US Single Member LLC owner and Malaysia residency

[andrew28fl]

Hello,

As the title suggests, I am looking for information on the tax treatment of a US SMLLC for a Malaysian Tax Resident (spending more than 183 days/year on MM2H). There won't be any remittances from this LLC to the resident person who is a Malaysian tax resident. Does anyone have information and/or personal experience dealing with this? Thanks!

Came across a useful article, if it helps someone else: Is your foreign-sourced income exempted from tax?

Last edited: Sep 23, 2023

 

[Don]

andrew28fl said:
Hello,

As the title suggests, I am looking for information on the tax treatment of a US SMLLC for a Malaysian Tax Resident (spending more than 183 days/year on MM2H). There won't be any remittances from this LLC to the resident person who is a Malaysian tax resident. Does anyone have information and/or personal experience dealing with this? Thanks!
Click to expand...

A company is tax resident in Malaysia in a basis year (normally the financial year) if, at any time during the basis year, the management and control of its affairs are exercised in Malaysia. Generally, a company is regarded as resident in Malaysia if, at any time during the basis period for a year of assessment, at least one meeting of the Board of Directors is held in Malaysia concerning the management and control of the company.

The business profits of a non-resident that are attributable to a place of business in Malaysia, as defined under the domestic law, will be subject to Malaysian income tax.

 

[andrew28fl]

Don said:
A company is tax resident in Malaysia in a basis year (normally the financial year) if, at any time during the basis year, the management and control of its affairs are exercised in Malaysia. Generally, a company is regarded as resident in Malaysia if, at any time during the basis period for a year of assessment, at least one meeting of the Board of Directors is held in Malaysia concerning the management and control of the company.

The business profits of a non-resident that are attributable to a place of business in Malaysia, as defined under the domestic law, will be subject to Malaysian income tax.
Click to expand...

Thanks for answering, Don. I understand that PE would make the entity a Malaysian entity for tax purposes.

For the sake of argument, if I bypass the LLC, and get paid directly in my name, would that change anything? Do I get taxed even if that income is never remitted to Malaysia?

I guess what I want to know is, is there any way to benefit from the "tax only on remitted income" regime that Malaysia has? Or do you only benefit from that for passive income, such as capital gains on stocks, dividends, etc?

I read the article No more exemption on foreign sourced income remitted to Malaysia., which says "If the income stays overseas, it will not be taxed".

Thanks again!

 

[Don]

andrew28fl said:
For the sake of argument, if I bypass the LLC, and get paid directly in my name, would that change anything? Do I get taxed even if that income is never remitted to Malaysia?

I guess what I want to know is, is there any way to benefit from the "tax only on remitted income" regime that Malaysia has? Or do you only benefit from that for passive income, such as capital gains on stocks, dividends, etc?
Click to expand...

For sure it is possible to benefit from this regime. It was explained in the first link you provided that there are certain conditions to avoid taxation.

 

[fshore]

Very common to do it this way, the LLC is only theoretically tax resident in Malaysia, if you'd try to actually pay taxes you'll find that very difficult.
You're also theoretically taxable personally for malaysia source income, however it's not possible to pay it as it's not legal to work locally (generate malaysia source income) under MM2H.
This might change in the future, but for now it's a very common setup.

 

[Marzio]

fshore said:
if you'd try to actually pay taxes you'll find that very difficult
Click to expand...

Do you have direct experience?

 

[andrew28fl]

fshore said:
Very common to do it this way, the LLC is only theoretically tax resident in Malaysia, if you'd try to actually pay taxes you'll find that very difficult.
You're also theoretically taxable personally for malaysia source income, however it's not possible to pay it as it's not legal to work locally (generate malaysia source income) under MM2H.
This might change in the future, but for now it's a very common setup.
Click to expand...

Thanks. Do you have a lawyer/accountant recommendation for Malaysia?