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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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Hello I am thinking about accepting a position in malaysia

Resolved Question:

Hello
I am thinking about accepting a position in malaysia and I have a couple of tax questions.
I will be here for 2 years on a proffesional visa. My salary will be 75000. I work for an American based airline out of Norwalk CT. I was told by others that if I am out of the U.S. for 335 days in a year I will be tax exempt. I left the country in March so I think if I file in april 2011 I should be exempt for 10 months. If I am going to be out of country and meet the exemption requirements should I change my status on my w-4 to exempt? I am a MI resident currently. What if any exemptions do I qualify for for MI state taxes? Finally what tax obligations will I have to malaysia under a proffesional visa. The company is also providing housing that they are going to pay at around 1000.00 a month directly to the person I rent from. Thank You Mike
Submitted: 6 years ago.
Category: Tax
Expert:  Lev replied 6 years ago.

As an US person living abroad - you may claim a foreign earned income exclusion.

The person may qualify for the foreign earned income exclusion - he/she should:
-- Work and reside outside the United States for at least 330 days during the year, or
-- Meet either the Bona Fide or Physical Presence tests.
If the person qualifies, he/she may exclude up to $91,500 (2010 in foreign wages -- plus housing allowances (limited to 30% of the earned income exclusion).

To receive that exclusion - the taxpayer should file either form 2555 or 2555EZ.

Here are forms you likely need:

Please be aware that - the exclusion above will not affect self-employment taxes - only income taxes. Only earned income is excludable - income from wages and self-employment. For instance - dividends, investment income, rental income, etc - are not excludable.

Please also be aware that this credit is not granted automatically - you need to file a tax return and claim the credit.

 

Considering your situation - as you left US on March 1, 2010 - you need to be in a foreign country at least 330 days between March 1, 2010 and March 1, 2011.

The amount you may exclude in 2010 will be 305 (days in a foreign country) / 365 * $91,500

 

Generally, as you will be in Malaysia for at least 182 days in a calendar year - you will be considered a tax resident. A resident individual is taxed on his chargeable income after deducting personal reliefs at a graduated rate from 0% to 27%.

The chargeable income of resident individuals is computed by deducting the personal reliefs from the total income. - http://www.mida.gov.my/en_v2/index.php?page=personal-income-tax

 

If the same income is taxable in the US and in a foreign country - you may claim a credit for taxes paid in a foreign country on your US tax return.

To determine the amount of credit -the person should use the form 1116 and attach it to the tax return. - http://www.irs.gov/pub/irs-pdf/f1116.pdf

Here are instructions - http://www.irs.gov/pub/irs-pdf/i1116.pdf

 

You might find helpful IRS publication 519 - http://www.irs.gov/pub/irs-pdf/p519.pdf

Let me know if you need any help.

Customer: replied 6 years ago.
Can you give me an estimate on where I will fall in the 2 to 27 percent that will have to pay malaysia. salary 75,000 yearly with 1000.00 a month for housing paid by company directly to the land lord.
Customer: replied 6 years ago.

Hello LEV,

 

I have never used answer before not sure if you received my reply.

 

 

Expert:  Lev replied 6 years ago.
Sorry for delay.

1 MYR = 0.31 USD, so $75000 = 238,762 MYR
minus personal relief 8,000 MYR - your expected taxable income 230,762 MYR
I was not able to access the official tax site - http://www.hasil.gov.my/lhdnv3e/index.jsp -

The resident individual tax rates are as follows:
on the first 150,000 27,975MYR
on the next 100,000 27%
Above 250,000 28%
See for reference - Malaysia Tax Guide

I may not comment how housing paid by the company directly to the landlord would be treated in Malaysia.
In US that payment should be included into your wages.

Lev and other Tax Specialists are ready to help you