VOICE-OVER:
This podcast channel it’s about you, successful international entrepreneurs, successful ex-pats, successful investors. Sponsored by HTJ.tax
DERREN JOSEPH:
Okay, good evening, gentlemen and ladies, thank you for joining us here on hj.tax. A member of Moores Rowland in Asia Pacific today, we’re going to talk about the advantage of Penang for those remote workers. It’s nomads location, independent entrepreneurs. So to help us to guide us through that discussion, we have Tony Yeoh as well as Ravi from our affiliate office in KL to handle like the tax side of things.So without further ado, I will hand it over to you, Tony, you have the mic.
TONY YEOH:
Great. Thank you. Thanks Darren. Thanks for the invitation. And thanks so Ravi for joining us. So today I would go through Penang and Malaysia just to introduce you about the city and the state and why you should move to the Lang. And then as you see, you can see from the map, here is an island plus a pit of a mainland on the peninsula itself and you to the south of Singapore and to the north, you have five. And so it’s basically one of the second smallest states in name in, in Malaysia and, and the island is about 400 square kilometers and the mainland is about 700 square kilometers. So I’ll take you through quickly about what is life like in the name and what is there to support business and why we are into the attracting digital nomads to come to the name because of the startup ecosystem that we have as well as in the manufacturing system ecosystem that we have. So the name was founded in 1786 by captain Francis light. So there’s obviously quite a lot of still residual colonial buildings and has been zone under UNESCO world. Heritage Georgetown is a heritage site. So you have religious sites as well as traditional traits and landmarks that are left over from colonial days. So places of worship, because it’s a multicultural, multi diverse community. So you have a basis of worship as well as English is widely spoken here also on the island itself. There’s a huge reserve in terms of recreation and parks and gardens. And that’s basically, in fact, we’ve just been recently awarded also the <inaudible> is awarded the UNESCO biosphere site as well. So it’s been perfected as one of the green lungs for the state. So there’s quite a lot of activities, especially if you like hiking, tracking the beach and the sun and the heroes it’s all on, on, in one place in dumps because it was a multicultural amount of diverse the society with a majority Chinese malaise Indians living in the state. So we have many events. We celebrate the Christmas Chinese new year, lunar new year, basically the millennial year, and then also the Indian festivals of populism and the poverty. So also because we are close to Thailand, so there’s a huge Thai community here as well. So it’s linked across, by to the mainland by two bridges, two main one at older bridge, the first bridge. And then the second bridge was built quite recently, across to the mainland. And it also has an international airport that connects you to Dubai and also to cities in China and to Singapore as well. It has pretty good healthcare system. In fact, we are known for medical tourism. So in the region itself, we have a neighboring countries, people from neighboring countries coming to Penang for medical tourism. So they get the surgery and basically a lot of the health care done in the state as well, also as a rich talent pool. And, and as I’ve mentioned earlier, it’s a multi-lingual society. So English is widely spoken also as well as Mandarin, Tamil. And then of course, Malaysia, there are people who speak various dialects as well in Cantonese, Hakim, and also people who can speak Korean and PI as well because we have call centers here and they basically serve multi-lingual companies in the Asia Pacific region. It’s a pretty kind of population in terms of the adult population. So it ranges between half of them, basically between 20 to 60. So that’s a pretty young population in terms of what we have. Yeah. Although a lot of retirees like to come to the name, especially under the relation, my second home program. So in the, we have graduates in various fields and we have quite a few universities here for, I guess, for the major universities here and a top science university is based in the state university science, Malaysia, and then we have other private universities as well. And then lots of other colleges is very active in stem, in stem or steam in terms of education. So it’s very highly encouraged because we need a huge engineering pool to supply to the manufacturing ecosystem in, in the state. And in fact, it contributes to a large percentage of the GDP for the country. The government funds supports a lot of programs, especially with the federal agencies like minder. So if manufacturing companies want to invest in the states, so they would get grants from Pedro in terms of incentive tax incentives. And then for MDA, especially for digital talent, you get a foreign, a visa, a work visa, and then also an entrepreneur scheme in terms of support for grants and also for MSC speakers for pecs. And then also in the north, especially the Northern corridor, which comprises of the four states of the name, Kara Perlis and para they’re actually also part of the Northern corridor. And they will get additional incentives, especially on hiring subsidies. If you hire local graduates to do your startup, then you get a hiring subsidy for fresh graduates as well. I’ll come back to the tax a bit more later. So Penang is kind of known as the Silicon valley of the east in the fact that we have got quite about 300 over a semi-colon and high-tech industries here, the likes of HP Agilent, as well as B brown and medical devices, seven of the top medical device companies, Boston scientific, they are all here and Broadcom. So the semi-colon companies, even lung research has just opened recently, micron they’re all based here. So very big manufacturing, especially in high-tech and manufacturing. Also a startup ecosystem that we have in terms of the successes that we have. In fact, quite a lot of them exhibit, for example, deliver it has been bought up by Asia job street has been bought up as well and listed. And then, and then several other startups in that actually born out of Pinang. Although we are looking still for the unicorn, the cost of a business working in here, so affordable coworking space. So price range of about a 50 to 600 gate, which is about 60 to 150 us dollars. So about one us dollar is about foraging it a four and a half ring date. And so you have a pretty affordable coworking spaces. So in the Georgetown area alone, these are all the coworking spaces and they are basically within less than five or 10 minutes drive from each other. So, and then across on the mainland as well, there’s also lots of other short-term coworking space. This is probably even a service suites in terms of service streets, in terms of offices. It’s also available on the mainland and also on the island. So there’s, this is the island itself. And then on the mainland is where a lot of the industrial manufacturing is only, there’s only one industrial park on the island and the other nine are on the mainland itself. The accommodation is quite affordable, so you’ve got various co-living. And actually also there’s like public school, for example, it’s actually a school that teaches technology. They provide co-living as well as coworking space. And then you have other co-living spaces around nearby, and they’re all in the heritage area.So they are basically prewar houses or renovate that for the purposes of co-living the cost of living. Obviously, as you can see, compared to the other cities like Columbia and New York, Singapore, it’s quite low in terms of the cost of living. And pretty much as you can see in terms of cost of a meal, for example, a burger, I guess, because the same from Carol and benign, but the cost of living and fitness clubs and all that, it’s definitely a lot lower compared to the capital, for example, in Kuala Lumpur or Singapore. Okay, here’s the tax bit that I want to just share a bit. So the personal, personal income tax ranges, and obviously the, you don’t get texts for the first 5,000 ringgit. And, and then beyond that is on a sliding scale and basically progressive tax or up to, I guess, a max of 30% on the pecs for an income bracket of 2 million a year. And then, and then on the right side is basically corporate tax that I wanted to share, which is basically on the first 600,000 is 70%. And then subsequent to that is basically 24% paid up capital of more than 2.5 billion. And then after that, it’s a flat rate tax of 24. The withholding tax is again, same thing, I guess there’s always with holding tax if looking at non-residents. So there’s a withholding tax, but compared to the US is a lot lower, I think US is about 33%. So here it’s a lot lower than that. There’s also an option to fill out a lab. One of short account, one is across east Malaysia, it’s just another island and it’s basically set up for offshore accounts and you can open.And it’s literally almost zero to, I don’t know, in some circumstances there may be 3% tax, but usually it’s zero tax. And then basically you only need to have a bit of capital of one us dollars and you can, you can open a multicurrency account for Penn for 50K US and it’s lab. One is a Freeport. And so there’s no import export duties. The other scheme that is available is Malaysia My Second Home. So this is basically you get a residence visa for 10 years, but the minimum age has not been raised to 35 and you need to have a monthly income or a liquid assets of 1.5 million ringgit, and then a fixed deposit of 1 million ringgit. And then you must spend at least 90 days a year in Malaysia and an annual visa fee of 500 ringlets. So that’s basically the, my Malaysia, my second home. And a lot of people have chosen the name to be one of the residents in Asia. So the creative digital district is basically where our office is based in digital Penang. And here is basically the heritage area that I showed you earlier. And this is where a lot of the startup activity is happening in this area. And a lot of the coworking spaces also in this area, the ability for you to Mingo and in fact, Draper startup house is actually set up in this location as well, right? And they are bringing in startups from Scandinavia Penang. Basically the focus is on deep technology and we have basically hardware companies. We have AI chip design companies, the minute they also manufacture wearable devices. So if you have a startup that you’re thinking of doing a prototype or MVP, invariable devices and stuff, so there are lots of local companies that are able to do your prototype for you in terms of doing that. And so that’s where the hardware and engineering guys are skilled in. And then there’s also the software guys who are also skilled and develop and focus in AI, software development and engineering. And basically in this key sectors that we have right in healthcare logistics, tourism, FinTech, and basically supporting also the E the electric electrical and electronics manufacturing industry. So just to talk a bit about the coworking space. So if you have a co-working space, which is a desktop 60 ringgit, well start from 50 ringgit per month, which is less about 12 US dollars a month, a year. It will handle all these things to you in terms of mail and the meeting rooms. You can have access to doing the event space and also the community in the city square sandbox. And then there’s also private offices for rental. If you need them. And inside here, if you have a startup and we have our working co-working partners, for example, with Amazon, you can get credits with Amazon for, I think it’s 5,000 us dollars if I’m not mistaken. Yeah. Okay. That’s all I have to share. Thank you, Derren.
