Investing in foreign stocks while being a resident of Malaysia? (or other foreign countries)

[freedomseeker]

Tossing around ideas....

Thinking about moving to Malaysia and becoming non resident of Canada because of it's territorial tax system.

My question is how do structure my investments so they don't trigger any income taxes?

Does Malaysia tax investment gains in foreign stock markets?

Would I have to update my IBKR account and have it transferred to a Malaysian account?

Are taxes applicable if my brokerage is Malaysian based?

Can i have a IBKR account not in my country of residence? (avoiding territorial)

Just trying to figure out the best way to structure things.. Also is it possible to structure this for other countries and what other countries are recommended to keep most of my capitol gains and quality of life?

Thanks.

 

[Freeman111]

Malaysia has a territorial taxation system and doesn't tax capital gains on a personal level.
income is potentially taxed if you remit into the country to a local bank account, like Thailand.

Can i have a IBKR account not in my country of residence? (avoiding territorial)

They want to know the country where you are a tax resident and where do you live with proof.

 

[fshore]

Malaysia has just introduced taxes on foreign source income when remitted to Malaysia when these are not taxed already. So no tax of income/capital gains that you hold outside of Malaysia. But it's still unclear what will be taxed in Malaysia of remittances to Malaysia.
You can change your address with IBKR to Malaysia, no issues. The broker is still in USA (for excisting account), or maybe in Canada in your case. They also have a SG office.

 

[ecool]

I’m currently residing in Malaysia for several years so here is first hand info:
Malaysia has introduced tax on foreign income remitted into Malaysia at the beginning of 2022 BUT they have given an exception for at least the next 4 years. So this doesn’t apply now. Nobody here knows what will happen after the exception period ends but people talks that they will extend some more years. We will see what happens in 2026

So the current situation for foreigners is the following:
No tax on foreign sourced income, even if you remit it to the country
No capital gain tax on any kind of investments

Yes, you can open interactive brokers account from Malaysia, but note that Malaysia doesn’t have tax treaty with USA, meaning that any dividends you get from investments, USA will withhold 30% tax on it (there are ways to avoid this by investing in equivalent markets where Malaysia has tax treaties but this is out of this post topic).

Life in Malaysia is great. Summer all year round, a lot of return for your money. Great food, super fast internet, english spoken in all major cities, first world shopping mall, etc

Let me know if you have other questions

 

[MiltonStone]

Malaysia has introduced tax on foreign income remitted into Malaysia at the beginning of 2022 BUT they have given an exception for at least the next 4 years. So this doesn’t apply now. Nobody here knows what will happen after the exception period ends but people talks that they will extend some more years. We will see what happens in 2026

That would be sufficient for someone to relocate there, do the investment and move on!

 

[freedomseeker]

I’m currently residing in Malaysia for several years so here is first hand info:
Malaysia has introduced tax on foreign income remitted into Malaysia at the beginning of 2022 BUT they have given an exception for at least the next 4 years. So this doesn’t apply now. Nobody here knows what will happen after the exception period ends but people talks that they will extend some more years. We will see what happens in 2026

So the current situation for foreigners is the following:
No tax on foreign sourced income, even if you remit it to the country
No capital gain tax on any kind of investments

Yes, you can open interactive brokers account from Malaysia, but note that Malaysia doesn’t have tax treaty with USA, meaning that any dividends you get from investments, USA will withhold 30% tax on it (there are ways to avoid this by investing in equivalent markets where Malaysia has tax treaties but this is out of this post topic).

Life in Malaysia is great. Summer all year round, a lot of return for your money. Great food, super fast internet, english spoken in all major cities, first world shopping mall, etc

Let me know if you have other questions

Thank you for the wonderful reply. I have a few questions.

If i apply to the S-MM2H, I hear recent changes have lengthened the stay in Sarawak to 1 month from 2 weeks, it also added money (i believe like $40,000) that must be deposited in a bank account.

