Most Malaysians working in the UAE owe Malaysia nothing on their UAE salary, even if they are still Malaysian tax residents and send the money home. Malaysia taxes foreign income only when it is received in Malaysia, and the Inland Revenue Board (LHDN) exempts foreign income received by a resident individual, including income that went untaxed abroad because the source country has no income tax. What still costs money is Malaysian-source income, such as rent from a condo in Kuala Lumpur, which a non-resident pays at a flat 30% with no reliefs.

This guide is for Malaysian citizens living and working in the UAE. It covers the four residence tests in section 7 of the Income Tax Act 1967, the foreign-income exemption and its conditions, the 1995 Malaysia to UAE tax agreement, and the practical traps: the linking rule in your year of departure, rental income back home, and the stoppage order that can stop you leaving Malaysia.

The UAE side is simple. The UAE does not tax employment income, as our guide to what a tax-free salary really means explains, so every question here is about Malaysia.

The Short Answer: Salary, Rent and Savings

Income If you are a Malaysian tax resident If you are non-resident
UAE salary kept in the UAE Not taxed: foreign income is only in scope when received in Malaysia Not taxed
UAE salary transferred to a Malaysian account Exempt under the individual foreign-income exemption, but you declare it and keep records Not taxed
Rent from a property in Malaysia Taxed at the resident scale (0% to 30%) with reliefs Taxed at a flat 30%, no reliefs

The authority for each row is set out below. The one step people skip is the declaration: an exemption is not the same as having nothing to report.

Section 7: The Four Ways to Be a Malaysian Tax Resident

LHDN’s residence status page sets out section 7(1) of the Income Tax Act 1967. You are resident for a year if any one of four paragraphs applies. Citizenship is not one of them.

Paragraph Test How it hits a Malaysian in the UAE
7(1)(a) In Malaysia for 182 days or more in the year Rarely met once you are working in Dubai or Abu Dhabi
7(1)(b) Under 182 days, but the period is linked to 182 or more consecutive days in the year before or the year after Catches your year of departure: leave in March after a full year at home and you can still be resident for that year
7(1)(c) 90 days or more in the year, and resident or present 90 days or more in any three of the four previous years Catches long home visits: 90 days back in Malaysia in your first years abroad can keep you resident
7(1)(d) Resident in the following year, and resident in each of the three years before Catches a year abroad sandwiched between years at home, for example a one-year UAE contract

The linking rule in your year of departure

Paragraph 7(1)(b) is the one that surprises people. If you were in Malaysia for 182 or more consecutive days running into the year you leave, the days you spent in Malaysia before departure are linked to that period and you can be resident for the whole year of departure.

The same paragraph treats some absences as part of the period, provided you are in Malaysia immediately before and after: absences connected with your service in Malaysia, conferences, seminars or study abroad, treatment for your own or an immediate family member’s ill health, and social visits of up to 14 days in total.

Why resident or not still matters

LHDN’s introduction to individual income tax states the consequence plainly. Residents are taxed at the progressive rates and get the reliefs in sections 45A to 49 of the Act. Non-residents are taxed at a flat 30% and get no reliefs.

The resident rates for years of assessment 2023 to 2025 run from 0% on the first RM5,000 of chargeable income to 30% above RM2 million, with 25% applying between RM100,001 and RM400,000.

Foreign Income: Why Your UAE Salary Is Exempt

Paragraph 28 of Schedule 6 to the Act used to exempt all foreign income received by residents. The Finance Act 2021 changed that from 1 January 2022, so foreign income received in Malaysia is now taxable unless an exemption order applies.

LHDN’s guideline on income received from abroad (amendment, June 2024) sets out the exemption that matters to you. Income Tax (Exemption) (No. 5) Order 2022, P.U.(A) 234/2022, exempts all foreign income other than partnership income received in Malaysia by a resident individual, “provided the income has been subjected to tax in the country of origin”.

