Malaysia Tax Incentive for Returning Expert Programme
Highly skilled workers are key drivers of economic growth and innovation. In today’s globalised economy, the mobility of talent has intensified, resulting in increasing competition among countries to attract and retain top talent. For developing countries, this has also led to concerns over “brain drain”, where highly skilled individuals are seeking employment opportunities abroad.
In response to this, the Malaysian Government has introduced the Return Expert Programme (“REP”), administered by Talent Corporation Malaysia Berhad (“TalentCorp”), to encourage Malaysians working abroad to return to Malaysia to contribute to the country’s economic development.
The REP provides a preferential tax rate on chargeable employment income for a period of five consecutive Year of Assessment (“YA”) to approved individuals.
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Legal Framework and Administration
The REP is administered by TalentCorp, a government agency responsible for managing Malaysia’s talent initiatives.
The tax incentive under the REP is granted pursuant to Part XV of Schedule 1 of the Income Tax Act, 1967 and is subject to approval by the Minister.
The REP applies to individuals whose employment in Malaysia commences on or after 1 May 2011. Applications must be submitted on or after 12 April 2011 and no later than 31 December 2027.
Further operational guidance, including application procedures and conditions, is provided by TalentCorp through its official guidelines and the MyHeart Portal at https://myheart.my/ .
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Eligibility Requirements for Incentive Application
A.
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General Requirements
To be eligible for the REP, an individual is required to fulfil the following conditions:
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Malaysian citizen;
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Has made an application under the REP and the application has been approved by the Minister for the applicant to be taxed under Part XV of Schedule 1 of the ITA and the application was made on or after 12 April 2011 but no later than 31 December 2027;
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An expert field determined by Minister (refer Note 3)
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No employment income derived from Malaysia consecutively for a minimum of 3 years (36 months) prior to the application for REP;
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The application for REP is made prior to the return to Malaysia;
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Do not hold any outstanding scholarship bond or loan with the Malaysian government or its agencies;
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Employment income shall be received from any person resident in Malaysia.
For individuals who are working abroad and wish to return to work in Malaysia with a company under the same group of companies, the individual must meet the following conditions:
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Served with a company within the same group abroad for at least 5 years;
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Not working abroad due to assignment, secondment or project-based arrangement;
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Overseas employment is under a direct-hire scheme by the foreign entity;
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Salaries are paid by the foreign entity and in the currency of the country in which the entity is based; and
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Not financially or legally bound to return to Malaysia under the same group of companies upon completion of overseas assignments.
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B.
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Sector Specific Requirements (by TalentCorp Malaysia)
The application for REP will be evaluated based on the following requirements:
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Academic Qualification
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Descriptions
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For all sectors (except healthcare)
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Diploma
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· 12 years of cumulative working
experience abroad; and
· Equivalent of RM20,000 or more
in monthly salary earned while working abroad.
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Bachelor’s Degree
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· 8 years of cumulative working
experience abroad; and
· Equivalent of RM20,000 or more
in monthly salary earned while working abroad.
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Master’s Degree / Full Membership
with a Professional Body
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· 5 years of cumulative working
experience abroad; and
· Equivalent of RM20,000 or more
in monthly salary earned while working abroad.
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Doctor of Philosophy (PhD)
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· 4 years of cumulative working
experience abroad; and
· Equivalent of RM20,000 or more
in monthly salary earned while working abroad.
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For healthcare sectors
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Bachelor’s Degree
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· 8 years from the date of full
professional registration of cumulative working experience abroad;
· Equivalent of RM20,000 or more
in monthly salary earned while working abroad; and
· Registered with Malaysian
Medical Council / Malaysian Dental Council
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Master’s Degree / Full Membership
with a Professional Body
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· Cumulative working experience
abroad as required for registration for NSR;
· Equivalent of RM20,000 or more
in monthly salary earned while working abroad;
· Registered with Malaysian
Medical Council / Malaysian Dental Council; and
· Registered with National
Specialist Register.
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Note: Other healthcare professionals (e.g. pharmacists, nurses, allied health practitioners) are subject to the eligibility criteria for general professionals as well as registration requirements set by the respective professional bodies/regulators.
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Recognised Field of Expertise
The eligibility for the REP is generally aligned with Malaysia’s key economic sectors, particularly those identified under the National Key Economic Areas (“NKEAs”).
