Any Americans on this site living in KL?

My American friends have just returned to America, but let me know if a Brit can help with any of your questions.

Where in America were your friends from?  I am curious how much of a cultural shock it was for them moving there.  Also, curious about the tax implications on them, although I know it is different for each situation.  I believe our taxes in the US are less that yours in the UK.  So the tax structure in KL is probably favorable for you.  However, I am not yet convinced it is favorable for Americans.  The cost of living would have to be less there for what I perceive, without a lot of research yet, would actually be a tax increase for me.

Appreciate any input.

Our friends are from Ohio but they had been living outside the US for a while before they came to the US. For them things here were difficult, their work situation was terrible, they were living on the out skirts of KL in a fairly run down and dirty area and they didn't much like the local food. After 1 year they decide enough was enough and went back to the US. Unfortunately things don't work out for everyone!
For us, yes there was a culture shock, and i've had the odd day of tears, but generally we love it here. The weather is great, we have a wonderful house near midvalley, my daughter loves her new school and we are very happy.
Tax wise for a Brit it is fantastic! I've gone from losing 40% of my salary to tax and national insurance to paying just 8% income tax. There is a 6 month period when you are classed as non-resident that the tax rate is 16%, but it drops after that. The % you pay depends on the salary earned, but I think i'm on the top level. Things that are expensive here are cars and alcohol, but property it very much depends where you live, and food depends what you are planning on eating. Eating local food can be very cheap, or eating in western style high-end restaurants can be similarly priced to in the West.
Hope this helps!

Hello lovetotravel9849:

If you are contemplating expat status I would really look into many other areas too as insinuated by jOamelie.  But to your tax question, all you will need to ask are a few questions I've outline below in statement form.

Being an American has little to do with your tax status.  Before you dismiss all I say answer this question.  If you work in the USA do you have friends that work for your company that are citizens of other countries?  Well most of us do know such people and let's say they are from Germany; so then you must ask; do they pay US taxes or German taxes?  It is not as straightforward as you may think.

They work in the USA so they should pay US taxes; but they are German citizens getting benefits from the German government, they should pay German taxes.  Maybe they should pay both – great?  It is a little more complicated as you can see.

You probably know the answer but if you don't here it is.  You can pay both, either, neither, more or less.  It depends on the company (US or foreign), tax status, residency and pay structure.  Yes all that is important and you can find out most of it on the IRS website.  This will give you a good idea of requirements and exemptions except for military and diplomatic personal.

http://www.irs.gov/businesses/small/int … 30,00.html

Every country has different taxation rates and requirements too.  Our German citizen (like me) does not have to pay German tax as long as several things occur.  I don't work for a German company or a company that has an affiliation in Germany.  I do not reside in Germany, meaning my residence status is outside the nation (careful on this). I do not spend more than 28 consecutive days in the country during any CALENDAR year (this is different from the USA and many other countries.)  And I do not bring any foreign earned income into the nation (or I must pay the tax.)  There are a few other things but that is mainly it.

So if all these criteria are met a German does not have to pay any German taxes on this income; but he/she may still have to pay USA taxes.  Simply check under IRS publication, “Who must file?”

My wife, on the other hand, is American and she (like you) must follow the USA standards but let's put her offshore.  We live in Dubai for the last 7+ years (about to move to KL if things work out).  For me I am free of German taxes (UAE does not have taxes); however, America still gets its sticky fingers into my wife's income.  HOWEVER, Americans are able to minimize this by examining the IRS allowances.  This will reveal that it is very important on how your employer pays you. This is the most important thing for you or any American - the method.

Let's say your employer will pay you the equivalent of $150,000 US a year, how he does that is vitally important to you.  I am going to assume all your income is foreign earned and your employer is not an American company.  Working for GM in a foreign country does not have the same tax benefits as working for Toyota in KL.  So the assumption is no US income and working for a foreign corporation by IRS standards.  And you met all residency requirements.


Situation 1.  Your foreign employer pays you $150K directly.  In that case you get the $93K deduction (as shown above) and must pay tax on $57K.  Of course you get most of the standard filing deductions to lower this income to an AGI, but that is that and I will ignore that for this discussion.