The condition that looks like a problem, and is not

A UAE salary is not subjected to income tax in the UAE. Read alone, the condition above would take it outside the exemption. Paragraph 5.2.2.2 of the guideline closes that gap. The condition is treated as met where foreign income is not subject to tax in the country of origin “due to the country’s taxation system”, where it falls below that country’s taxable threshold, or where it is exempt under a tax incentive. Georgia also taxes individuals territorially, with its own traps for freelancers, covered in Georgians in the UAE: territorial tax and what Georgia still taxes.

The guideline’s own Example 11 is almost exactly the Gulf case. A Malaysian resident works as a welder for a company in Brunei, Brunei does not tax his employment income, and he brings his earnings home. LHDN’s conclusion is that the income brought into Malaysia is exempt. A UAE salary sits in the same position.

What counts as receiving money in Malaysia

The guideline defines “received in Malaysia” as transferred or brought in as cash or by electronic funds transfer. Electronic funds transfer is drawn widely: bank transfers, debit, credit and charge cards, e-money, privately issued digital assets such as crypto-assets and stablecoins, and central bank digital currency.

So paying for a holiday in Penang with a UAE credit card is a receipt of foreign income in Malaysia. For most employees that makes no difference, because the income is exempt anyway, but it matters for the declaration and for records.

How long the exemption lasts

The 2022 orders ran from 1 January 2022 to 31 December 2026, which is the period printed in the June 2024 guideline. The government then extended the individual exemption to 31 December 2036 by P.U.(A) 451/2024, gazetted in December 2024, as reported by Bloomberg Tax and the major advisory firms. We could not read the gazette itself (see the limits section below).

Declare it and keep the evidence

Paragraph 5.2.4 of the guideline requires the exempt foreign income to be declared, with supporting documents kept. For a UAE salary, the obvious file is your employment contract, UAE payslips, the bank statements showing each transfer, and your Emirates ID and residence visa to show where the work was done.

Expenses connected with exempt foreign income cannot be deducted against your taxable income, under paragraph 5.2.3 of the guideline.

What Still Gets Taxed: Malaysian-Source Income

The exemption covers foreign income only. Income that accrues in or is derived from Malaysia is taxed under the ordinary rules, whether or not you live abroad.

  • Rent from Malaysian property. A flat 30% if you are non-resident, with no reliefs; the resident scale if you are resident.
  • Work physically done in Malaysia. Days worked remotely from Malaysia for a UAE employer during a long visit can produce Malaysian-source employment income.
  • Payments from a Malaysian employer after you leave. LHDN notes that under section 25(6), employment income receivable after you leave Malaysia permanently is taxed in the year you leave.

The Malaysia to UAE Tax Agreement

Malaysia and the UAE signed an agreement on 28 November 1995. LHDN’s list of comprehensive agreements shows it in force from 18 September 1996, published as P.U.(A) 127/1996.

Article What it says What it means for you
4(1)(b) A UAE resident is “a person who is resident in the United Arab Emirates for the purpose of U.A.E. tax” No nationality condition, but it depends on UAE tax residence. A UAE tax residency certificate is the practical evidence.
4(3) Tie-breaker: permanent home, then center of vital interests, then habitual abode, then nationality, then mutual agreement Decides which country wins if both treat you as resident
15(1) Pay for services is taxable only in the state of residence unless the services are performed in the other state Work done in the UAE may be taxed in the UAE; it does not stop Malaysia’s own rules applying to a Malaysian resident
23(2) Malaysia gives a credit for UAE tax paid by a Malaysian resident Worth nothing on a salary, because no UAE tax is paid

In practice the agreement matters less for Malaysians than for most nationalities we cover, because Malaysia’s own exemption already removes UAE salary from tax. It cannot reduce Malaysian tax on rent from Malaysian property, which the source country keeps the right to tax.

If you need to prove UAE residence to a Malaysian bank or to LHDN, see our UAE tax residency certificate guide.

The Stoppage Order: Unpaid Tax Can Stop You Leaving

LHDN can ask Immigration to stop a taxpayer with outstanding tax from leaving Malaysia. Its stoppage order page says you can check your status through MyTax or the Immigration Department’s travel status check.