DERREN JOSEPH:
Well, fantastic. Thanks for giving us that brief, but quite comprehensive overview on the landscape in Penang and how it is an attractive proposition for those that would be location independent and looking for base to, to get work done. But understandably, we live in uncertain times, right. You know, things, things are happening, you know, and I would imagine that has had some impact as well. So specifically, how difficult is it to get to Malaysia right now in terms of the requisite visas and stuff like that? Is it the same as you’ve described it’s a pretty straightforward process or is there anything else that someone needs to like consider or prepare for, to get a requisite visa and what is the right type of visa to enable someone to take advantage of the pin and opportunity?
TONY YEOH:
Right. So I think if it is, if first of all is you have to be fully vaccinated now to travel to, like, I think in most countries, now you have to prove of vaccination and must be the vaccines that are recognized by who, so I guess Pfizer AstraZeneca even Sinovac is recognized. So if you can prove that then you are able to travel to Malaysia. I guess there are some countries that have already been designated and open for that travel. So you can come on a tourist visa and then I guess, look at what’s available here, see whether you like it. And then you can start to see if you want to set up any corporate accompany here. And then you can then go ahead and apply for, I guess, basically to convert, to see whether you are eligible to do your startups. And there will be that startup program on the end, and that you could apply for that talent visa, and then basically do your asset entrepreneur that you would get be eligible for that entrepreneurship with some,
DERREN JOSEPH:
Okay. So just, you know, just to kind of quickly summarize for those that may have missed it. What are generally, I know it’s not an immigration discussion, but what are the general requirements that someone needs to have to qualify for that entrepreneurship visa generally top line?
TONY YEOH:
Yeah. I guess you prove that you’re a startup and that is a startup that is in deep tech or in one of the areas. I think that, that you are going to set up a base in Penang or for that matter in KL, then you will be able to apply. Are there are some requirements I cannot remember, but you do. Shivas is my guy here and he used to be from MDECK. So maybe he is able to share a bit more.
SHIVAS:
Okay. Hi everyone. Good day. Thanks for the opportunity. So, yes. What is tech? We style technical, not visa. Some of the requirements is as, as Tony highlighted, it should be in deep tech. It should be a startup. The startup founder has some form of recognition from their country, from a coworking space or from the community there. And then, and then they should also be engaging one of the startup hubs in Malaysia. Okay. And, and the startups will also facilitate by recommending the startup to Malaysia. So, so we can pass this state with all those process. If there’s a startup interested in getting into Malaysia will be more than happy to connect you with the ecosystem, trying to help you facilitate you your visa.
DERREN JOSEPH:
Okay. Understood. Understood. And would that entrepreneur need to form a Malaysian company, a cinder in Barrhead? Yes. Okay. And of course, for those who may not be aware, there are some minimum capital requirements. Am I correct in saying that?
SHIVAS:
Yes, there is a minimum capital requirement for fall. Basically there’s two parts. One is that if it’s a syndrome, heart, and it’s a, what do you call that? It’s, you’re not coming in through the techno promo visa, then your minimum paid-up capital requirement for fully foreign owned companies, about half a million ringgit or 125,000 USD. Right. And for the enterprise provable visa, then it’s much more basically it’s a very minimum summit, but the major thing is that tech it’s a startup founder and the recommendation.
DERREN JOSEPH:
Right. Is the recommendation, but just, you know, just to kind of, to let people know what that threshold is. Can you give like a ballpark? I still haven’t paid up capital should be okay.
TONY YEOH:
I think it’s 50,000 ringit now. I should have Google
RAVINDRAN NARAYANASAMY:
Based on the EAP that you are going to apply and believe if I understand correctly, because if let’s say your EP, you’re going to apply more means your beta capital should be more, but the minimum is what Shivas told, I think the minimum is 500K.
SHIVAS:
Yeah. No. Okay. So basically, if you are wanting to hire locals, that’s no issues. If you’re bringing in more foreigners, then it’s not only about the beta capital, but also about the size of your office, all those things met us. Right? So because we have MSC companies, large companies still at 500,000 P that can be done, but it depends on the activities. Depends on the average salary of this person who’s coming from overseas and all those. And of course there should be a balance of 70, 30 local employment. Let me look into that visa, beta Capitola, because I used to. yeah. Let me just share screen. Yeah. So this is what it is. So if you are a new type entrepreneur, one year professional visit visa. So if you go to the MPAC dot mine, this website here, you’ll be able to see that, right. So one year professional visit pass. So you just new entrepreneur then for the founder or co-founder with no track record of established business, basically you’ll be eligible for that visa, but if you’re an experienced one, then you get five years. Right. So, but then you need to prove that your track record of your business for two years, and then you’re also eligible to bring your dependence.
TONY YEOH:
And then rest is the five-year resident past established visa, which is basically for a tech investor. This is more than the investor rather than the entrepreneur itself.
DERREN JOSEPH:
Okay. Yeah. So this is pretty good to this is a pretty good resource. So for those who may be listening, I may not be seeing the screen right now. MDEC.MY forward slash MTEP is what you’re looking for. And if you are a new tech entrepreneur, so you don’t have that experience, I can see that the minimum that you’d need to show would be 50,000 ringgit. She had mentioned earlier, so about 12,000 us dollars about, yeah. Okay. That’s, that’s great. And right now, of course you need to be fully vaccinated and stuff like that. What are the processing times roughly:
TONY YEOH:
Across the same time? I think it’s a, if you get a visa as a tourist to come in, you can stay here and then apply. And it ranges, I guess, from, I dunno, or any experience
SHIVAS:
In average about two to three months. Right? So what we, what we, the entire process is done online, so we’ll start processing it and then they will basically present it to the immigration for the technical knowledge. So the entire process would take about two to three months.
DERREN JOSEPH:
Okay. <inaudible> the country. Do you need to exit and reenter or would it be all
SHIVAS:
Normally in, during my days in what we will recommend to them is that start engaging the coworking spaces or the digital hubs in Malaysia, and then start the application before they come to Malaysia. Okay. Okay. That’s the recommendation. Then they talk to the public in space. Then we try to get them the FFT stuff before they come to the leisure. Right. If they are already in Malaysia with a tourist visa and they are applying for Emterra first deputy, they have to go out.
DERREN JOSEPH:
Okay. Understood that. That’s great to know. So let’s pivot a bit now onto the tax side, of course, being, being, tax professionals. So, I’m not making this up. I literally was speaking with an entrepreneur yesterday. He is in another country. I don’t want, I don’t want to say where he is, but he’s having a seize and a process of successfully exiting a tech company that he founded. And he’s going to be walking away with, let’s say the low eight figures in the US and he mentioned Pinon. He, I didn’t bring it up. And he said, he’s thinking of coming to Penang. Now, the thing is he has, you know, so it’s not just him, but other successful nomads entrepreneurs, they may have passive income from other investments or from other companies that they would have been involved in. Now, historically Malaysia was quite attractive because essentially it was territorial tax, right? So you would pay tax on income arising from within Malaysia, but there are some exceptions. I know it’s nuanced, but generally speaking, if you had investment income from outside of Malaysia, that was being taxed, et cetera, et cetera, it would not be taxed by the, by the revenue Malaysia. But I understand that that may be changing. Anyone want to comment on that?
RAVINDRAN NARAYANASAMY:
Yeah. Starting next year, January 2020 income barometer, back to Malaysia for an income source. When we come back from, they will be subject to tax. So we still, they will came out some guidelines, but we’re still waiting for further information from the income income tax. But generally most of the income will be tax except for capital gains.
TONY YEOH:
Yeah. So only if you remit that income back, right. So if you keep your income overseas, then if you just keep what is enough to sustain your day-to-day living, then you don’t need to remit that income back. So it’s not subject to tax.
RAVINDRAN NARAYANASAMY:
Yeah. But I think it would be a difficult position to not to repeat back, you see
TONY YEOH:
<inaudible> a million, a million ring get deposit. Right. So, and if they buy, they bring in that initial sum, then I think it’s probably the interest income from that is enough to, to survive in Pennsylvania.
DERREN JOSEPH:
So, because that’s a good point that Ravi raised that, you know, it’s good. Well, first of all, it’s good that it’s on the remittance basis, right? So it’s not like for example, nearby in Indonesia, for those people who may be based in Bali, it’s not like Australia. It’s not like New Zealand where you will pay tax on it, even though regardless of where it resides, because you’re going to be tasked with your worldwide income. Malaysia is potentially saying, no, you can have investment income outside, but once you don’t bring it in, it’s not going to be taxed. But if you are an entrepreneur and you dare to start a company before things turn profitable, right, you need to live so you need to bring it in. So is it the strategy around this is to open an account and get the money into Malaysia before things that before the clock starts ticking, you know, is that how it would work?
