Taxation of international executives
Are there social security1/social insurance taxes in Malaysia? If so, what are the rates for employers and employees?
The Social Security Organization (SOCSO) is a scheme to provide certain benefits to the employees in cases of employment injury including occupational diseases and invalidity and for certain other matters in relation to the employment. Prior to 1 June 2016, the employees to be covered are those whose wages do not exceed MYR3,000 per month. Effective 1 June 2016, the ceiling for contributions to SOCSO has been increased from MYR3,000 per month to MYR4,000 per month. Contributions are capped at the monthly wage of MYR4,000. All local employees are to contribute irrespective of their amount of wages. However, expatriate employees are excluded. The current rates of contribution vary from MYR0.10 to MYR19.75 for the employee and from MYR0.40 to MYR69.05 for the employer.2
EPF is a national social security organization operating through a provident fund scheme in Malaysia. Its primary aim is to provide retirement benefits to Malaysian employees through the management of their savings in an efficient and reliable manner.
Malaysian employees are required to be contributors to the EPF. The employee and employer’s contribution are at the rate of 11 percent and 12 percent of the employee’s wages. Non-Malaysian employees have the option of becoming members. The minimum statutory contribution by the expatriate employee and the employer will be 11 percent and MYR5 of the expatriate employee’s wages.3
The employee and employer’s contribution for employees who have attained the age of 60 years old and above (up to age of 75 years) is 5.5 percent and 6 percent of the employee’s wages. For expatriate employee, the employee’s contribution has been revised to 5.5 percent of the expatriate employee’s wages and the employer’s contribution remain the same as MYR5.
Starting from 1 January 2012, for employees earning a monthly wage not exceeding RM 5,000, the revised employers’ statutory contribution rate has been increased to 13 percent. Similarly, for employees who are 60 years and above and earning wages not exceeding RM 5,000, the revised employers’ statutory contribution rate has been increased to 6.5 percent.
|Type of social security||Paid by employee||Paid by employer||Total|
* The employer pays 1.77 percent of the employee’s monthly wages for the Employment Injury Insurance Scheme and the Invalidity Pension Scheme. An employee’s share of 0.51 percent would be paid for coverage under Invalidity Pension Scheme. The same prescribed contribution schedule provides for the amount of employee’s share up to wages which exceed MYR3,900.
Effective from March 2016 until December 2017, the employees’ monthly statutory contribution rate will be reduced from 11 percent to 8 percent for members below the age of 60 and 5.5 percent to 4 percent for those age 60 and above. However, the employees can opt to maintain the current contribution rate of 11% (for members below the age of 60) or 5.5% (for those age 60 and above) by completing the prescribed form [(Form KWSP 17A/Khas2016)] and submit to the employers. There is no change to the employer statutory contribution rate.
Are there any gift, wealth, estate, and/or inheritance taxes in Malaysia?
No, other than real property gains tax on gains arising from disposal of real property or shares in a real property company.
Are there sales and/or value-added taxes in Malaysia?
The Goods and Services Tax (GST) would replace the current sales and service tax regime, with effect from 1 April 2015.
GST is a multi-stage consumption tax which is levied on all taxable supplies of goods and services made in the course or furtherance of any business by a taxable person in Malaysia. It is also levied on the importation of goods and services into Malaysia.
Broadly, GST works on a value added principle whereby input tax (i.e. GST incurred on business purchases) is offset against output tax (i.e. GST charged on taxable supplies made) and the difference is either paid to or refunded by the Royal Malaysian Customs.
The standard rate of GST is 6%. However, certain goods or services are zero-rated or exempted, where GST will not be charged.
Businesses with an annual sales value of RM500,000 and above are required to register for GST purposes. Businesses below the threshold may register on a voluntary basis.
Are there unemployment taxes in Malaysia?
Are there additional taxes in Malaysia that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.
Not applicable for assignee.
In general, stamp duty4 is payable on instruments executed in Malaysia.
To encourage ownership of first residential properties by Malaysian citizens, instruments of transfer for the purchase of a house not exceeding MYR500,000 be given a 50 percent stamp duty exemption. This exemption is granted to only one house per individual and is effective for sale and purchase agreement executed from 1 January 2015 to 31 December 2016.5 A full stamp duty exemption is given on sale and purchase agreement executed from 1 January 2017 to 31 December 2018 for the purchase of the following:-
To strengthen family values, the transfer of real property between spouses will also be exempted from stamp duty.6
A 50 percent stamp duty exemption is extended to loan agreement instruments executed for the sale and purchase of residential properties not exceeding MYR400,000. This remission is granted to Malaysians for sale and purchase agreements executed from 1 January 2013 until 31 December 2014.7
Pursuant to the Stamp Duty (Remission) Order 2014 and Stamp Duty (Remission) (No.2) Order 2014, 50% is remitted from the stamp duty chargeable on loan agreement instruments and instruments of transfer for the purchase of first residential property costing not more than RM500,000 for sales and purchase agreement executed from 1 January 2015 to 31 December 2016.
Pursuant to the Stamp Duty (Remission) order 2016 and Stamp Duty (Remission)(No.2) order 2016, following stamp duty exemption be given on instrument of transfer and loan agreement relating to sales and purchase agreement executed from 1 January 2017 to 31 December 2018 for the purchase of first residential property as follows:-
Pursuant to Stamp Duty (Exemption)(No.3) Order 2011, instruments of loan agreements executed for the purchase of a residential property not exceeding MYR300,000 under Skim Perumahan Rakyat 1Malaysia (“PR1MA”) be given full stamp duty exemption. The above tax exemption is effective for sale and purchase agreement executed from 1 January 2012 to 31 December 2016.
1 Employees Social Security Act, 1969.
2 Social Security Organization Act.
3 First Schedule (Section 2) and Third Schedule (Section 43) of the Employees Provident Fund Act, 1991.
4 Stamp Act, 1949.
5 Stamp Duty (Remission) (No.3) Order 2012.
6 Stamp Duty (Exemption) (No.10) (Para 3) Order 2007.
7 Stamp Duty (Remission) (No.4) Order 2012.
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