  • To lift it: pay the amount on the certificate in full through ByrHASiL, using payment code 084 or 095 for income tax.
  • If you cannot pay in full: apply for a temporary release by letter to the LHDN branch handling your file, stating destination, purpose and duration, and pay 50% of the outstanding tax.
  • Timing: the payment receipt and application must reach LHDN five days before your travel date.

The practical risk is a Malaysian who flies home for a family visit with an old assessment unpaid and cannot fly back to Dubai. Check before you travel.

The Order to Do This In

  1. Count your days for each year and test all four paragraphs of section 7, including the linking rule for the year you left.
  2. If you are resident, file your return, declare foreign income received in Malaysia as exempt, and keep your UAE payslips, contract and transfer records.
  3. If you have Malaysian rental income, declare it on the correct form. LHDN lists the BE form for residents without business income and the M form for non-residents.
  4. Get a UAE tax residency certificate if a Malaysian bank or LHDN asks you to prove where you live.
  5. Check for a stoppage order on MyTax before every trip home.

For moving savings, our guides to sending money from the UAE and moving large sums out of the UAE cover the UAE side, and how UAE banks report accounts under CRS explains why LHDN may already know your UAE balances.

What We Could Not Verify

  • The text of P.U.(A) 451/2024. The 2036 end date comes from Bloomberg Tax and advisory firm reports. LHDN’s June 2024 guideline predates it and still shows 31 December 2026. We could not confirm whether the new order repeats the “subjected to tax” condition word for word.
  • Whether LHDN’s Brunei example binds the UAE case. Guidelines are LHDN’s stated position, not legislation, but the facts are materially the same.
  • The return filing deadlines for the current year. LHDN publishes them each year in its Return Form Filing Programme; check the current one before filing.

Frequently Asked Questions

Do Malaysians working in the UAE pay tax in Malaysia?

Not on their UAE salary in most cases. Malaysia taxes foreign income only when it is received in Malaysia, and LHDN exempts foreign income received by resident individuals, including income untaxed abroad because the source country has no income tax. Malaysian-source income such as rent is still taxed.

Is my UAE salary taxable if I transfer it to Malaysia?

If you are a Malaysian tax resident, the transfer is a receipt of foreign income, but it is exempt under P.U.(A) 234/2022 as explained in LHDN’s guideline. You must declare it as exempt income and keep supporting documents.

How many days make me a Malaysian tax resident?

182 days in a year is the headline test in section 7(1)(a), but three other tests can make you resident with fewer days, including a linking rule for the year you leave and a 90-day test for people who were resident in three of the previous four years.

What tax does a non-resident pay on rental income from Malaysia?

A flat 30%, with no personal reliefs, according to LHDN. A resident pays the progressive scale from 0% to 30% and can claim reliefs.

Is there a tax treaty between Malaysia and the UAE?

Yes. It was signed on 28 November 1995 and has been in force since 18 September 1996, published as P.U.(A) 127/1996. It defines a UAE resident as a person resident in the UAE for the purpose of UAE tax.

Does paying with a UAE credit card in Malaysia count as bringing income in?

Yes. LHDN’s guideline defines electronic funds transfer to include debit, credit and charge cards, e-money and digital assets, so card spending in Malaysia is a receipt of foreign income. For a UAE salary it remains exempt.

Can LHDN stop me leaving Malaysia?

Yes. A stoppage order can be issued for outstanding tax. You can pay in full to lift it, or apply for a temporary release by paying 50% of the amount and applying five days before you travel.

How long does the foreign income exemption last?

The 2022 orders covered 1 January 2022 to 31 December 2026. P.U.(A) 451/2024 extended the individual exemption to 31 December 2036.

Official Sources

Information current as of September 2026. Verify with official authorities before proceeding.

This guide is for informational purposes only and is not tax advice. Malaysian and UAE regulations are subject to change. Always verify current requirements with the relevant official authority, or a licensed tax adviser, before proceeding with any filing or transaction.