Umbrella Company in Malaysia

Independent contracting in Malaysia isn’t always straightforward. You’ve got immigration issues, tax difficulties, and mountains of complex admin work. Even worse, missteps can cost you serious money, or even land you in legal trouble.

Before you consider taking a contract in Malaysia, you should be aware of what you’re getting into – and how you can make it simpler.

Difficulties of Contracting in Malaysia

Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Malaysia.

If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.

Also, are you familiar with the intricacies of the tax system in Malaysia, as well as your own country’s laws on overseas earnings? If so, good on you!

However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Malaysia and your home country can seem like full-time work in itself.

How Umbrella Companies Work

Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.

They’re called Umbrella Companies (or, contractor management companies).

Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.

Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in Malaysia. Even better, most are experts in Malaysia and expat tax law, meaning they’ll also help you optimise your earnings in Malaysia.

Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.

Why Use an Umbrella Company in Malaysia

Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.

When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.

While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Malaysia (which means avoiding fees, fines, or even worse penalties).

How We Can Help You

There’s a huge variety of Umbrella Companies with different specialities and advantages in Malaysia. How do you find the right one for your circumstances?

We work closely with Umbrella Companies all throughout Malaysia and match contractors with the right company for them. If you’ve already secured a contract in Malaysia, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).

 

A Contractor's Guide to Taxes in Malaysia

One of the most consistently challenging aspects of contracting in Malaysia is complying with the country’s tax system. As well as paying tax in Malaysia, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge. 

How do I calculate my taxable income in Malaysia

If you’re working in Malaysia under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Malaysia for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Malaysia, but contractors may not be offered this service because of their short stay with each employer.

Anybody who can’t pay their tax in Malaysia through PAYE is left with the prospect of doing everything themselves.

Do you know much about Malaysian Tax Law? Does Malaysia have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Malaysia can range from 0 to 28 percent, and you need to be sure you are placed in the correct tax brackets.

Tax Filing in Malaysia


When Do You Need to Lodge Your Tax Return?From 1st of March after the taxable year (calendar year)
Tax Filing Deadline30th of April for individuals without any income from a business source. 30th of June for individuals with income from a business source.
Can you file it online?Yes, https://ez.hasil.gov.my/CI/

How to File Taxes in Malaysia

The process of filing taxes in Malaysia involves:

Step 1: Register as a taxpayer with LHDN (Lembaga Hasil Dalam Negeri) here.

Step 2: Register for online filing through ezHASil.

Step 3: Select the appropriate tax form:

  • BE form: resident individuals without income from a business source.
  • B form: resident individuals with income from a business source.
  • M form: non-resident individuals with/without income from a business source.

Step 4: Collect the appropriate documentation to complete the tax return.

  • Documents relating to tax reliefs for medical expenses, education fees, disabled individual, mortgage and insurance.
  • Documents regarding tax rebates.
  • Documents regarding tax exemptions.

Step 5: Electronically sign the form.

Step 6: After submitting the tax return, any tax refund will be credited to the taxpayer’s accounting within 30 working days. Any taxpayers who do not receive a refund within 30 working days will be compensated.

Tax Figures in Malaysia

CurrencyMalaysian Ringgit (MYR)
Tax-free Threshold in Malaysia5000 MYR
Income Tax Rates
Grossed Income Tax Rate (%)
From 5000 to 19,999 1%
From 20,000 to 34,999 150 MYR + 5% on excess of 20,000
From 35,000 to 49,999 900 MYR + 10% on exxcess of 35,000
From 50,000 to 69,999 2,400 MYR + 16% on excess of 50,000
From 70,000 to 99,999 5,600 MYR + 21% on excess of 70,000
From 100,000 to 249,999 11,900 MYR + 24% on excess of 100,000
From 250,000 to 399,999 47,900 MYR + 24.5% on excess of 250,000
From 400,000 to 599,999 84,650 MYR + 25% on excess of 400,000
From 600,000 to 999,999 134,650 MYR + 26% on excess of 600,000
1,000,000 and above 238,650 MYR + 28% on excess of 1,000,000
Notes

The above rates are applicable to resident taxpayers.

A non-resident individual that earns Malaysian income is taxed at a flat rate of 28%.

Tax Residency in Malaysia

When do you become a tax resident in Malaysia

  • You are physically present in Malaysia for more than 182 days in a calendar year or for 182 consecutive days.
  • You are present in Malaysia during the calendar year for at least 90 days and have been resident or present in Malaysia for at least 90 days in any 3 of the 4 preceding years

Does the 183 day rule apply in Malaysia

Yes

Am I taxed on my global income in Malaysia

No, only Malaysian-sourced income. 

Can you set up your own Limited Company in Malaysia

How long does it take to set up 18 days
How much does it cost2060 MYR
Is it easy? Starting a Business Rank: 111. Low ranking means that starting a business is difficult.

Tax Calculator in Malaysia

If you are a contractor and want a calculation on your tax and net retention in Malaysia, we can supply it to you free of charge. 

Using an Umbrella Company for Income Tax in Malaysia

Contractors in Malaysia are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Malaysian umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).

The companies are experts in Malaysian taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Malaysian tax office or tax department directly including processing your tax refund if you are eligible.

How We Can Help You with Tax in Malaysia

We work with numerous umbrella companies in Malaysia, many of whom are experts in tax and immigration laws. If you have any questions about tax in Malaysia, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Malysian work permit.

Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Malaysia but without the overhead of directly dealing with the Malaysian tax authorities. Get in touch with us today for some reliable advice on tax in Malaysia!

 

A Contractor's Guide to Work Permits in Malaysia

Immigration is one of the primary concerns for any contractor hoping to start working in Malaysia. Permanent employees will find it easy to get their Malaysian work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.

The Malaysian work permit, known more commonly as the Malaysian Employment Pass, is dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in Malaysia is more difficult because the work permit is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue. 

 

How Can Umbrella Companies Help You Get a Work Permit in Malaysia ?

As your permanent employer, umbrella companies are able to sponsor you for your Malaysian Employment Pass provided they’re on the register of approved sponsors. Many different companies offer this service, because it makes contracting in Malaysia infinitely simpler and saves you the hassle of continuous paperwork. Instead of changing your work permit every time you get a new contract, you can just work how you ordinarily would under the same permit. They protect you from the bureaucratic “rain” of legal compliance with the Malaysian immigration authorities. They can even deal with the Malaysian Embassy directly. 

Through their service you may be able to use a business visa to get started quickly and then transition to a work visa in Malaysia. It depends on your specific visa requirements. Be aware you may have to register for a residence permit in Malaysia.

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