An overseas employer usually pays your salary in a foreign currency and doesn’t take any tax out of it each month. If you do your job while living in Malaysia, the Inland Revenue Board of Malaysia (LHDN) still expects you to declare that salary and pay tax on it here.
This applies if you’re on an employment contract with an overseas company that has no Malaysian payroll. If you’re hired as a contractor, including through platforms such as Deel or Remote, your income is treated as business income, so the rules for filing your taxes as a freelancer apply instead. Anyone paid through a Malaysian employer of record (a Malaysian company that employs you on the overseas firm’s behalf) gets PCB deductions and an EA Form as normal.
You may have read that the foreign-sourced income (FSI) exemption or DE Rantau, Malaysia’s digital nomad programme, gets you out of paying tax on your salary. Neither one does.
Malaysia Taxes Your Salary Based On Where You Work
Your employer’s location and the currency you’re paid in don’t change where you’re taxed, and neither does keeping your pay in an overseas bank account. If you live in Shah Alam or Penang and work from home for a company in New York, LHDN treats your salary as income from Malaysia.
Your tax rate then depends on whether you’re a Malaysian tax resident. In most cases, you’re a tax resident if you stay in Malaysia for 182 days or more in a calendar year. If you work from home here all year, you’ll almost always pass this test.
Tax residents pay tax in steps, from 0% up to 30%, using the same income tax rates and reliefs as anyone working for Maybank or Petronas. Non-residents pay a flat 30% on everything, with no reliefs at all. The 182 days start again every year, so a year with long trips overseas can change your status for that year only.
Your Tax Bill At Four Salary Levels
A tax resident earning between US$1,500 and US$5,000 a month pays between RM3,128 and RM43,650 a year, at the 2025 tax year rates that apply to returns filed in 2026. Each salary is converted at RM4.10 to US$1, close to the rate in September 2026, and only the RM9,000 personal relief is taken off.
Monthly Salary
Tax A Year
Set Aside Each Month
US$1,500 (RM6,150)
RM3,128
RM261 (4.2% of pay)
US$2,000 (RM8,200)
RM7,386
RM616 (7.5% of pay)
US$3,000 (RM12,300)
RM19,050
RM1,588 (12.9% of pay)
US$5,000 (RM20,500)
RM43,650
RM3,638 (17.7% of pay)
Non-resident on US$2,000 (RM8,200)
RM29,520
RM2,460 (30% of pay)
On a US$2,000 salary, you earn RM98,400 a year, and the personal relief leaves chargeable income of RM89,400. The first RM70,000 comes to RM3,700, and the next RM19,400 is taxed at 19%, which adds RM3,686.
You can probably claim more than the personal relief, such as lifestyle or medical relief, which would lower your bill. The full list of income tax reliefs shows what else you can claim.
What The Foreign-Sourced Income Exemption Covers
Since 1 January 2022, income from overseas that a Malaysian tax resident brings into Malaysia can be taxed. However, resident individuals get a tax exemption on this income. It was first set to end on 31 December 2026 and has since been extended to 31 December 2036.
The exemption covers most types of income from outside Malaysia, such as dividends from foreign shares or rent from a property overseas. To qualify, the income must have been subject to tax in the country it came from, even if no tax was charged there. In other words, that country’s tax rules must cover the income, and the tax charged can be zero. It doesn’t apply to income received through a partnership business in Malaysia.
Your salary doesn’t qualify, because it’s Malaysian income. The exemption only helps with overseas income you earn on top of it.
DE Rantau Is A Visa Programme For Foreign Digital Nomads
DE Rantau is a programme the Malaysia Digital Economy Corporation (MDEC) started in 2022 to bring foreign digital nomads to Malaysia. Its DE Rantau Nomad Pass lets foreigners live here for up to 24 months while working for clients or employers overseas.
As a Malaysian, you don’t need this pass, and it doesn’t give anyone a tax break. MDEC’s FAQ, updated on 28 August 2026, says a foreign remote worker who stays in Malaysia for more than 60 days can be taxed here. Pass holders must also register with LHDN before they get their pass.
Filing Your Tax Without An EA Form
Your overseas employer usually won’t give you an EA Form, so you need to work out your yearly salary yourself. Change each month’s salary into ringgit using the exchange rate for that month, then add up all 12 months. LHDN’s website points to the foreign exchange rates published by the Accountant General’s Department. Keep your payslips, bank statements, and a note of the rates you used, because LHDN may ask to see them.
