Malaysia Remote Work Laws 2026

16.1 Income Tax

Tax Residency

Authority: Inland Revenue Board of Malaysia (Lembaga Hasil Dalam Negeri Malaysia – LHDN)

Tax Residency Determination:

Tax residence is based on time spent in Malaysia, not citizenship.

Resident for tax purposes if present in Malaysia for:

• 182 days or more in a calendar year, OR
• Less than 182 days in a calendar year but certain conditions are met

Source: Income Tax Act 1967

Official Guidance:
Inland Revenue Board of Malaysia
Website: www.hasil.gov.my

Taxation of Employment Income

Resident Individuals:

Employment income is subject to Malaysian income tax under progressive tax rates.

Non-Resident Individuals:

Employment income derived from Malaysia is taxed at a flat rate.

Source: Income Tax Act 1967

Remote Work Tax Implications

Malaysian Residents Working for Malaysian Companies:

Employment income is taxable in Malaysia regardless of work location (office or home).

Foreign Nationals Working Remotely in Malaysia:

May trigger tax residency if staying 182+ days in Malaysia. Tax obligations depend on:

• Duration of stay
• Source of income
• Employment structure

Guidance Required: Foreign nationals should consult with Malaysian tax professionals to determine tax obligations.

16.2 Employees Provident Fund (EPF)

Overview

Official Name: Kumpulan Wang Simpanan Pekerja (KWSP)
English: Employees Provident Fund (EPF)

Purpose: Mandatory retirement savings scheme

Website: https://www.kwsp.gov.my

Malaysian Employees – Contribution Rates

For employees earning less than RM20,000 per month:

Contribution rates are determined by the Third Schedule of the EPF Act, based on salary ranges.

Standard Rates (for employees < 60 years):

• Employee contribution: 11%
• Employer contribution: 12% or 13% (depending on wage level)

For employees earning RM20,000 or more per month:

• Employee contribution: 11% of monthly wages
• Employer contribution: 12% or 13%

Source: Employees Provident Fund Act 1991

Foreign Workers – Mandatory Contributions (Effective October 2025)

Major Change:

According to the EPF (Amendment of Third Schedule) Order 2025:

Effective October 1, 2025, EPF contributions are mandatory for non-Malaysian citizen employees.

Contribution Rates for Foreign Workers:

• Employer contribution: 2% of monthly wages
• Employee contribution: 2% of monthly wages

Coverage:

Applies to non-Malaysian citizens:

• Below 75 years of age
• With valid work pass (excluding domestic workers)
• Who are employed by an employer receiving wages in the form of money

Work Pass Categories Covered:

• Visitor’s Pass (Foreign Workers except Foreign Domestic Helpers)
• Employment Pass
• Professional Visitor Pass
• Student Pass (with work permission)
• Residence Pass
• Long-Term Social Visit Pass

Excluded: Foreign domestic helpers

Source: EPF official website – https://www.kwsp.gov.my/en/employer/responsibilities/non-malaysian-citizen-employees

Payment Deadline

EPF contributions must be paid by the 15th of the following month.

Example: Contributions for January salary must be paid by February 15.

Late Payment: Failure to meet deadline results in late payment charges of up to 6% per annum.

Source: EPF Act 1991

EPF Withdrawal for Foreign Workers

Foreign workers may withdraw EPF savings upon returning to their home countries with proof of employment termination.

Source: EPF guidance for foreign workers

16.3 Social Security Organization (SOCSO)

Overview

Official Name: Pertubuhan Keselamatan Sosial (PERKESO)
English: Social Security Organization (SOCSO)

Purpose: Social security protection against workplace injuries, invalidity, and related benefits

Website: https://www.perkeso.gov.my

Malaysian Employees – SOCSO Schemes

Two Schemes:

1. Employment Injury Scheme (EI)
2. Invalidity Pension Scheme

Coverage: All Malaysian employees and certain categories of foreign employees

Contribution Rates – Malaysian Employees

Contribution rates vary based on monthly wages.

For employees earning under RM4,000:

• Total contribution: Approximately 1.75% (employer) + 0.5% (employee)

Wage Ceiling for Contributions:

Effective October 2024, the wage ceiling is RM6,000 per month.

Source: https://www.perkeso.gov.my

Foreign Workers – SOCSO Coverage

Employment Injury Scheme Only:

According to SOCSO, all legal foreign workers are covered by the Employment Injury (EI) Scheme under the Employees’ Social Security Act 1969 (Act 4).

Foreign workers are NOT covered by:

• Employment Insurance System (EIS) under Act 800

Contribution Rate for Foreign Workers:

Employer contribution: 1.25% of insured’s monthly wages
Employee contribution: None (foreign workers do not contribute)

Wage ceiling: RM6,000 per month

Source: PERKESO official guidance – https://www.perkeso.gov.my/en/rate-of-contribution.html

Registration Requirements

Employers must register all eligible foreign workers with SOCSO using:

• Automated SOCSO Integrated System (ASSIST) portal
• Foreign Worker Registration Form at nearest SOCSO office

Source: PERKESO guidance

16.4 Employment Insurance System (EIS)

Overview

Purpose: Financial protection for employees who lose their jobs

Administering Body: SOCSO/PERKESO

Contribution Rates

Both employer and employee: 0.2% of employee’s monthly wages

Source: Employment Insurance System Act 2017 (Act 800)

Coverage

Eligible:

• All Malaysian employees aged 18 to 60
• Except permanent government staff and domestic workers

Not Eligible:

• Foreign workers
• Self-employed persons
• Domestic workers

Source: Employment Insurance System Act 2017

Benefits

EIS provides:

• Job search allowance
• Training allowance
• Early re-employment allowance
• Reduced income allowance

Source: Employment Insurance System Act 2017

16.5 Human Resources Development Fund (HRDF)

Overview

Purpose: Fund for employee training and skills development

Administering Body: HRD Corp (formerly PERKESO HRDF)

Website: www.hrdcorp.gov.my

Contribution Requirements

Mandatory for employers with 10 or more employees:

• Contribution rate: 1% of monthly payroll

Optional for employers with fewer than 10 employees:

• Contribution rate: 0.5% if they choose to participate

Effective Date: January 1, 2001 (mandatory provision from January 1, 2021 for 10+ employees)

Source: Pembangunan Sumber Manusia Berhad Act 2001

Eligible Employers

Employers in specific sectors as determined by the Minister of Human Resources.

Source: HRDF guidance