Can you recommend a immigration agent?

Is all that money frozen the whole time (say 10 year visa) or after a set time can it be withdrawn?

I think I read some can be used to buy a car, could one sell the car after that and pocket the money or would it have to go back into a bank account?

Also I am just learning about what happens if I change residency in regards to IBKR. If i move to Malaysia does my Canadian IBKR account have to be transferred to the Malaysia IBKR? If so is that still considered foreign income if i sell USA stocks, or would that now be considered Malaysian income?

What do you recommend for banking (Malaysian bank?) Is it advantageous to select a bank that will allow me access to Singapore for lees of a deposit (or is that even possible?)

Can you expound on the methods to avoid paying full tax on dividends, I am interested as obviously I would prefer to retain more of my funds.

Thank you again... Maybe see you soon.

 

[Freeman111]

Also I am just learning about what happens if I change residency in regards to IBKR. If i move to Malaysia does my Canadian IBKR account have to be transferred to the Malaysia IBKR? If so is that still considered foreign income if i sell USA stocks, or would that now be considered Malaysian income?

No capital gains tax in Malaysia, you won't get taxed selling stock at a personal level whatsoever.

There is no ibkr Malaysia, only ibkr Singapore, all accounts in Asia are opened under the SG entity if I am not mistaken.

Some interesting new visa option for Malaysia : MDEC announces DE Rantau, Malaysia's first digital-nomad visa

 

[fshore]

I’m currently residing in Malaysia for several years so here is first hand info:
Malaysia has introduced tax on foreign income remitted into Malaysia at the beginning of 2022 BUT they have given an exception for at least the next 4 years. So this doesn’t apply now. Nobody here knows what will happen after the exception period ends but people talks that they will extend some more years. We will see what happens in 2026

So the current situation for foreigners is the following:
No tax on foreign sourced income, even if you remit it to the country
No capital gain tax on any kind of investments

Yes, you can open interactive brokers account from Malaysia, but note that Malaysia doesn’t have tax treaty with USA, meaning that any dividends you get from investments, USA will withhold 30% tax on it (there are ways to avoid this by investing in equivalent markets where Malaysia has tax treaties but this is out of this post topic).

Life in Malaysia is great. Summer all year round, a lot of return for your money. Great food, super fast internet, english spoken in all major cities, first world shopping mall, etc

Let me know if you have other questions

The final rules says that to get the exemption on tax on remitted foreign income the income has to have been subject to tax in another country. You should check the gazetted rules published in July.

 

[ecool]

The final rules says that to get the exemption on tax on remitted foreign income the income has to have been subject to tax in another country. You should check the gazetted rules published in July.

So yes you are right. Strangely enough, I've spent this whole morning asking different accountants, lawyers, and people, and nobody is aware of this. Like wtf but you seem to be correct. In July they gazetted the final rules looks like. The remitted income should be taxed in another country with a minimum of 15% to avoid being taxed in Malaysia. But it only applies to remitted income to Malaysia so far. If kept outside, it will not be taxed (for now).

Can you recommend a immigration agent?

I can recommend for peninsula MM2H, but I don't know any for S-MM2H

Is all that money frozen the whole time (say 10 year visa) or after a set time can it be withdrawn?

Yes, as long as you have the visa, the money has to be kept in the bank in a fixed deposit. For peninsula MM2H you can withdraw 50% after one year for expenses like buying a car, health insurance, buying a property, etc. You need to keep all receipts/invoices and then apply for a one-time withdrawal (banks are aware of this procedure and can help). This again is for regular MM2H. Not sure how S-MM2H works but I think it's similar.

I think I read some can be used to buy a car, could one sell the car after that and pocket the money or would it have to go back into a bank account?

You are free to do anything you like with the car, you can sell it the next day and keep the money if you wish. Once it's out of the fixed deposit, there is no need to put it back.