RAVINDRAN NARAYANASAMY:
Yeah. Technically they have given a grace period from first, January, 2020 until the teacher 20, 20 to six months period. They are given during this period any amount remitter from the OCS, the tax only at 3%. It’s not a corporate rate of 24%. So this, these guidelines just came on yesterday. So we are waiting for further update on this because there are so many unanswered questions to linking, but only 3% is good also because it encouraged a lot of people to bring back the money for.
SHIVAS:
And this is also a Malaysia to comply on the global minimum texts. So if not, if the Malaysia doesn’t comply, then it will get into the grade east of the us and view. Right? So, so it’s basically to comply on this global minimum tax. And I think every other country will probably bring something similar.
DERREN JOSEPH:
Well, not exactly because there was some descend from countries like Ireland, one of the arrangements like that, they came to a last minute, was that the threshold for the global minimum, 15% corporate tax is that you have to have a turnover of 750 million euros. So, which is probably not anybody that we’d be talking to on this live stream.
RAVINDRAN NARAYANASAMY:
But at this point, yeah. So yeah, just to add a point here, from my experience as a tax practitioner here in Sydney, a lot of cases reasonably, you can see, you can see they’re doing it to metric the go global standard of ex ex throughs, all these, but end of the day, I think that income tax is looking for revenue X, not to say extra LMU. They try to close all those loopholes on this revenue. That means income, not with pocket for, or not subject. Technically it is subject for tax because of certain provision in the act is the income tax couldn’t exit okay. Actually, this, this provision came in 2004. It is clearly say under schedule 628 of the income tax state, any amount remitted from OSI sauce. Okay. Is exam context, except for three industry, there is banking shipping and another one. Okay. I couldn’t recall. I think maybe yeah. Right. Something like that. Okay. So these are this provision. A lot of company take whatever income derived from pouring sauce as thanks to exam. Okay. Like royalty payments. Some of them like royalty payment, this payment, but recently a lot of tax audits going on income tax, going back on this and saying it is based on relation sauce. And this is also one of the things happen is recently last year. I think not lawsuits. Yeah. Sorry. Last year, December income tax one major case. Okay. So the income was remitted from overseas. There was few case before this, at that point in complex lost the case. But recently in December, there was one case in complex. One, the case exists. The income derived from the overseas is taxable in Malaysia because the work is done in militia. Only the services is performed in OCS. So they come in on this way around as long as they can just show the proof. They see your company in registered in militia, your management, English, or director seeping in Malaysia, your personal sitting in issue. Before you do the project, you do the planning, everything in relationship, only think the family and product only you’re going to do in overseas. Okay. So you’re going to do and come back all your job done in militia. So is technically is, is ablation source of income. That’s where they’re coming from, but it’s always, it’s still a gray area. You’re saying that means a lot of things had to be taken, can do the section. But at the moment in complex also looking, one of the things they are checking is whether the taxpayer have been beholding tax or banks in the country that receiving the income. That’s one of the points plus point that the taxpayer can get as one of the defense to not taxing militia. You see? So we are going, technically, they’re closing on this. I can sit there moving forward. That’s why they come in with the app. We changed the act I say from next year, there’s no more exemption on this because there’s a lot of gray area. A lot of people utilizing it because some of the, my, my clients are so they are not paying issue. They are not paying taxes in OCS. And they are not paying taxes in Malaysia. It’s not to say they don’t want to pay because the provision allows it. But the approach in saying that the prohibition is very general, it’s only state income tax Romita from OSI sauce. It doesn’t say that you have to pay withholding tax where the job is done. So it’s, it’s how you say it’s arguable is based on the facts of the cases, case by case basis. Yeah. That’s my point. Yeah.
DERREN JOSEPH:
That’s great. That’s for clarifying and adding to that, Tony, you also mentioned lab one and I understand that. Well, that’s not this year, but I think it was last year and correct me if I’m wrong, guys, that there was some changes in the rules for level one companies as well. Can anyone comment on that?
TONY YEOH:
Yeah. Probably Ravi, you should comment on that.
RAVINDRAN NARAYANASAMY:
Yeah. I have a small slide here. Maybe I can share this. You can see the slide. Yup. Okay. Just a quick one. I got few things to me here. Okay. First is a substance requirement. So last time there was no substance requirement in the act itself. They insist to have a suspense substance requirement, but in the act they don’t have such a cross. You say, what are the substance? What I’m meaning their requirements. But since 2019 January, they started this they implemented from first, January, 2020. But I think supposed to start in 2019, because there’s a lot of backlash from the industry level industry, especially the insurance, then the delay. And then they implement this starting from first, January 2020s. So they say, must have assessed a substance. That means substance means you must have an office there. You must have a minimum staff. You must have a minimum expenditure. So it’s depends on industry based. It’s not, it’s a blanket requirement that you must have. So much of stuff is based on the industry you are in this industry needs. You must have so much off stock example, like a holding company. They said, you must have minimum two employees in Labuan. You must have a physical office there. And the minimum expenditure for the year must be 50 K, but a okay to comply. If you don’t comply to it, what happens is you will be taxed on 20% flat rate for the net profit. Okay. But as you know, lab one tax at the moment, it’s only 3%. So you won’t enjoy the 3% texts before you couldn’t fulfill the requirement. You will be taxed at 24%. So that is the main thing on the substance requirement, then abolishment or next flat rate. Okay. Because there’s option before this, either you pay 20K, or you opt to 3% on your net profit. Okay. So they have lifted this 20 K bench. That means there’s no, no more anymore. 20 K you year to pay fixed a 3% based on your net profit. That is the loved one text that is one of eight, then income from intellectual property. Currently it’s Texas company rate. That is 24%. Okay. That is royalty and intellectual property rights. Okay. Okay. Then the other thing is restriction of tax deduction for payments made to a loved one. Company’s ambulation, taxpayer. Okay. Some companies, they don’t want relation company that the other side use loved one as a shell for not paying tax. That means they put all their expenditure here, then weekly, okay. They pro the income here. Then they want, I want this thing. So what they say is whatever expenditure made by the Malaysian company to allow one only certain percentage will be allowed. Okay. For example, here under the rule for interest, you only can deduct 33% of the payment amount, not a lot, sorry. You are not allowed 33%. That means you only can deduct the balance 67% and neatly lease rental. Same other payments, 97%. You only can claim 3%. Okay. So these are the restriction they have made. Okay. That’s the weekly.
DERREN JOSEPH:
Yeah. Thanks for clarifying and giving us that detail, because you know, just, I wasn’t familiar with the, the details of you as you’ve described it, but I know that just anecdotally people within ecosystem and clients who may have been considering lab one, they became a bit hesitant when things happened last year.
RAVINDRAN NARAYANASAMY:
I think these chain changes is in rentable because it’s, I think the ratio, we went to the briefing <inaudible> they said they put no choice. They have to do this because Russia was in, in the stage of being blacklisted, is it picks heaven. So because of this, they did all this because the big five changes all this. So technically it’s unavoidable. Anyway, they still, okay. I think loved one is still okay at the moment. It’s not, that was off. Okay. It’s technically, because the problem is also a lot of companies, they just don’t have a presence. There is just on people most of the companies.
DERREN JOSEPH:
Exactly. Exactly that was. Yeah. And you know for many of our clients, now they’re looking at Hong Kong because Hong Kong is still, well, I know Hong Kong is being, then there’s some sort of negotiation because they are on the brink of being blacklisted as well. But for now they do have, they allow that, that shell company, that, that offshore company would no real substance requirements, at least anyway, but that everything is in a state of flux moving forward though, crypto, I think, you know, not just remote workers or digital nomads, I think many of us have been unable to avoid the law of crypto investments. How, and so let’s say that I moved to Malaysia. How would Malaysia view my crypto gains? Would it be taxed
RAVINDRAN NARAYANASAMY:
At the moment? Yes. It goes under digital text, they are texting it. E-commerce technically is, go on the e-commerce number says looking further on this back recently areas, they are looking at this one is you, your bus active UPU bus. Okay. There are a lot of people actually, since the MCU or they spend the week games, a lot of people are on, we are also looking at it. Okay. Secondly, game gamers, online game, as you’re looking at that also, whatever, because you gave us, you have a competition, all these things, they win money or anything. If you’re frequent gamers, we’re doing that. Is this like your business socially, technically you’re doing that. That is your job really technically. So it’s an income for you and you on and off, you’re doing as a hobby is different, but this person is doing all again. And again, that means that a habitual is technical. Is that, that is income really? So it’s taxable. Then it’s what you’re saying is the crypto, okay. Tipped over a big coins, all these things, selling Bitcoins <inaudible> we are looking on that. So then the other thing is advertising online, advertising, digital advertising at the moment they already advertising at the moment, it’s already fallen the royalty. So they are looking further to tax it also under income tax, as an e-commerce and commerce.
