What is Tax Residency?

What is Tax Residency?

In order to have a good relationship, you should go to where you are treated well. Some countries’ tax policies might be more beneficial to you than others.

For example, rather than placing your savings in an American bank, you could put it in a Singaporean bank due to its currency diversification and asset protection.

While it’s unlikely that the US banking system goes under next week, other countries might have more advantages when it comes to a possible recession.

Banking offshore is usually a defensive measure to guarantee that your money will be okay regardless of what happens.

There are also offensive measures you can take to dynamically ensure success. Reducing your taxes is one possible strategy.

What is Tax Residency?

But there are many important factors to think about when planning tax reduction. Swiss bankers showing up at your house to cart away bags of cash might not give the most legitimate appearance. It is much better to be open and transparent in all your dealings.

After reports of a large leak of tax data known as the Pandora Papers, which revealed how the rich and powerful avoid taxes, the EU tax commissioner Paolo Gentiloni told the European Parliament that they will present new legal proposals to tackle tax evasion.

What is Tax Residency?

European Commissioner for Economy Paolo Gentiloni

One legal method to lower taxes would be residence planning. It means setting yourself up in another country so that you can claim legally that you should not be paying taxes where you are from originally.

You might think that because you’re not in your country of citizenship, you do not have to pay taxes there. That is how you end up with a giant tax bill.

In order to avoid this tax trap, you could be the tax resident of another country. But simply relocating your assets might not be enough.

Large companies like Facebook Ireland and Starbucks hire staff in their main regional headquarters in Ireland for example to benefit from lower taxes before they move their profits to zero-tax countries from low-tax countries.

You might think that simply because you are away from your country of citizenship, then you do not have to pay any taxes back home. This is a typical scenario in which a digital nomad gets caught and typically ends up with a huge tax bill.

However, simply putting money in a foreign bank does not mean not paying taxes. You need a more formal plan.

What is Tax Residency?

In Malaysia, tax residents pay progressive income tax rates (1-28% based on income).  Non-residents pay a flat rate (28% on income. It would put your employees in a more powerful position if they qualify as a resident. Deductions from income are available to residents but not available to non-residents.

Also make note of the capital gains tax. Capital gains tax is paid on profits on an investment that has been held for over a year. 

Capital gains are not taxed in Malaysia, other than the gains obtained from the disposal of real estate property or on the sale of shares in a property company. The rate is 30% for such disposals of property made within three years after the date of acquisition.

How can TOP help you?

What is Tax Residency?

Whether you’re an established company looking to expand with a regional headquarters or an expatriate digital nomad looking for greener pastures, our experts in taxes can deliver a custom made solution to enhance your tax position based on your needs.

  • Assistance in getting residency permits
  • Setting up companies.
  • Introduction to local banks
  • Managing compliance
  • Xero cloud accounting software

To find out what TOP can do for you feel free to contact us at or call 03-2732 6084.

Disclaimer: The material prepared is for informational purposes only, and is not intended to provide, and should not be relied on for tax advice. You should consult your own tax consultant before engaging in any tax related matters.

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