Situation 2.  Your foreign employer pays you $120K base and $30K housing.  This situation (assuming your base housing allowance for country is equal to or less than $30K) means you pay tax on $27K.

http://www.irs.gov/businesses/small/int … 43,00.html

“The housing exclusion applies only to amounts considered paid for with employer-provided amounts….The computation of the base housing amount (line 32 of Form 2555) is….”

Basically you must be able to prove this and if your employer separates it then there is no problem with the IRS.

Situation 3.  Your foreign employer pays you $80K base, $30K housing, $10K medical, $5K transportation and $25K education (children).  If your countries limits are below these “allowances” then you pay no taxes to the USA.  It is best if they pay these directly, but not necessary (as long as it is either separated on pay-stubs or in your contract.)

Of course, in every case you must file, but simply take the allowance deductions accordingly. SO it all depends on your employer, your status and the nation you live in.  Be very careful of retirement accounts (could lose some or all of certain exclusions) as well as your residency test (going home for 45 days during the summer for example).  This is ok for Canadians but bad for US Americans. 

Yet, this only takes care of USA taxes and does not take care of the taxes in your country of residence.  Most nations in Africa, Middle East and CIS countries have no taxes (or extremely low) for expats.  Malaysia (and China) on the other hand, does have taxes and you will be required to file accordingly; however, many employers will file those for you.  In both of my cases the perspective employer and I have negotiated a NET salary with all tax liabilities paid to the government by the employer.

Hope this helps some but you must check for yourself with a competent international tax attorney.  They are specialists and your normal H&R Block guy or neighborhood CPA – lawyer is probably less knowledgeable than you.

One further thing you must remember.  Any foreign taxes paid can be applied toward your US tax liability if the two nations have mutual tax treaties.  In your case in KL, the taxes you pay to the Malaysian government are deductible from your USA tax liability.  Unfortunately, this is limited to the max of your US liability but you can carry the excess forward under certain circumstances.  Furthermore, tax liability could trigger Social Security liabilities!  Once again get a good attorney who specializes in international tax law for your region (i.e. USA-Malaysia).

All in all, working overseas and being an expat is fantastic.  You get to see and experience life as others can only imagine.  With time you will understand the planet the way it was meant to be understood and can truly call yourself a citizen of Earth.  I have been an expat for many decades and will concede it is not a life for everyone.  Usually the more nationalistic a person is, the less likely they will succeed; however, the tax benefits for Americans (even though far less than other nations) are still good and should be only a secondary consideration in your decision.

Hi I knew a lot of Americans in KL but they all claimed to be Canadian due to someone called George Bush and his wars but all forgiven now I'm sure!

An American friend is in rural Malaysia, he loves it, but he is a long term expat (I met him in Thailand). I tried to employ American IT project managers when in KL and they all thought Malaysia was like Saudi Arabia lol. You can party a lot harder in KL than most places ;-) so I would say it's western friendly. Like Singapore it's "Asia Lite"

If your potential IT manager thought KL is like Saudi - well I sure hope you did not hire him.

You can party pretty hard in Dubai too.

Thanks to all of you.  I will review in more detail the tax implications.  But one point is true, one does get a persepective of the world that those that sit a home do not get.  Not even those that travel on a 2 or so week vacation.

Thanks all

I am also American new to Kl. How are you?

Hi all!! Sorry for being gone so long, been off station and very busy past few months. Any way, for those who don't know me I'm from the US and have been in Malaysia for 6 years now. I work in Desa Sri Hartamas. I will be having beers this Friday (16-9-11) night @ "Home & Away" in Desa Sri Hartamas. All are welcome join me.

Garthak wrote:

Hi all!! Sorry for being gone so long, been off station and very busy past few months. Any way, for those who don't know me I'm from the US and have been in Malaysia for 6 years now. I work in Desa Sri Hartamas. I will be having beers this Friday (16-9-11) night @ "Home & Away" in Desa Sri Hartamas. All are welcome join me.

Nice but might be heading to Changkat BB this long weekend. I am in the mood to party!!!

Hey there! I moved recently to KL, I m Nesrine from Tunisia