DERREN JOSEPH:
Right? I get it like if you’re your gamer or whatever, and you may win some sort of digital currency, I get that. So that’s a winning. So that’s like an earning that’s income, but what if it’s capital gains? So I moved to Malaysia and I had, you know, 10 coins in whichever, you know, and I, I, you know, after a while I sold it, that’s capital gains. Would that capital gains be taxable?
RAVINDRAN NARAYANASAMY:
Okay. At the moment, Malaysia don’t have a capital gain tax. As long as you can prove it is a capital gain. It won’t be next, including the foreign source income. I told you that you’re going to be texts from first, January, 2012. So it’s only income taxable. That means the income has fall under the income tax tech, 1967 as an income to be taxed. If a capital B, if you bring back a capital gain is not taxable. Let’s say you have a property in Australia, you sell off the property, the companies and other property. Then they bring back the money. That is a capital gain. You won’t be exed. Okay. Unless they changed the rule tax capital gain, that is a different scenario.So at the moment, as it’s stays, there’s no capital gain tax except for real property gain tax from property that disposed in Malaysia.
DERREN JOSEPH:
Okay. So that I can breathe a sigh of relief now. So someone moves to Malaysia, they have the whichever corner it may be, and they sell it once they can demonstrate because they want to, they may need it to invest in whatever they’re trying to do in Malaysia. So as long as they can demonstrate it with capital gains, it should be tax-free at this point anyway. Okay. Gotcha. Gotcha. Okay. That’s that’s fantastic. Can any one another program that was pretty popular for those who wanted to stay in Malaysia? I know it may not be related to entrepreneurship, but I personally have clients long-term clients who have, who live in Phnom Penh, under MMT wage. They’ve been recent changes to the M two H programs. Can any of you comment on that?
RAVINDRAN NARAYANASAMY:
Yeah. I have a small slide on there. We can share. So Tony, you want to add means later you can add in just, you all can see my slide.
DERREN JOSEPH:
We were still seeing the Labuan. Okay.
RAVINDRAN NARAYANASAMY:
Yeah. Okay. No, the first one is the monthly income requirement to qualify. Last time was 10 K Malaysian ringgit, 10 K. Now increased to 40 K. That is for Greece. Okay. Is roughly around us nine, five as what is income? A year. Okay. You need to show liquidation asset 1.5 million. Okay. That, okay. So earlier you said previously it’s only 150,000 readership age, 50 years and 300,000 for those under 50 years. So now increase for 1 million is, is the technically the 1.5 million with the break it up in the FB, 1 million. So it’s quite a high figure. Okay. You must be Spang in relation 90 days a year in Malaysia is a minimum requirement. The minimum age increase from 21 to 35 for principle application, technically. Okay. Then this is technically the fees. Okay. For the application has been increased immigration place. Now 10 degrees I, 5,000 is nothing for <inaudible> point is the income. Okay? Cause I all six cases, the point is the income is for full income increase. Then the minimum placement as a security has increased. Okay. There was a lot of backlash on this. When we talk about this, even though a ton of Jehu is very upset about this, because I think he have a lot of business associates under MME because Joel is a big nearer to Singapore. So technically this is not new. What he saying that, but then the government, it looks like doesn’t when to back their foot, they’re going, based on this, what they told us this study was done quite some time ago, all the agency and Pittman wall, the related party had been called. They said, what they found out is some of the people are using this. Mm, two H as a transit Neisha as a transit to do illegal activities. We don’t know how true is it. So they want to get a really person who quality can see a quality person who really qualify for M to H to apply it. That’s why we are saying, okay. But anyway, what they have lesson, a big loosen, a bit of the requirement is they say of all those requirements, those existing M and two H they only need to comply two conditions. One is the 90 days requirement in Malaysia. The other one is the increased fee on the application. Okay. There’s at the moment they say they can, at the moment they are waving the secret security deposit that they increase. They won’t comply further. The current one who are the under the program, they want to review, they can still fold or at S as it now.
DERREN JOSEPH:
And what about the age? Cause it’s gone up to 35 for the principal applicant rank. So if someone is already on the M two H and they are younger than 35, what happens?
RAVINDRAN NARAYANASAMY:
It won’t have any, because they told only that two conditions when you, that two conditions, grandfather the existing.
DERREN JOSEPH:
Yeah. Okay. Thank you for that. That that’s good to know. That’s good to know. Another question that I had from the client that I was speaking to yesterday, the one who is considering coming to Pinon from another jurisdiction was, you know, he is, he he’s running businesses online, right? So, you know, he’s doing, I wouldn’t say what it is, but he’s doing e-commerce type businesses online. So we, I think we reviewed the, the tax part of it, but there’s also being part of an ecosystem because we spoke about all of the coworking spaces. I’ve been to pinata myself multiple times. I have gone to several coworking spaces. We’ve worked there, we’ve given presentation to members there. So I’m quite familiar with it. And one of the good things about Pinang is being, is connecting with that ecosystem and attending the networking events that happen in those spaces because of the, the restrictions. I would imagine that that may or may not be possible. And if it’s not possible right now, I know you don’t have a crystal ball, but can you estimate when things would be opened up to the extent that they can be that sort of business networking again in Penang.
TONY YEOH:
Actually we are beginning to have the activities happening again, physical activities. So as long as we comply to the social distancing requirements, right? So I think, for example, the S the space distance, then we can hold events. In fact, we were planning to do that from next month onwards in, in our co-working space. So I think that’s going to start to get up actually next year, September 2022, Penang is the host city for world Congress in it. And hopefully, hopefully it’s going to be a physical event, but we never know.But even if it’s not, maybe it’s going to be a hybrid event at a minimum. In fact, people are already holding conferences and I’m, I’ve been attending physical conferences already. Yeah.
DERREN JOSEPH:
Okay. And are there like any capacity constraints? Like not more than 50 people?
TONY YEOH:
It all depends on the size of the ballroom and the size of the space.
DERREN JOSEPH:
Okay. Okay. Yeah, that’s great. Let me any, if anyone has any questions, if you are on zoom, you can type in the box below, or you can mute yourself and ask questions in the 10 minutes or so we have left. If you’re on Facebook, please feel free to type your questions in the box underneath. Same on LinkedIn. If you have any questions, feel free to type your questions in the box underneath the, the stream itself. So I’m just going to have a quick look to see if anyone has asked any questions on those other platforms. I think no, we’re good. We’re good. So, w on that note, Tony, what’s, what’s the best way. I know you typed it in the zoom box that your, your contact, but could you say it aloud just in case someone is on a platform, what’s the best way to reach you?
TONY YEOH:
So if people want to reach us, just drop us an email at contact at digitalpenang.my or just visit our website. Yeah. But I think contact would be the best. And you just have the title of the subject as digital nomads or moving to Penang, then we’ll follow up with you.
DERREN JOSEPH:
Okay. That’s wonderful. And Ravi, what, the best way for someone to reach you with their highly technical questions and Malaysia tax?
RAVINDRAN NARAYANASAMY:
Yeah. You can always can drop me an email. ravi@rocky thomas.com. Or you can visit us for the information or website rockythomas.com. So we can look at that.
DERREN JOSEPH:
Yeah. So just in terms of full disclosure, so Ravi’s office as an affiliate office of ours under the Moores Rowland and Asia Pacific umbrella. And within Malaysia, we have affiliate offices, not just in KL where Ravi sits, but also on Penang as well, Malacca, JB, Johur Baru, and Sarawak. So there’s pretty comprehensive coverage in Malaysia. So wherever you may be or would like to go, chances are one of all offices or affiliate offices would be nearby. So on that note, thank you for joining us for, if you want to see this recording, it’s obviously being recorded. It would be on Facebook, YouTube, SoundCloud, iTunes, Spotify, basically, wherever you want to get your podcasts. This will be made available as well as on our website, htj.tax. So we do these live streams every week, different jurisdictions, different places of interest, always from a tax perspective. Thank you for joining us and we’ll see you next time.
VOICE-OVER:
Here are four ways we can help you.
1. We offer HOLISTIC strategies to help you live that international life. Tax + MIGRATION options.
2. We help you MODEL the tax impact of moving to a new jurisdiction
3. CONTACT us for tax optimization consults over Zoom
4. High Net Worth? We can QUOTE for doing your “US – International” tax returns
Our books and upcoming events are available at HTJ.tax. Please subscribe like, share and comment down below or email us at help@htj.tax to engage us to advice on international tax or business matters.
