What is the concession1

Employers having foreign employees who have yet to qualify as tax residents under S.7 of the Income Tax Act (ITA) 1967 are granted concession by the Inland Revenue Board of Malaysia (LHDNM) to apply the tax resident scale rate on the MTD subject to the foreign employee having an employment contract with the duration of employment of more than 182 days.   


What is LHDNM’s additional guidance2

The concession with the stipulated condition is still in force.  However, employers are not mandatorily subject to the said concession and could determine the MTD based on the “non-resident” rate if there is a risk consideration such as the possibility of the foreign employee returning to his country before fulfilling the tax resident status.  Employers should not be compelled by foreign employees to apply the concession because employers are still responsible to comply with the employer obligations under S.83 and S.107 of the ITA 1967 and the Income Tax Rules (Deduction from Remuneration) 1994.


Who does the concession apply to3

The concession applies to all employers across all sectors.



1.     LHDNM’s letter dated 3 August 2017

2.     LHDNM’s letter dated 11 September 2020

3.     LHDNM’s email dated 7 December 2020



Members may read the above LHNDM’s letters and email (in Bahasa Malaysia only) in full at the Institute’s website – Members Only section under updates.