May I add that there's some minor correction to be made to your statement. The statement "Only income received in Malaysia but derived outside Malaysia is tax-exempt" is not necessarily true in all cases. If the employer is a Malaysian company and sends the Malaysian employee to a Korean company (secondment) for work purposes eg: 2 years, and the employer completely remunerates the employee, he would be subject to Malaysian tax. In this case, although income received in Malaysia but derived outside Malaysia, still, it is taxable. Hence, your statement is not quite right.

Alternatively, if the Malaysian employer sends the employee to Korea to work closely with a Korean company, and the secondment agreement is such that the employee shall be remunerated by the Korean company for the 2 years, then the scenario is that the work done overseas is for the Korean company. This will constitute income received in Malaysia but derived outside Malaysia.

In a nutshell, two conditions to fulfill the criteria: 1) Employee shall not perform work in Malaysia  &  2) The Employer shall not be Malaysian employer (if the employer is any foreign companies based in Malaysia, this automatically means Malaysian company)

that is another full can of worms to confuse ppl. wages related to employment in malaysia. which is well, hard to define unless you knlw the in and out of each situation.

Well, I'm afraid it is not to confuse people. It is the law, and the responsibility lies on the individual to research the laws of the land in detail and plan the "arrangements" accordingly to safeguard oneself from taxation.

I'm attaching a Malaysian employee secondment to overseas scenario. You may want to read it at your leisure.  Secondment_of_Malaysian_employees_to_Overseas.pdf ( 554.7k ) Number of downloads: 57

thanks, but i have read it maybe 7 to 10 years ago... you can even throw in more such as withholding tax, double taxation agreement etc etc. the reason i said its confusing is for layman, to me im just generally explaining what is consider derived from malaysia and what is not. layman normally thinks received from overseas = derived from oversea which is not right at all.

Question:

If I am the director of a company registered in switzerland. Company is used as a shell company for online market trading.

In actuality, I trade from malaysia using the company in switzerland.

But i pay corporate tax in Switzerland. The profit of the company is sent back to malaysia every quarter to my personal bank account as profit from investment from my switzerland company.

1)Technically, the company in switzerland is making money for me. Although i am the one trading in Malaysia.
2)I am already paying corporate tax to switzerland. And any income repatriated to my personal account should not be taxable because it is foreign sourced investment right?

But using overseas shell company to trade, beware of violating potential profit transfer ruling, as well as respective country tax ruling issue.

what is this?

There are companies that using overseas shell company to avoid tax, or reduce tax, through profit transfer or pricing transfer method, especially for those tax heaven countries.

Eg.
A has a local company (X) doing export business, so every profit you made to need to taxed at 24%.

Now A set up another shell company (Y) at country Z, that only has corporate tax of 10% or tax exempted countries.

X sell the good to Y first at cost, (no profit made, hence no tax locally),
But then Y sell to the customer at a profit but the profit is taxed at much lower rate or no tax at all, as Y is following Z country tax rate.

In this way, A has evaded the tax through an overseas shell company.

So beware on this kind of issue, especially if one is running the actual business/operation here through overseas shell company as it may look suspicious in the eye of both countries tax department.
And every countries tax ruling may not the same, and one needs to clear about respectively country tax law.

I see. But if I'm dealing with financial products then this doesn't apply right? After all everything is capital gains. But a profit nontheless. So it would be reported as a profit from financial trading.

I don't see how transfer pricing is applied here.
I'm basically saying:
1)I'm a director of xyz swiss. xyz swiss is a financial trading company registered in switzerland and pays tax there.
2)I put money into xyz swiss under my personal capacity for investment purposes. Not as a director expanding his company.
3)Profit from xyz swiss is sent back to me in malaysia as investment gains every quarter under my personal capacity.

Bonus question: 4)If trading profits are repatriated fully, meaning the company doesn't report any gains or losses, and thus is not taxed, is this considered fraud? Because:
1)Swiss company doesn't gain or lose anything thus not eligible to tax in swiss.
2)Yet money is coming back to me in malaysia as capital gains from overseas investment. Therefore not taxable.