Skip to content
Taxes in Malaysia – including MM2H, Entrepreneur Visas, Penang and Labuan – November 10th 2021
VOICE-OVER:
This podcast channel it’s about you, successful international entrepreneurs, successful ex-pats, successful investors. Sponsored by HTJ.tax
DERREN JOSEPH:
Okay, good evening, gentlemen and ladies, thank you for joining us here on hj.tax. A member of Moores Rowland in Asia Pacific today, we’re going to talk about the advantage of Penang for those remote workers. It’s nomads location, independent entrepreneurs. So to help us to guide us through that discussion, we have Tony Yeoh as well as Ravi from our affiliate office in KL to handle like the tax side of things.So without further ado, I will hand it over to you, Tony, you have the mic.
TONY YEOH:
Great. Thank you. Thanks Darren. Thanks for the invitation. And thanks so Ravi for joining us. So today I would go through Penang and Malaysia just to introduce you about the city and the state and why you should move to the Lang. And then as you see, you can see from the map, here is an island plus a pit of a mainland on the peninsula itself and you to the south of Singapore and to the north, you have five. And so it’s basically one of the second smallest states in name in, in Malaysia and, and the island is about 400 square kilometers and the mainland is about 700 square kilometers. So I’ll take you through quickly about what is life like in the name and what is there to support business and why we are into the attracting digital nomads to come to the name because of the startup ecosystem that we have as well as in the manufacturing system ecosystem that we have. So the name was founded in 1786 by captain Francis light. So there’s obviously quite a lot of still residual colonial buildings and has been zone under UNESCO world. Heritage Georgetown is a heritage site. So you have religious sites as well as traditional traits and landmarks that are left over from colonial days. So places of worship, because it’s a multicultural, multi diverse community. So you have a basis of worship as well as English is widely spoken here also on the island itself. There’s a huge reserve in terms of recreation and parks and gardens. And that’s basically, in fact, we’ve just been recently awarded also the <inaudible> is awarded the UNESCO biosphere site as well. So it’s been perfected as one of the green lungs for the state. So there’s quite a lot of activities, especially if you like hiking, tracking the beach and the sun and the heroes it’s all on, on, in one place in dumps because it was a multicultural amount of diverse the society with a majority Chinese malaise Indians living in the state. So we have many events. We celebrate the Christmas Chinese new year, lunar new year, basically the millennial year, and then also the Indian festivals of populism and the poverty. So also because we are close to Thailand, so there’s a huge Thai community here as well. So it’s linked across, by to the mainland by two bridges, two main one at older bridge, the first bridge. And then the second bridge was built quite recently, across to the mainland. And it also has an international airport that connects you to Dubai and also to cities in China and to Singapore as well. It has pretty good healthcare system. In fact, we are known for medical tourism. So in the region itself, we have a neighboring countries, people from neighboring countries coming to Penang for medical tourism. So they get the surgery and basically a lot of the health care done in the state as well, also as a rich talent pool. And, and as I’ve mentioned earlier, it’s a multi-lingual society. So English is widely spoken also as well as Mandarin, Tamil. And then of course, Malaysia, there are people who speak various dialects as well in Cantonese, Hakim, and also people who can speak Korean and PI as well because we have call centers here and they basically serve multi-lingual companies in the Asia Pacific region. It’s a pretty kind of population in terms of the adult population. So it ranges between half of them, basically between 20 to 60. So that’s a pretty young population in terms of what we have. Yeah. Although a lot of retirees like to come to the name, especially under the relation, my second home program. So in the, we have graduates in various fields and we have quite a few universities here for, I guess, for the major universities here and a top science university is based in the state university science, Malaysia, and then we have other private universities as well. And then lots of other colleges is very active in stem, in stem or steam in terms of education. So it’s very highly encouraged because we need a huge engineering pool to supply to the manufacturing ecosystem in, in the state. And in fact, it contributes to a large percentage of the GDP for the country. The government funds supports a lot of programs, especially with the federal agencies like minder. So if manufacturing companies want to invest in the states, so they would get grants from Pedro in terms of incentive tax incentives. And then for MDA, especially for digital talent, you get a foreign, a visa, a work visa, and then also an entrepreneur scheme in terms of support for grants and also for MSC speakers for pecs. And then also in the north, especially the Northern corridor, which comprises of the four states of the name, Kara Perlis and para they’re actually also part of the Northern corridor. And they will get additional incentives, especially on hiring subsidies. If you hire local graduates to do your startup, then you get a hiring subsidy for fresh graduates as well. I’ll come back to the tax a bit more later. So Penang is kind of known as the Silicon valley of the east in the fact that we have got quite about 300 over a semi-colon and high-tech industries here, the likes of HP Agilent, as well as B brown and medical devices, seven of the top medical device companies, Boston scientific, they are all here and Broadcom. So the semi-colon companies, even lung research has just opened recently, micron they’re all based here. So very big manufacturing, especially in high-tech and manufacturing. Also a startup ecosystem that we have in terms of the successes that we have. In fact, quite a lot of them exhibit, for example, deliver it has been bought up by Asia job street has been bought up as well and listed. And then, and then several other startups in that actually born out of Pinang. Although we are looking still for the unicorn, the cost of a business working in here, so affordable coworking space. So price range of about a 50 to 600 gate, which is about 60 to 150 us dollars. So about one us dollar is about foraging it a four and a half ring date. And so you have a pretty affordable coworking spaces. So in the Georgetown area alone, these are all the coworking spaces and they are basically within less than five or 10 minutes drive from each other. So, and then across on the mainland as well, there’s also lots of other short-term coworking space. This is probably even a service suites in terms of service streets, in terms of offices. It’s also available on the mainland and also on the island. So there’s, this is the island itself. And then on the mainland is where a lot of the industrial manufacturing is only, there’s only one industrial park on the island and the other nine are on the mainland itself. The accommodation is quite affordable, so you’ve got various co-living. And actually also there’s like public school, for example, it’s actually a school that teaches technology. They provide co-living as well as coworking space. And then you have other co-living spaces around nearby, and they’re all in the heritage area.So they are basically prewar houses or renovate that for the purposes of co-living the cost of living. Obviously, as you can see, compared to the other cities like Columbia and New York, Singapore, it’s quite low in terms of the cost of living. And pretty much as you can see in terms of cost of a meal, for example, a burger, I guess, because the same from Carol and benign, but the cost of living and fitness clubs and all that, it’s definitely a lot lower compared to the capital, for example, in Kuala Lumpur or Singapore. Okay, here’s the tax bit that I want to just share a bit. So the personal, personal income tax ranges, and obviously the, you don’t get texts for the first 5,000 ringgit. And, and then beyond that is on a sliding scale and basically progressive tax or up to, I guess, a max of 30% on the pecs for an income bracket of 2 million a year. And then, and then on the right side is basically corporate tax that I wanted to share, which is basically on the first 600,000 is 70%. And then subsequent to that is basically 24% paid up capital of more than 2.5 billion. And then after that, it’s a flat rate tax of 24. The withholding tax is again, same thing, I guess there’s always with holding tax if looking at non-residents. So there’s a withholding tax, but compared to the US is a lot lower, I think US is about 33%. So here it’s a lot lower than that. There’s also an option to fill out a lab. One of short account, one is across east Malaysia, it’s just another island and it’s basically set up for offshore accounts and you can open.And it’s literally almost zero to, I don’t know, in some circumstances there may be 3% tax, but usually it’s zero tax. And then basically you only need to have a bit of capital of one us dollars and you can, you can open a multicurrency account for Penn for 50K US and it’s lab. One is a Freeport. And so there’s no import export duties. The other scheme that is available is Malaysia My Second Home. So this is basically you get a residence visa for 10 years, but the minimum age has not been raised to 35 and you need to have a monthly income or a liquid assets of 1.5 million ringgit, and then a fixed deposit of 1 million ringgit. And then you must spend at least 90 days a year in Malaysia and an annual visa fee of 500 ringlets. So that’s basically the, my Malaysia, my second home. And a lot of people have chosen the name to be one of the residents in Asia. So the creative digital district is basically where our office is based in digital Penang. And here is basically the heritage area that I showed you earlier. And this is where a lot of the startup activity is happening in this area. And a lot of the coworking spaces also in this area, the ability for you to Mingo and in fact, Draper startup house is actually set up in this location as well, right? And they are bringing in startups from Scandinavia Penang. Basically the focus is on deep technology and we have basically hardware companies. We have AI chip design companies, the minute they also manufacture wearable devices. So if you have a startup that you’re thinking of doing a prototype or MVP, invariable devices and stuff, so there are lots of local companies that are able to do your prototype for you in terms of doing that. And so that’s where the hardware and engineering guys are skilled in. And then there’s also the software guys who are also skilled and develop and focus in AI, software development and engineering. And basically in this key sectors that we have right in healthcare logistics, tourism, FinTech, and basically supporting also the E the electric electrical and electronics manufacturing industry. So just to talk a bit about the coworking space. So if you have a co-working space, which is a desktop 60 ringgit, well start from 50 ringgit per month, which is less about 12 US dollars a month, a year. It will handle all these things to you in terms of mail and the meeting rooms. You can have access to doing the event space and also the community in the city square sandbox. And then there’s also private offices for rental. If you need them. And inside here, if you have a startup and we have our working co-working partners, for example, with Amazon, you can get credits with Amazon for, I think it’s 5,000 us dollars if I’m not mistaken. Yeah. Okay. That’s all I have to share. Thank you, Derren.
