Malaysia: International tax issues due to COVID-19 travel restrictions

A. Individual Tax Residence Status 

If an individual resident in Malaysia is outside of Malaysia because of COVID-19 travel restrictions, the period of temporary absence from Malaysia shall be taken to form part of a period or periods in Malaysia for the purpose of tax residence. 

For an individual who is not a resident in Malaysia due to COVID-19 travel restrictions, the period of temporary presence in Malaysia shall not be taken to form part of period or periods in Malaysia for the purpose of tax residence status. 

B. Company Tax Residence Status 

If a company resident in Malaysia is unable to convene a meeting of the Board of Directors (BOD) in Malaysia because of COVID-19 travel restrictions, the Inland Revenue Board of Malaysia (IRBM) is prepared to presume the company as a Malaysian resident, provided the company is a resident in the immediate previous year of assessment and the directors of the company have to attend the BOD meeting held outside Malaysia (either physical meeting or via electronic means) due to COVID-19 travel restrictions. 

For a company not resident in Malaysia (not intend to seek residence status in Malaysia) convenes a meeting of the BOD in Malaysia because of COVID-19 travel restrictions, the IRBM is prepared to presume that the company is not a Malaysian resident if the company is required to hold BOD meeting in Malaysia due to COVID-19 travel restrictions. 

C. Permanent Establishment 

In a scenario where a company is not resident in Malaysia but the employees or personnel are temporary presence in Malaysia due to Covid-19 travel restrictions, the IRBM will consider such temporary presence of employees or personnel does not result in permanent establishment in Malaysia, provided it meets the following criteria: 

1. the company does not have a permanent establishment in Malaysia before existence of COVID-19 travel restrictions 
2. no other changes to the economic circumstances of the company 
3. the temporary presence of the employees or personnel in Malaysia is solely due to COVID-19 travel restrictions; and 
4. the activities performed by the employees or personnel during their temporary presence would not have been performed in Malaysia if not for COVID-19 travel restrictions 

D. Cross Border Employment Income 

If an individual would normally exercise employment in Malaysia and is forced to work temporarily outside of Malaysia because of COVID-19 travel restrictions, the individual is regarded to be exercising employment in Malaysia and the income is deemed derived from Malaysia and still taxable in Malaysia. The individual may be subject to taxation in the locality where he is temporarily present if no special tax measures for COVID-19 are provided by that locality’s tax authority. 

For a non-resident individual arrived in Malaysia on a company assignment before travel restriction and currently working from Malaysia due to COVID-19 travel restrictions, the IRBM is prepared to consider nonresident individual as not exercising an employment in Malaysia for the period of temporary presence due to COVID-19 travel restrictions if the following conditions are met: 

1. temporary presence due to COVID-19 travel restrictions 
2. work performed during temporary presence is not related to assignment in Malaysia and would not have been performed in Malaysia if not for the COVID-19 travel restrictions 
3. employment with the same overseas employer, prior to the COVID-19 travel restrictions; and 
4. left Malaysia immediately after the travel restrictions on COVID-19 ends in Malaysia. 

Relevant documentations and information must be kept and submitted to IRBM upon request.