Also I am just learning about what happens if I change residency in regards to IBKR. If i move to Malaysia does my Canadian IBKR account have to be transferred to the Malaysia IBKR? If so is that still considered foreign income if i sell USA stocks, or would that now be considered Malaysian income?

I'm not really sure about this one. From my understanding (again, not sure about this) if the stocks are from a stock market outside of Malaysia, then it's a foreign source income. Only if the stocks are from Malaysia local bursa, then they are considered local income. But better double-check this one.

What do you recommend for banking (Malaysian bank?) Is it advantageous to select a bank that will allow me access to Singapore for lees of a deposit (or is that even possible?)

Usually, for foreigners, a foreign bank is recommended (Citibank, HSBC, Standard Chartered, etc). They know and understand foreign customers better, and it's usually easier to access and use (plus you avoid the long queues of the local banks). But that is up to you. The Singapore question I don't really understand. If you mean about opening a bank account in Singapore, I know for example in HSBC if you are a premier customer, they facilitate opening bank accounts in other countries. Facilitate doesn't mean they always open. They only open if they see you have valid reasons and you pass their whatever checks they do in the other country.

Can you expound on the methods to avoid paying full tax on dividends, I am interested as obviously I would prefer to retain more of my funds.

You need to buy equivalent stocks or indexes domiciled in countries that have tax treaties with Malaysia. To give you an example, if you are interested in the S&P500 index, instead of buying the SPY from the USA, you can buy the VUSD in the London Stock Exchange which is domiciled in Ireland (this is not investment advice, so do your diligence before buying anything) so IBKR will not take US withholding tax from any dividends (if any).

 

[Freeman111]

I'm not really sure about this one. From my understanding (again, not sure about this) if the stocks are from a stock market outside of Malaysia, then it's a foreign source income. Only if the stocks are from Malaysia local bursa, then they are considered local income. But better double-check this one.

Selling assets fall under capital gain tax, not income tax, no matter where it came from. There is no capital gain tax in Malaysia except for selling local property below 6 years of holding (or something close to that).

Dividend might be seen as income however and fall under the income tax if remitted in the country the same year it is earned but this might fall under the current exemption.
https://www.taxathand.com/article/2...-taxation-of-foreign-source-income-legislated

 

[ecool]

Dividend might be seen as income however and fall under the income tax if remitted in the country the same year it is earned but this might fall under the current exemption.

This is interesting but not clear to me. I guess you said it because of this point from the Deloitte article you shared:

This order exempts a “qualifying individual” from the payment of income tax in respect of gross income from all sources of income specified under section 4 of the Income Tax Act, 1967 (ITA) (which refers to the classes of income on which tax is chargeable) other than a source of income from a partnership business in Malaysia, which is received in Malaysia from outside Malaysia in the basis period for a relevant year of assessment (YA).

Would that mean that a dividend received in January 2022 but transferred to Malaysia in March 2023 would not have to pay income tax? How can they even control this

 

[Freeman111]

Would that mean that a dividend received in January 2022 but transferred to Malaysia in March 2023 would not have to pay income tax? How can they even control this

Yes this how it works, Thailand function like this as well. with a bit of saving or using credit card (or whatever form of debt) you can bypass this issue at reasonable costs.

They only have control over the Malaysian banking system, if they investigate you they can check your bank account and ask you to provide proof of fund on anything remitted during the year of assessment being investigated and if you can't provide proof then they will likely assume it is income and therefore ask you to pay accordingly.

Basically they can't control s**t outside their border/jurisdiction but if you are under investigation and still in the country, its likely you will be on a red list and unable to leave the country legally until everything is settled, aka you pay.

That's my understanding at least ...

 

[fshore]

Would that mean that a dividend received in January 2022 but transferred to Malaysia in March 2023 would not have to pay income tax? How can they even control this

So far there has been nothing released that refers to transferring funds the next year.
The current rules could be interpreted as that it covers also previous years earning when remitted to malaysia now.