a progressive scale [1]:
- up to 5,000 MYR: 0 percent
- 5,001 to 20,000: 1 percent
- 20,001 to 35,000: 3 percent
- 35,001 to 50,000: 6 percent
- 50,001 to 70,000: 11 percent
- 70,001 to 100,000: 19 percent
- 100,001 to 400,000: 25 percent
- 400,001 to 600,000: 26 percent
- 600,001 to 2,000,000: 28 percent
- above 2,000,000: 30 percent
As a rough guide, 100,000 MYR is around 21,000 EUR. Non-residents pay a flat 30 percent on Malaysian-source income with no reliefs. Various reliefs (lifestyle, medical, EPF, parental, life insurance) can materially reduce chargeable income.
Foreign-source income, the rule from 2022 and what came next
Malaysia historically did not tax foreign-source income received in Malaysia by a resident individual. Finance Act 2021 reversed that from 1 January 2022. Government concessions then layered exemptions on top [2]:
- A conditional exemption initially ran from 1 January 2022 to 31 December 2026.
- The Finance (No. 2) Act 2023 extended the individual-resident exemption to 31 December 2036, on the condition that the income has already been subject to tax in the country of origin.
- All types of foreign-source income received by a resident individual are within scope, except partnership income from a Malaysian business.
What this means for a relocator: if your foreign pension, dividend, rental income or capital gain has been subject to tax abroad (a UK state pension is liable in the UK even if the tax due is zero; a German pension is taxed in Germany; an Irish private pension is taxed in Ireland), bringing the money into Malaysia is not subject to Malaysian PIT until at least 2036. If the foreign source country imposes no tax at all on the item, the exemption may not apply and the income falls into the brackets above when received in Malaysia.
MM2H
Participants in the Malaysia My Second Home (MM2H) programme are non-employed long-term residents. Their foreign-source income remitted to Malaysia (pension, interest, dividend, rental, capital gain) is exempt from Malaysian tax in line with the general rule above. Pension income paid to MM2H holders has long been explicitly exempt under separate guidelines. Malaysia-source income for MM2H holders (Malaysian bank interest, Malaysian rental) is taxable on the resident scale.
Pension income
Pensions from Malaysian-approved schemes (private retirement, EPF) paid to a resident over the statutory retirement age are exempt from Malaysian PIT [2]. Foreign state and private pensions follow the foreign-source-income rule above: usually exempt when received by a resident individual through end-2036, provided they have been taxed in the source country.
Capital gains
Malaysia introduced a Capital Gains Tax (CGT) on disposals of unlisted Malaysian shares from 1 January 2024, levied on companies (not on individuals). Individuals are not yet subject to CGT on share disposals [3]. There is however a Real Property Gains Tax (RPGT) on disposals of Malaysian real estate by individuals, currently 30 percent in the first three years of ownership, 20 percent in year four, 15 percent in year five, and 0 percent for citizens and permanent residents from year six (5 percent for non-citizens) [3]. Foreign-share or foreign-property gains of a resident individual sit inside the foreign-source-income exemption to 2036 above.
Inheritance and gift tax
Malaysia has no inheritance, estate or gift tax. There is no wealth tax [3].
Worldwide investment income
For a resident individual, foreign dividends, interest and gains received in Malaysia are within the 2022 worldwide-income rule but covered by the 2036 conditional exemption [2]. Malaysian-source single-tier dividends paid to individual residents are exempt at the shareholder level (the company has already paid corporate tax). Bank interest from Malaysian licensed banks is exempt for resident individuals.
Treaty status with IE, GB, US, DE, FR
Malaysia has comprehensive DTAs with 75 jurisdictions [4]:
- Ireland: signed 28 November 1998, in force 11 September 1999 [4].
- United Kingdom: signed 10 December 1996, in force 8 July 1998 [4].
- Germany: signed 23 February 2010, in force 21 October 2010 [4].
- France: signed 24 April 1975, in force 23 July 1976 [4].
- United States: no comprehensive DTA. Malaysia is not on the US treaty list and there is no plan to negotiate; relief is via each side's domestic foreign-tax-credit rules [4].
Filing notes
The Malaysian tax year ("year of assessment") is the calendar year. Resident individuals file Form BE (no business income) by 30 April or Form B (with business income) by 30 June, both for the year of assessment that ended the previous 31 December [3]. Filings are in Bahasa Malaysia and English; e-filing via the MyTax portal is standard. You need a Malaysian Income Tax Number. LHDN issues it on submission of passport, visa and proof of address.
Not tax advice
This is a relocator-level overview. The foreign-source-income exemption is conditional on each item being taxed in the source country and could be amended again before 2036. Engage a Malaysian tax adviser before relying on the MM2H or exemption-based positioning [1].