Tax Category For Foreign Worker

Income Tax Category and Income Tax Resident is the crucial part to be filled up because it is related to LHDN.

*  Do not leave income tax resident & tax category blank for all employees as it will affect greatly tax deduction and CP8D form

To set up the income tax and income tax resident you need to navigate to Employee Profile > Bank&Statutory.

* If your employee does not have Income Tax, you need to fill up the tax number field as 11 digits inclusive for "SG". For example SG 00000000000

1. Foreigners working in Malaysia are divided into two categories:

Resident: Presence in Malaysia more than 182 days in a calendar year.

Non-resident: Presence in Malaysia less than 182 days in a basis year and is employed for at least 60 days in a calendar year.

2. Tax treatment

Resident status: Fall under the normal Malaysian tax laws that are also applicable to the local

Non-resident status: Subjected to a flat taxation rate of 30%, this means that the tax percentage will remain the same no matter the amount of income. Not eligible for any tax deductions.

Here is the link that you can click to know more about tax treatment for foreign workers:

• https://www.nbc.com.my/files/tax-public-ruling-8-2011-foreigner-tax.pdf
• https://www.yycadvisors.com/residence-status-of-individual.html#:~:text=An%20individual%20is%20considered%20to%20be%20resident%20for%20the%20basis,3%20immediately%20preceding%20basis%20years.