DERREN JOSEPH:
Well, fantastic. Thanks for giving us that brief, but quite comprehensive overview on the landscape in Penang and how it is an attractive proposition for those that would be location independent and looking for base to, to get work done. But understandably, we live in uncertain times, right. You know, things, things are happening, you know, and I would imagine that has had some impact as well. So specifically, how difficult is it to get to Malaysia right now in terms of the requisite visas and stuff like that? Is it the same as you’ve described it’s a pretty straightforward process or is there anything else that someone needs to like consider or prepare for, to get a requisite visa and what is the right type of visa to enable someone to take advantage of the pin and opportunity?
TONY YEOH:
Right. So I think if it is, if first of all is you have to be fully vaccinated now to travel to, like, I think in most countries, now you have to prove of vaccination and must be the vaccines that are recognized by who, so I guess Pfizer AstraZeneca even Sinovac is recognized. So if you can prove that then you are able to travel to Malaysia. I guess there are some countries that have already been designated and open for that travel. So you can come on a tourist visa and then I guess, look at what’s available here, see whether you like it. And then you can start to see if you want to set up any corporate accompany here. And then you can then go ahead and apply for, I guess, basically to convert, to see whether you are eligible to do your startups. And there will be that startup program on the end, and that you could apply for that talent visa, and then basically do your asset entrepreneur that you would get be eligible for that entrepreneurship with some,
DERREN JOSEPH:
Okay. So just, you know, just to kind of quickly summarize for those that may have missed it. What are generally, I know it’s not an immigration discussion, but what are the general requirements that someone needs to have to qualify for that entrepreneurship visa generally top line?
TONY YEOH:
Yeah. I guess you prove that you’re a startup and that is a startup that is in deep tech or in one of the areas. I think that, that you are going to set up a base in Penang or for that matter in KL, then you will be able to apply. Are there are some requirements I cannot remember, but you do. Shivas is my guy here and he used to be from MDECK. So maybe he is able to share a bit more.
SHIVAS:
Okay. Hi everyone. Good day. Thanks for the opportunity. So, yes. What is tech? We style technical, not visa. Some of the requirements is as, as Tony highlighted, it should be in deep tech. It should be a startup. The startup founder has some form of recognition from their country, from a coworking space or from the community there. And then, and then they should also be engaging one of the startup hubs in Malaysia. Okay. And, and the startups will also facilitate by recommending the startup to Malaysia. So, so we can pass this state with all those process. If there’s a startup interested in getting into Malaysia will be more than happy to connect you with the ecosystem, trying to help you facilitate you your visa.
DERREN JOSEPH:
Okay. Understood. Understood. And would that entrepreneur need to form a Malaysian company, a cinder in Barrhead? Yes. Okay. And of course, for those who may not be aware, there are some minimum capital requirements. Am I correct in saying that?
SHIVAS:
Yes, there is a minimum capital requirement for fall. Basically there’s two parts. One is that if it’s a syndrome, heart, and it’s a, what do you call that? It’s, you’re not coming in through the techno promo visa, then your minimum paid-up capital requirement for fully foreign owned companies, about half a million ringgit or 125,000 USD. Right. And for the enterprise provable visa, then it’s much more basically it’s a very minimum summit, but the major thing is that tech it’s a startup founder and the recommendation.
DERREN JOSEPH:
Right. Is the recommendation, but just, you know, just to kind of, to let people know what that threshold is. Can you give like a ballpark? I still haven’t paid up capital should be okay.
TONY YEOH:
I think it’s 50,000 ringit now. I should have Google
RAVINDRAN NARAYANASAMY:
Based on the EAP that you are going to apply and believe if I understand correctly, because if let’s say your EP, you’re going to apply more means your beta capital should be more, but the minimum is what Shivas told, I think the minimum is 500K.
SHIVAS:
Yeah. No. Okay. So basically, if you are wanting to hire locals, that’s no issues. If you’re bringing in more foreigners, then it’s not only about the beta capital, but also about the size of your office, all those things met us. Right? So because we have MSC companies, large companies still at 500,000 P that can be done, but it depends on the activities. Depends on the average salary of this person who’s coming from overseas and all those. And of course there should be a balance of 70, 30 local employment. Let me look into that visa, beta Capitola, because I used to. yeah. Let me just share screen. Yeah. So this is what it is. So if you are a new type entrepreneur, one year professional visit visa. So if you go to the MPAC dot mine, this website here, you’ll be able to see that, right. So one year professional visit pass. So you just new entrepreneur then for the founder or co-founder with no track record of established business, basically you’ll be eligible for that visa, but if you’re an experienced one, then you get five years. Right. So, but then you need to prove that your track record of your business for two years, and then you’re also eligible to bring your dependence.
TONY YEOH:
And then rest is the five-year resident past established visa, which is basically for a tech investor. This is more than the investor rather than the entrepreneur itself.
DERREN JOSEPH:
Okay. Yeah. So this is pretty good to this is a pretty good resource. So for those who may be listening, I may not be seeing the screen right now. MDEC.MY forward slash MTEP is what you’re looking for. And if you are a new tech entrepreneur, so you don’t have that experience, I can see that the minimum that you’d need to show would be 50,000 ringgit. She had mentioned earlier, so about 12,000 us dollars about, yeah. Okay. That’s, that’s great. And right now, of course you need to be fully vaccinated and stuff like that. What are the processing times roughly:
TONY YEOH:
Across the same time? I think it’s a, if you get a visa as a tourist to come in, you can stay here and then apply. And it ranges, I guess, from, I dunno, or any experience
SHIVAS:
In average about two to three months. Right? So what we, what we, the entire process is done online, so we’ll start processing it and then they will basically present it to the immigration for the technical knowledge. So the entire process would take about two to three months.
DERREN JOSEPH:
Okay. <inaudible> the country. Do you need to exit and reenter or would it be all
SHIVAS:
Normally in, during my days in what we will recommend to them is that start engaging the coworking spaces or the digital hubs in Malaysia, and then start the application before they come to Malaysia. Okay. Okay. That’s the recommendation. Then they talk to the public in space. Then we try to get them the FFT stuff before they come to the leisure. Right. If they are already in Malaysia with a tourist visa and they are applying for Emterra first deputy, they have to go out.
DERREN JOSEPH:
Okay. Understood that. That’s great to know. So let’s pivot a bit now onto the tax side, of course, being, being, tax professionals. So, I’m not making this up. I literally was speaking with an entrepreneur yesterday. He is in another country. I don’t want, I don’t want to say where he is, but he’s having a seize and a process of successfully exiting a tech company that he founded. And he’s going to be walking away with, let’s say the low eight figures in the US and he mentioned Pinon. He, I didn’t bring it up. And he said, he’s thinking of coming to Penang. Now, the thing is he has, you know, so it’s not just him, but other successful nomads entrepreneurs, they may have passive income from other investments or from other companies that they would have been involved in. Now, historically Malaysia was quite attractive because essentially it was territorial tax, right? So you would pay tax on income arising from within Malaysia, but there are some exceptions. I know it’s nuanced, but generally speaking, if you had investment income from outside of Malaysia, that was being taxed, et cetera, et cetera, it would not be taxed by the, by the revenue Malaysia. But I understand that that may be changing. Anyone want to comment on that?
RAVINDRAN NARAYANASAMY:
Yeah. Starting next year, January 2020 income barometer, back to Malaysia for an income source. When we come back from, they will be subject to tax. So we still, they will came out some guidelines, but we’re still waiting for further information from the income income tax. But generally most of the income will be tax except for capital gains.
TONY YEOH:
Yeah. So only if you remit that income back, right. So if you keep your income overseas, then if you just keep what is enough to sustain your day-to-day living, then you don’t need to remit that income back. So it’s not subject to tax.
RAVINDRAN NARAYANASAMY:
Yeah. But I think it would be a difficult position to not to repeat back, you see
TONY YEOH:
<inaudible> a million, a million ring get deposit. Right. So, and if they buy, they bring in that initial sum, then I think it’s probably the interest income from that is enough to, to survive in Pennsylvania.
DERREN JOSEPH:
So, because that’s a good point that Ravi raised that, you know, it’s good. Well, first of all, it’s good that it’s on the remittance basis, right? So it’s not like for example, nearby in Indonesia, for those people who may be based in Bali, it’s not like Australia. It’s not like New Zealand where you will pay tax on it, even though regardless of where it resides, because you’re going to be tasked with your worldwide income. Malaysia is potentially saying, no, you can have investment income outside, but once you don’t bring it in, it’s not going to be taxed. But if you are an entrepreneur and you dare to start a company before things turn profitable, right, you need to live so you need to bring it in. So is it the strategy around this is to open an account and get the money into Malaysia before things that before the clock starts ticking, you know, is that how it would work?
