Malaysia: Tougher Enforcement of Exit Tax Rules

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By Lien Hoang

Foreigners who skirt their tax duties may have a hard time leaving Malaysia now that border officials are checking tax records to keep pace with an increasingly mobile and global workforce. Two agencies, the Inland Revenue Board and the Immigration Department, began sharing data July 1 to nab expatriates who don’t square away their taxes before exiting the Southeast Asian country, the board said in a press release.

The tax collector didn’t elaborate on penalties, but Yvonne Beh, a partner at Baker McKenzie affiliate Wong & Partners, pointed to the 1967 Income Tax Act as a guide. Based on that law, tax dodgers face up to six months in jail and 2,000 ringgit ($465) in fines, she said.

“A police officer or immigration officer may arrest any person whom he reasonably suspects to be committing or about to commit an offence” under the tax law, Beh told Bloomberg BNA June 28. She added that the tax board “will penalize employers who fail to deduct income tax” for foreigners.

More Complex Compliance

Hilda Liow, an executive director of PwC international assignment services, doesn’t think expats are trying to evade taxes. Compliance is merely getting more “complex,” she said, as better transportation allows people to work abroad, including many commuters from nearby Singapore.

“We definitely see more short-term business travelers and short-term assignees in Malaysia and the region,” Liow said June 30 by phone from the capital of Kuala Lumpur. “Tax authorities are concerned with revenue slipping through the cracks.”

Such is their concern that tax authorities teamed up with the immigration office in 2014 to start swapping information about expats. Funds collected from foreign taxpayers rose steadily, reaching 201 million ringgit ($47 million) in 2016, more than double the 91 million ringgit ($21 million) in 2013, according to the revenue board. This interagency cooperation will be helped by the introduction this month of an internal database known as My EXPAT to be used by both the immigration agency’s expatriate services division and the tax offices throughout Malaysia.

In the press release, the tax board’s chief executive officer Datuk Sabin Samitah “expressed confidence that more enforcement efforts would be carried out jointly.”

According to Beh, Sabin has shown concerns that some foreigners are falsely reporting low wages, while sending home large remittances and enjoying “luxurious lifestyles.”

To contact the reporter on this story: Lien Hoang at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For More Information

For more information on Malaysian HR law and regulation, see the Malaysia primer.

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