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Oil, gas and energy
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Trading services
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Financial services
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Healthcare
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Communication and infrastructure
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Electronics and electrical
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Education
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Wholesale and retailing
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Tourism
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Agriculture
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Palm oil and rubber
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Greater Kuala Lumpur / Klang Valley
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Tax Incentives
Approved participants of the REP are eligible for a preferential flat tax rate of 15% on chargeable employment income for five (5) consecutive YAs. The following table summarises the key features and conditions of the preferential tax rate incentive:
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Aspect
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Treatment and condition
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Flat tax rate
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15% on chargeable employment
income for 5 consecutive YAs.
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Commencement
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· Return to Malaysia within a
period of 2 years upon approval of REP.
· Obtain the Surat Akuan
Tarikh Kembali (SATK) from TalentCorp to claim the REP incentives.
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Election
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· Option to claim the flat tax
rate incentive starting in the first YA or in the following YA.
· Deemed to have rejected the REP
incentive if no election has been made.
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Employment income from multiple
sources / Change of employer
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· Flat tax rate is applicable to
additional job or change of job, provided that the additional or new job is
in line with the individual’s expertise as approved under the REP incentive.
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Self-employed and becomes company
director
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· REP incentive remains
applicable provided that the principal activity of the business are in line
with the individual’s expertise and the company is resident in Malaysia.
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Source of income other than
employment
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· Employment income: in line with
REP incentive and taxed at a flat rate of 15%.
· Non-employment income (i.e.
rental income): taxed at the progressive tax rates.
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Expenses related to employment
income
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· Certain expenses directly
related to the production of gross income from employment and discharge of
official duties are deductible.
· In case of a specialist doctor
who has been granted the REP tax incentive, any payment to locum doctors
cannot be deducted in ascertaining the chargeable income that is subject to
preferential tax rate. This is in line with the conditions stated for the REP
incentive.
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Other Non-Tax Related Benefits
Approved REP participants may also enjoy the following benefits:
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Aspect
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Treatment and condition
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Tax exemption on Complete Knocked
Down (CKD) vehicle
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· Exemption
on excise duty for the purchase of 1 locally manufactured CKD vehicle, where
the total duty exemption is capped at RM100,000.
· The vehicle must be delivered
before the expiry date, and the entire process might take up to 4 months.
· For those approved under the
revised incentive, the process must be done manually should the taxes for the
vehicle exceeds R100,000.
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Family benefits
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· Foreign spouses and children
are eligible to apply for the Permanent Resident (PR) status.
· The REP applicants and foreign
spouses must be married before the submission date of the REP application.
· The PR status is only
applicable for Peninsular Malaysia.
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Tax exemption on personal effects
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· Individuals are eligible to
enjoy tax exemption for all personal effects brought into Malaysia (limited
to one shipment).
· Personal effects encompass
furniture and fittings, electronic and other general household items.
· Alcohol, tobacco and motorised
vehicles are excluded.
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Withdrawal and Termination of REP Incentive
An approved REP participant may voluntarily withdraw from the 15% flat tax rate at any time during the incentive period. Once withdrawn, the REP approval is considered invalid from the YA in which the opt-out occurs.
The incentive will also automatically terminate if the participant ceases employment in Malaysia, relocates abroad or is transferred by the employer to work outside Malaysia. Tax benefits already claimed for the period of employment in Malaysia will not be clawed back.
The REP incentive is designed to encourage actual contribution to Malaysia’s economy, and benefits are only available while the participants work and reside in Malaysia in an approved role.
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Conclusion
The REP is a strategic initiative to attract skilled Malaysians working abroad back to the country. By offering a flat tax rate of 15% on employment income for five consecutive YAs, the programme incentivises returning experts to contribute their skills to key economic sectors. The REP provides flexibility in employment agreements while establishing clear rules for withdrawal or termination, reinforcing Malaysia’s commitment to leveraging its human capital for national development.
For further information, please visit the official website of the Inland Revenue Board of Malaysia at
https://www.hasil.gov.my/en or the MyHeart Portal at
https://myheart.my/ .
KAIZEN Group, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professional accountants in Kaizen for further clarification.
KNOWLEDGE