RAVINDRAN NARAYANASAMY:
Yeah. Technically they have given a grace period from first, January, 2020 until the teacher 20, 20 to six months period. They are given during this period any amount remitter from the OCS, the tax only at 3%. It’s not a corporate rate of 24%. So this, these guidelines just came on yesterday. So we are waiting for further update on this because there are so many unanswered questions to linking, but only 3% is good also because it encouraged a lot of people to bring back the money for.
SHIVAS:
And this is also a Malaysia to comply on the global minimum texts. So if not, if the Malaysia doesn’t comply, then it will get into the grade east of the us and view. Right? So, so it’s basically to comply on this global minimum tax. And I think every other country will probably bring something similar.
DERREN JOSEPH:
Well, not exactly because there was some descend from countries like Ireland, one of the arrangements like that, they came to a last minute, was that the threshold for the global minimum, 15% corporate tax is that you have to have a turnover of 750 million euros. So, which is probably not anybody that we’d be talking to on this live stream.
RAVINDRAN NARAYANASAMY:
But at this point, yeah. So yeah, just to add a point here, from my experience as a tax practitioner here in Sydney, a lot of cases reasonably, you can see, you can see they’re doing it to metric the go global standard of ex ex throughs, all these, but end of the day, I think that income tax is looking for revenue X, not to say extra LMU. They try to close all those loopholes on this revenue. That means income, not with pocket for, or not subject. Technically it is subject for tax because of certain provision in the act is the income tax couldn’t exit okay. Actually, this, this provision came in 2004. It is clearly say under schedule 628 of the income tax state, any amount remitted from OSI sauce. Okay. Is exam context, except for three industry, there is banking shipping and another one. Okay. I couldn’t recall. I think maybe yeah. Right. Something like that. Okay. So these are this provision. A lot of company take whatever income derived from pouring sauce as thanks to exam. Okay. Like royalty payments. Some of them like royalty payment, this payment, but recently a lot of tax audits going on income tax, going back on this and saying it is based on relation sauce. And this is also one of the things happen is recently last year. I think not lawsuits. Yeah. Sorry. Last year, December income tax one major case. Okay. So the income was remitted from overseas. There was few case before this, at that point in complex lost the case. But recently in December, there was one case in complex. One, the case exists. The income derived from the overseas is taxable in Malaysia because the work is done in militia. Only the services is performed in OCS. So they come in on this way around as long as they can just show the proof. They see your company in registered in militia, your management, English, or director seeping in Malaysia, your personal sitting in issue. Before you do the project, you do the planning, everything in relationship, only think the family and product only you’re going to do in overseas. Okay. So you’re going to do and come back all your job done in militia. So is technically is, is ablation source of income. That’s where they’re coming from, but it’s always, it’s still a gray area. You’re saying that means a lot of things had to be taken, can do the section. But at the moment in complex also looking, one of the things they are checking is whether the taxpayer have been beholding tax or banks in the country that receiving the income. That’s one of the points plus point that the taxpayer can get as one of the defense to not taxing militia. You see? So we are going, technically, they’re closing on this. I can sit there moving forward. That’s why they come in with the app. We changed the act I say from next year, there’s no more exemption on this because there’s a lot of gray area. A lot of people utilizing it because some of the, my, my clients are so they are not paying issue. They are not paying taxes in OCS. And they are not paying taxes in Malaysia. It’s not to say they don’t want to pay because the provision allows it. But the approach in saying that the prohibition is very general, it’s only state income tax Romita from OSI sauce. It doesn’t say that you have to pay withholding tax where the job is done. So it’s, it’s how you say it’s arguable is based on the facts of the cases, case by case basis. Yeah. That’s my point. Yeah.
DERREN JOSEPH:
That’s great. That’s for clarifying and adding to that, Tony, you also mentioned lab one and I understand that. Well, that’s not this year, but I think it was last year and correct me if I’m wrong, guys, that there was some changes in the rules for level one companies as well. Can anyone comment on that?
TONY YEOH:
Yeah. Probably Ravi, you should comment on that.
RAVINDRAN NARAYANASAMY:
Yeah. I have a small slide here. Maybe I can share this. You can see the slide. Yup. Okay. Just a quick one. I got few things to me here. Okay. First is a substance requirement. So last time there was no substance requirement in the act itself. They insist to have a suspense substance requirement, but in the act they don’t have such a cross. You say, what are the substance? What I’m meaning their requirements. But since 2019 January, they started this they implemented from first, January, 2020. But I think supposed to start in 2019, because there’s a lot of backlash from the industry level industry, especially the insurance, then the delay. And then they implement this starting from first, January 2020s. So they say, must have assessed a substance. That means substance means you must have an office there. You must have a minimum staff. You must have a minimum expenditure. So it’s depends on industry based. It’s not, it’s a blanket requirement that you must have. So much of stuff is based on the industry you are in this industry needs. You must have so much off stock example, like a holding company. They said, you must have minimum two employees in Labuan. You must have a physical office there. And the minimum expenditure for the year must be 50 K, but a okay to comply. If you don’t comply to it, what happens is you will be taxed on 20% flat rate for the net profit. Okay. But as you know, lab one tax at the moment, it’s only 3%. So you won’t enjoy the 3% texts before you couldn’t fulfill the requirement. You will be taxed at 24%. So that is the main thing on the substance requirement, then abolishment or next flat rate. Okay. Because there’s option before this, either you pay 20K, or you opt to 3% on your net profit. Okay. So they have lifted this 20 K bench. That means there’s no, no more anymore. 20 K you year to pay fixed a 3% based on your net profit. That is the loved one text that is one of eight, then income from intellectual property. Currently it’s Texas company rate. That is 24%. Okay. That is royalty and intellectual property rights. Okay. Okay. Then the other thing is restriction of tax deduction for payments made to a loved one. Company’s ambulation, taxpayer. Okay. Some companies, they don’t want relation company that the other side use loved one as a shell for not paying tax. That means they put all their expenditure here, then weekly, okay. They pro the income here. Then they want, I want this thing. So what they say is whatever expenditure made by the Malaysian company to allow one only certain percentage will be allowed. Okay. For example, here under the rule for interest, you only can deduct 33% of the payment amount, not a lot, sorry. You are not allowed 33%. That means you only can deduct the balance 67% and neatly lease rental. Same other payments, 97%. You only can claim 3%. Okay. So these are the restriction they have made. Okay. That’s the weekly.
DERREN JOSEPH:
Yeah. Thanks for clarifying and giving us that detail, because you know, just, I wasn’t familiar with the, the details of you as you’ve described it, but I know that just anecdotally people within ecosystem and clients who may have been considering lab one, they became a bit hesitant when things happened last year.
RAVINDRAN NARAYANASAMY:
I think these chain changes is in rentable because it’s, I think the ratio, we went to the briefing <inaudible> they said they put no choice. They have to do this because Russia was in, in the stage of being blacklisted, is it picks heaven. So because of this, they did all this because the big five changes all this. So technically it’s unavoidable. Anyway, they still, okay. I think loved one is still okay at the moment. It’s not, that was off. Okay. It’s technically, because the problem is also a lot of companies, they just don’t have a presence. There is just on people most of the companies.
DERREN JOSEPH:
Exactly. Exactly that was. Yeah. And you know for many of our clients, now they’re looking at Hong Kong because Hong Kong is still, well, I know Hong Kong is being, then there’s some sort of negotiation because they are on the brink of being blacklisted as well. But for now they do have, they allow that, that shell company, that, that offshore company would no real substance requirements, at least anyway, but that everything is in a state of flux moving forward though, crypto, I think, you know, not just remote workers or digital nomads, I think many of us have been unable to avoid the law of crypto investments. How, and so let’s say that I moved to Malaysia. How would Malaysia view my crypto gains? Would it be taxed
RAVINDRAN NARAYANASAMY:
At the moment? Yes. It goes under digital text, they are texting it. E-commerce technically is, go on the e-commerce number says looking further on this back recently areas, they are looking at this one is you, your bus active UPU bus. Okay. There are a lot of people actually, since the MCU or they spend the week games, a lot of people are on, we are also looking at it. Okay. Secondly, game gamers, online game, as you’re looking at that also, whatever, because you gave us, you have a competition, all these things, they win money or anything. If you’re frequent gamers, we’re doing that. Is this like your business socially, technically you’re doing that. That is your job really technically. So it’s an income for you and you on and off, you’re doing as a hobby is different, but this person is doing all again. And again, that means that a habitual is technical. Is that, that is income really? So it’s taxable. Then it’s what you’re saying is the crypto, okay. Tipped over a big coins, all these things, selling Bitcoins <inaudible> we are looking on that. So then the other thing is advertising online, advertising, digital advertising at the moment they already advertising at the moment, it’s already fallen the royalty. So they are looking further to tax it also under income tax, as an e-commerce and commerce.
