Every day, an estimated 400,000 people travel between the two land checkpoints between Singapore and Johor.
For some Malaysians who work in Singapore, they may prefer to live in Malaysia instead. Aside from the lower cost of living, many Malaysians may also have family in Johor or may be more willing to move their family to Johor instead of into Singapore.
This can spring questions over income tax filing – and whether those who work in Singapore but live in Malaysia need to pay income taxes in Singapore, Malaysia or both countries.
Read Also: Malaysians’ Guide To Finding Employment In Singapore
Paying Income Tax As A Malaysian Working In Singapore
Regardless of where you live, you need to pay income tax on all income earned in Singapore to the Inland Revenue Authority of Singapore (IRAS).
Income tax treatment on income earned differs for tax residents and non-residents in Singapore. Those issued with a work pass valid for at least 1 year will be treated as a tax resident – and you can pay income tax based on the progressive tax rate.
You also qualify as a tax resident in Singapore if you are a:
- Foreigner who worked in Singapore for at least 183 days in a year
- Foreigner who worked continuously for 3 consecutive years
- Foreigner who worked in Singapore for at least 183 days for a continuous period straddling 2 calendar years
Your tax residency will be reviewed again at the point of tax clearance when you cease employment in Singapore. If your stint in Singapore is less than 183 days, you will be regarded as a non-resident. In this case, you have to pay the higher of a 15% flat income tax rate or the progressive tax rate.
How Much Income Tax Do You Need To Pay In Singapore?
The amount of tax you need to pay and eligibility to claim deductions depends on whether you’re a tax resident or non-resident.
| Tax Residency | Tax Treatment |
| Tax resident | Income after claims deduction is subject to progressive tax rates of 0% to 24%. Foreign income except those that result from partnerships in Singapore is exempt from tax. Eligible to claim deductions on allowable expenses, donations and reliefs. |
| Non-resident (hired between 61 and 182 days) | Income subject to: a flat tax rate of 15% orthe progressive resident tax rate, whichever is higher. Eligible to claim deductions on allowable expenses and donations, but not personal reliefs. |
| Non-resident for short-term employment (hired for 60 days or less in a year) | Income from a short-term employment of 60 days or less in a year is exempt from tax. This is unless you are a: Board director, Public entertainer, Professional including foreign experts, foreign speakers, king’s counsels, consultants, trainers, coaches, etc. |
Read Also: Complete Guide To Personal Income Tax Rates And Income Brackets In Singapore
Foreign Income Exempted From Taxation In Malaysia
In 2022, the Malaysian government announced that foreign income received by residents would be taxed, starting from 1 January 2022. Before that, all foreign income was exempted from tax.
Currently, only foreign income that is brought back to Malaysia via cash or electronic transfer falls under income received in Malaysia. If your Singapore income is kept in Singapore, it is not considered as income received in Malaysia.
This move was made to impose equal tax treatment on income derived from outside and within Malaysia, which is aligned to best international tax practices.
In general, if you have already paid income tax on your foreign income that you take back to Malaysia, you can claim tax credits. If your tax credits exceed your Malaysian tax payable, you may not have to pay any Malaysian income tax.
Residents claiming tax credits must keep evidence that foreign income tax has been imposed on their income.
To smoothen this transition, the government decided to provide a blanket tax exemption on foreign income received by individual residents, provided that the income has been subjected to tax in the origin country, from January 2022 to December 2026. The exemption does not apply to income from a partnership business in Malaysia.
Although foreign income that you receive may be exempted, you will still need to declare the income in your Malaysian income tax return and provide relevant documentation to show that it’s exempted from tax.
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