Based on the simple and brief info (as there is always need a full info before a conclusion can be made),

4) You may be evading tax in this way.
Only after tax profit repatriated is tax exempted.
Repatriating profit made doesn't result in XYZ swiss doesn't have a profit, and doesn't need to pay tax.

When XYZ swiss is making a profit, then it needs to pay the Swiss tax first.

Fundamentally, when a company making a profit through trading, it needs to pay a tax at their respective country, before it can be repatriated as tax exempted foreign income.

5) Only if those repatriated money is declared as dividend, only it is treated as capital gain/tax exempted income.
If you are repatriated profit made (before tax in Swiss) of XYZ swiss, then it is not a capital gain, nor a tax exempted income.

There are companies that using overseas shell company to avoid tax, or reduce tax, through profit transfer or pricing transfer method, especially for those tax heaven countries.

Eg.
A has a local company (X) doing export business, so every profit you made to need to taxed at 24%.

Now A set up another shell company (Y) at country Z, that only has corporate tax of 10% or tax exempted countries.

X sell the good to Y first at cost, (no profit made, hence no tax locally),
But then Y sell to the customer at a profit but the profit is taxed at much lower rate or no tax at all, as Y is following Z country tax rate.

In this way, A has evaded the tax through an overseas shell company.

So beware on this kind of issue, especially if one is running the actual business/operation here through overseas shell company as it may look suspicious in the eye of both countries tax department.
And every countries tax ruling may not the same, and one needs to clear about respectively country tax law.

Hi, out of curiosity.

Why does 'A' need company 'X' when he can directly use company 'Y' to buy the goods and repatriate the money back after making profits and paying taxes in country 'Z'.
Any reason to establish the company 'X'?

thanks.

The main reason is probably the ease of setting up shop in country Z.

Setting up a foreign company is not easy. The requirement usually is one of the below or maybe a few of the below combined.
1)You're a citizen or permanent resident
2)If you're opening a foreign owned company, you usually require one of the directors to be a citizen of the country
3)High paid up capital. Usually in millions. For Signapore for example, you must have a min of 5 mil and employ at least 10 people if I'm not wrong.

For the normal person, it is usually not possible to just set up shop in another country. But for the rich, these problems can be solved with money. Easily.

Hi everyone. Sorry need some guidance here.

I am Malaysian working in Malaysia. I am employed by a company with HQ in Singapore and factory in Malaysia. I currently draw 2 salary, one issued by the Singapore HQ into my Singapore bank account, and another issued by the Malaysia factory into my Malaysian account. In fact I'm contributing to both CPF and EPF for my salaries.

My question is, is my Singapore salary taxable in Malaysia? Can I bring the money in to Malaysia?

The answer is yes.
As you derived the income in Malaysia, whether the salary is paid in Sg and in Sgd, doesn't change the status that the income is derived in Malaysia, hence the salary paid in Sgd is taxable.

For sure, there is no restriction is bring in or out money.
But if you are not declaring the income of Sg salary, then you will have hard time to explain the authorities.

I see. But if I'm dealing with financial products then this doesn't apply right? After all everything is capital gains. But a profit nontheless. So it would be reported as a profit from financial trading.

I don't see how transfer pricing is applied here.
I'm basically saying:
1)I'm a director of xyz swiss. xyz swiss is a financial trading company registered in switzerland and pays tax there.
2)I put money into xyz swiss under my personal capacity for investment purposes. Not as a director expanding his company.
3)Profit from xyz swiss is sent back to me in malaysia as investment gains every quarter under my personal capacity.

Bonus question: 4)If trading profits are repatriated fully, meaning the company doesn't report any gains or losses, and thus is not taxed, is this considered fraud? Because:
1)Swiss company doesn't gain or lose anything thus not eligible to tax in swiss.
2)Yet money is coming back to me in malaysia as capital gains from overseas investment. Therefore not taxable.

The answer is yes.
As you derived the income in Malaysia, whether the salary is paid in Sg and in Sgd, doesn't change the status that the income is derived in Malaysia, hence the salary paid in Sgd is taxable.

For sure, there is no restriction is bring in or out money.
But if you are not declaring the income of Sg salary, then you will have hard time to explain the authorities.