DERREN JOSEPH:
Right? I get it like if you’re your gamer or whatever, and you may win some sort of digital currency, I get that. So that’s a winning. So that’s like an earning that’s income, but what if it’s capital gains? So I moved to Malaysia and I had, you know, 10 coins in whichever, you know, and I, I, you know, after a while I sold it, that’s capital gains. Would that capital gains be taxable?
RAVINDRAN NARAYANASAMY:
Okay. At the moment, Malaysia don’t have a capital gain tax. As long as you can prove it is a capital gain. It won’t be next, including the foreign source income. I told you that you’re going to be texts from first, January, 2012. So it’s only income taxable. That means the income has fall under the income tax tech, 1967 as an income to be taxed. If a capital B, if you bring back a capital gain is not taxable. Let’s say you have a property in Australia, you sell off the property, the companies and other property. Then they bring back the money. That is a capital gain. You won’t be exed. Okay. Unless they changed the rule tax capital gain, that is a different scenario.So at the moment, as it’s stays, there’s no capital gain tax except for real property gain tax from property that disposed in Malaysia.
DERREN JOSEPH:
Okay. So that I can breathe a sigh of relief now. So someone moves to Malaysia, they have the whichever corner it may be, and they sell it once they can demonstrate because they want to, they may need it to invest in whatever they’re trying to do in Malaysia. So as long as they can demonstrate it with capital gains, it should be tax-free at this point anyway. Okay. Gotcha. Gotcha. Okay. That’s that’s fantastic. Can any one another program that was pretty popular for those who wanted to stay in Malaysia? I know it may not be related to entrepreneurship, but I personally have clients long-term clients who have, who live in Phnom Penh, under MMT wage. They’ve been recent changes to the M two H programs. Can any of you comment on that?
RAVINDRAN NARAYANASAMY:
Yeah. I have a small slide on there. We can share. So Tony, you want to add means later you can add in just, you all can see my slide.
DERREN JOSEPH:
We were still seeing the Labuan. Okay.
RAVINDRAN NARAYANASAMY:
Yeah. Okay. No, the first one is the monthly income requirement to qualify. Last time was 10 K Malaysian ringgit, 10 K. Now increased to 40 K. That is for Greece. Okay. Is roughly around us nine, five as what is income? A year. Okay. You need to show liquidation asset 1.5 million. Okay. That, okay. So earlier you said previously it’s only 150,000 readership age, 50 years and 300,000 for those under 50 years. So now increase for 1 million is, is the technically the 1.5 million with the break it up in the FB, 1 million. So it’s quite a high figure. Okay. You must be Spang in relation 90 days a year in Malaysia is a minimum requirement. The minimum age increase from 21 to 35 for principle application, technically. Okay. Then this is technically the fees. Okay. For the application has been increased immigration place. Now 10 degrees I, 5,000 is nothing for <inaudible> point is the income. Okay? Cause I all six cases, the point is the income is for full income increase. Then the minimum placement as a security has increased. Okay. There was a lot of backlash on this. When we talk about this, even though a ton of Jehu is very upset about this, because I think he have a lot of business associates under MME because Joel is a big nearer to Singapore. So technically this is not new. What he saying that, but then the government, it looks like doesn’t when to back their foot, they’re going, based on this, what they told us this study was done quite some time ago, all the agency and Pittman wall, the related party had been called. They said, what they found out is some of the people are using this. Mm, two H as a transit Neisha as a transit to do illegal activities. We don’t know how true is it. So they want to get a really person who quality can see a quality person who really qualify for M to H to apply it. That’s why we are saying, okay. But anyway, what they have lesson, a big loosen, a bit of the requirement is they say of all those requirements, those existing M and two H they only need to comply two conditions. One is the 90 days requirement in Malaysia. The other one is the increased fee on the application. Okay. There’s at the moment they say they can, at the moment they are waving the secret security deposit that they increase. They won’t comply further. The current one who are the under the program, they want to review, they can still fold or at S as it now.
DERREN JOSEPH:
And what about the age? Cause it’s gone up to 35 for the principal applicant rank. So if someone is already on the M two H and they are younger than 35, what happens?
RAVINDRAN NARAYANASAMY:
It won’t have any, because they told only that two conditions when you, that two conditions, grandfather the existing.
DERREN JOSEPH:
Yeah. Okay. Thank you for that. That that’s good to know. That’s good to know. Another question that I had from the client that I was speaking to yesterday, the one who is considering coming to Pinon from another jurisdiction was, you know, he is, he he’s running businesses online, right? So, you know, he’s doing, I wouldn’t say what it is, but he’s doing e-commerce type businesses online. So we, I think we reviewed the, the tax part of it, but there’s also being part of an ecosystem because we spoke about all of the coworking spaces. I’ve been to pinata myself multiple times. I have gone to several coworking spaces. We’ve worked there, we’ve given presentation to members there. So I’m quite familiar with it. And one of the good things about Pinang is being, is connecting with that ecosystem and attending the networking events that happen in those spaces because of the, the restrictions. I would imagine that that may or may not be possible. And if it’s not possible right now, I know you don’t have a crystal ball, but can you estimate when things would be opened up to the extent that they can be that sort of business networking again in Penang.
TONY YEOH:
Actually we are beginning to have the activities happening again, physical activities. So as long as we comply to the social distancing requirements, right? So I think, for example, the S the space distance, then we can hold events. In fact, we were planning to do that from next month onwards in, in our co-working space. So I think that’s going to start to get up actually next year, September 2022, Penang is the host city for world Congress in it. And hopefully, hopefully it’s going to be a physical event, but we never know.But even if it’s not, maybe it’s going to be a hybrid event at a minimum. In fact, people are already holding conferences and I’m, I’ve been attending physical conferences already. Yeah.
DERREN JOSEPH:
Okay. And are there like any capacity constraints? Like not more than 50 people?
TONY YEOH:
It all depends on the size of the ballroom and the size of the space.
DERREN JOSEPH:
Okay. Okay. Yeah, that’s great. Let me any, if anyone has any questions, if you are on zoom, you can type in the box below, or you can mute yourself and ask questions in the 10 minutes or so we have left. If you’re on Facebook, please feel free to type your questions in the box underneath. Same on LinkedIn. If you have any questions, feel free to type your questions in the box underneath the, the stream itself. So I’m just going to have a quick look to see if anyone has asked any questions on those other platforms. I think no, we’re good. We’re good. So, w on that note, Tony, what’s, what’s the best way. I know you typed it in the zoom box that your, your contact, but could you say it aloud just in case someone is on a platform, what’s the best way to reach you?
TONY YEOH:
So if people want to reach us, just drop us an email at contact at digitalpenang.my or just visit our website. Yeah. But I think contact would be the best. And you just have the title of the subject as digital nomads or moving to Penang, then we’ll follow up with you.
DERREN JOSEPH:
Okay. That’s wonderful. And Ravi, what, the best way for someone to reach you with their highly technical questions and Malaysia tax?
RAVINDRAN NARAYANASAMY:
Yeah. You can always can drop me an email. ravi@rocky thomas.com. Or you can visit us for the information or website rockythomas.com. So we can look at that.
DERREN JOSEPH:
Yeah. So just in terms of full disclosure, so Ravi’s office as an affiliate office of ours under the Moores Rowland and Asia Pacific umbrella. And within Malaysia, we have affiliate offices, not just in KL where Ravi sits, but also on Penang as well, Malacca, JB, Johur Baru, and Sarawak. So there’s pretty comprehensive coverage in Malaysia. So wherever you may be or would like to go, chances are one of all offices or affiliate offices would be nearby. So on that note, thank you for joining us for, if you want to see this recording, it’s obviously being recorded. It would be on Facebook, YouTube, SoundCloud, iTunes, Spotify, basically, wherever you want to get your podcasts. This will be made available as well as on our website, htj.tax. So we do these live streams every week, different jurisdictions, different places of interest, always from a tax perspective. Thank you for joining us and we’ll see you next time.
VOICE-OVER:
Here are four ways we can help you.
1. We offer HOLISTIC strategies to help you live that international life. Tax + MIGRATION options.
2. We help you MODEL the tax impact of moving to a new jurisdiction
3. CONTACT us for tax optimization consults over Zoom
4. High Net Worth? We can QUOTE for doing your “US – International” tax returns
Our books and upcoming events are available at HTJ.tax. Please subscribe like, share and comment down below or email us at help@htj.tax to engage us to advice on international tax or business matters.
Table of Contents: Taxes in Malaysia – including MM2H, Entrepreneur Visas, Penang and Labuan – November 10th 2021
Related Sites
Contact
Related Posts
Foreign Non Grantor Trusts as a Pre Immigration Tax Planning Tool to those migrating to the US
The Ultimate Guide to PFICs