When your salary is your only income, you file Form BE and put your yearly salary under employment income. First-timers can file their taxes on e-Filing step by step. If you also have freelance clients, you’ll need to check the rules for filing your taxes as a freelancer as well.
The deadline for Form BE is 30 April, so returns for the 2026 tax year are due by 30 April 2027. LHDN has extended the e-Filing deadline to 15 May in recent years, but it announces this separately each year.
If your employer’s country has already taken tax from your pay, a Double Taxation Agreement may help you avoid paying tax twice. Speak to a licensed tax agent before you claim this.
Your overseas employer also doesn’t pay into your EPF, so your retirement savings grow only if you add to them yourself through i-Simpan, EPF’s voluntary contribution scheme, which any Malaysian EPF member under 75 can use. Voluntary EPF contributions qualify for up to RM4,000 of tax relief a year, plus up to RM3,000 more that’s shared with life insurance premiums.
If you haven’t declared your salary in past years, you can still file those returns. Coming forward yourself usually leads to lower penalties than waiting for LHDN to find you.
Paying A Whole Year’s Tax In One Go
Without PCB, you pay the whole year’s tax at once when you file. On a US$2,000 salary, that’s RM7,386 due in one go, instead of RM616 taken from each payslip.
If you pay after the deadline, LHDN adds a 10% penalty to the unpaid tax.
Spending your full salary every month can make that bill hard to pay. As soon as your salary arrives, move the set-aside for your salary level in the table into a separate savings account. On US$2,000, that’s about RM616. By the time you file, the whole year’s tax is ready.
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Steffi Manisha Arokiam is a Tax Director at ThinkTX Consultants, where she leads the firm’s Transfer Pricing and e-Invoicing practice. She advises both individuals and corporations across a wide range of tax matters, including Real Property Gains Tax (RPGT), stamp duty, estate tax, and global mobility for expatriates. Recognised for combining strong technical expertise with a practical, solutions-driven approach, Steffi helps clients navigate complex tax issues with clarity and confidence.
A respected thought leader in taxation, Steffi has authored numerous technical articles and professional newsletters. Her work has been published by the International Bureau of Fiscal Documentation (IBFD) and Wolters Kluwer (CCH), and she has been featured on BFM 89.9 discussing crypto taxation.
Professional Affiliations
Member of the Malaysian Institute of Accountants (MIA)
Member of the Chartered Tax Institute of Malaysia (CTIM)
ASEAN Chartered Professional Accountant (ASEAN CPA)
Member of the International Fiscal Association (IFA)
Professional Trainer certified by HRD Corp
As a trusted tax partner of RinggitPlus, Steffi reviews and verifies all content relating to Malaysian taxation to ensure it is accurate, up to date, and practical — helping readers better understand the tax system and make the most of their tax position.
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About THE AUTHOR
Steffi Manisha Arokiam
Steffi Manisha Arokiam
Steffi Manisha Arokiam is a Tax Director at ThinkTX Consultants, where she leads the firm's Transfer Pricing and e-Invoicing practice. She advises both individuals and corporations across a wide range of tax matters, including Real Property Gains Tax (RPGT), stamp duty, estate tax, and global mobility for expatriates. Recognised for combining strong technical expertise with a practical, solutions-driven approach, Steffi helps clients navigate complex tax issues with clarity and confidence.
A respected thought leader in taxation, Steffi has authored numerous technical articles and professional newsletters. Her work has been published by the International Bureau of Fiscal Documentation (IBFD) and Wolters Kluwer (CCH), and she has been featured on BFM 89.9 discussing crypto taxation.
Professional Affiliations
Member of the Malaysian Institute of Accountants (MIA)
Member of the Chartered Tax Institute of Malaysia (CTIM)
ASEAN Chartered Professional Accountant (ASEAN CPA)
Member of the International Fiscal Association (IFA)
Professional Trainer certified by HRD Corp
As a trusted tax partner of RinggitPlus, Steffi reviews and verifies all content relating to Malaysian taxation to ensure it is accurate, up to date, and practical — helping readers better understand the tax system and make the most of their tax position.
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