Steeped in history and rich in culture, Malaysia is one of Southeast Asia’s most underrated destinations for digital nomads and the geoarbitrage crowd. In today’s episode, we take a look at why the country – and its new(ish) Digital Nomad Pass – could make a lot of sense in 2023…
A closer look at Malaysia’s Digital Nomad Visa
Geoarbitrage – earning hard currency at home and living in a far more affordable country – is a term that’s been bandied about a lot in recent years. (And since the meteoric rise of remote work, in particular.)
While massive influxes of foreign remote workers have made cities like Barcelona, Lisbon and Tbilisi far less affordable than they used to be five years ago, there are still ample places in the world that have not become too “mainstream”…
Modern convenience, exceptional value for money, AND a paradise location
In Malaysia, you can easily cut your living costs by 50% or more compared to the US, the UK or Australia, while enjoying similar modern amenities.
It’s an advanced economy with developed infrastructure. The country’s capital — Kuala Lumpur — is sophisticated and beautiful. And many expats choose it as their base.
Penang — a tropical island with amazing beaches — is another highly livable area favored by Western retirees and digital nomads.
But for the lion’s share of expat arrivals, the main drawcard is Malaysia’s cost of living. A one-bedroom apartment in a nice area of Kuala Lumpur will cost you around $500 in 2023, and a three-bedroom is only around $920 monthly.
Penang is even cheaper. A one-bedroom apartment in a nice expat area will cost you around $410 per month, and three-bedroom apartments are not much more expensive.
The country’s mobile download speed is around 43 Mbps, while fixed broadband internet is 94 Mbps.
Additionally, Malaysians are generally very friendly, and many speak fluent English.
So that’s a lot of pros.
Just keep in mind that the weather is properly tropical there. You may find adjusting difficult if you aren’t partial to never-ending heat and humidity.
Being an Islamic country, you may also find that pork dishes and alcohol aren’t as readily available as back home.
But if none of these issues bother you, Malaysia could be an excellent destination for an extended remote working trip…
In addition, the country recently introduced a bona fide Digital Nomad Visa called the DE Rantau Digital Nomad Pass, and its conditions are very reasonable…
Malaysia’s DE Rantau Digital Nomad Visa at a glance…
|Initial residency validity and renewals||Initial: 1 year|
Renewals: Once, for 1 more year.
|Financial requirements||Monthly Income: $2,000|
Your immediate family is covered by the same amount.
|Personal Safety||Safe (3/7)|
|Expat’s cost of living level||Very cheap (2/7)|
|Can the DNV lead to PR or citizenship?||No|
|Tax situation||Standard conditions apply: Territorial taxation after 183 days on the ground. Only your Malaysia-sourced income will be taxed.|
Source: Sovereign Cost of Living Index
A nice benefit of the program is that you can start your application for the Nomad Pass online.
The key requirement is really that you’re earning enough to support yourself whilst living in Malaysia (just $2,000 per month).
You’ll also be required to prove that you’re either employed, or have steady freelance contracts, and the Malaysian authorities want to see a copy of your highest academic qualification. (Holding a higher education qualification should count in your favor.)
You’ll also need to obtain a “letter of good conduct” (issued by the authorized body in your country of current residency).
Obtaining this document is one of the more challenging steps in preparing your visa application…. Because the “letter of good conduct” is not a commonly used document in countries like the USA. (Hence, US Embassies won’t be able to issue you one.)
HOWEVER… the FBI can issue you with an Identity History Summary a.k.a., the so-called Rap Sheet. (You’ll need to have your fingerprints taken for this.)
In other countries, this is also known as a Police Clearance Certificate. And these alternative documents can tick the relevant box for the Malaysian authorities.
Another challenge can stem from the certification of copies of documents like birth certificates (especially if you’re already traveling abroad).
A possible solution is to schedule an appointment with your nearest US embassy and confirm, under oath, that the documents are in fact legit. (Contact that embassy for more information.)
You’ll also have to sign a so-called “personal bond”. This is an undertaking that you’ll respect the conditions of your visa, and the laws of Malaysia.
Once approved, you’ll be required to pay a refundable security deposit as the primary applicant. Americans and Canadians currently have to pay RM 2,000 (~$450).
And finally, you’ll need to obtain a tax registration number from the Malaysian Inland Revenue Board. (More on the taxation situation below.)
Once you’re approved, you’ll also need to obtain health insurance covering you (and any dependents) for the duration of your stay.
Your initial visa will be issued for 12 months. After it expires, you can extend it once for an additional 12 months. And you can include your spouse and children under the age of 18 years in your application at no additional cost.
The application fees are RM 1,050 (~$230) for a single person and RM 530 (~$115) for each dependent. And according to the official program website, applications are processed within around six to eight weeks – which is reasonably fast.
However, you should probably bank on this process taking at least two to three months.
There is however, a significant restriction to be aware of.
The Malaysian Nomad Pass allows you to stay long-term only in West (peninsular) Malaysia. It does NOT allow you to reside in Sabah or Sarawak — Malaysia’s two autonomous regions located on the island of Borneo. (You can, however, still travel there as a tourist.)
A word on digital nomad taxation in Malaysia
After spending six months in Malaysia, you will become a tax resident. Hence you’ll be subject to tax rates reaching 30% for income above ~$445,000.
On the bright side, Malaysia is home to a territorial tax system, meaning that only your income generated inside Malaysia will be taxed.
Does it mean that all remote workers are off the taxation hook then?
You will not be taxed on your passive income coming from outside Malaysia, such as your pension, rental income, investment income, etc.
But your earned income can be an issue. Just like in other countries with territorial taxation, since you do your work while living in Malaysia, local tax authorities will likely consider it locally-sourced. (Definitely discuss this with a Malaysian tax advisor.)
Given that the Malaysia My Second Home (MM2H) program has become a LOT more restrictive in recent years, the introduction of the Malaysian Digital Nomad Pass has been great news for folks seeking to spend meaningful periods of time there.
And while there are some paperwork related challenges to be aware of, the experience of living in Malaysia should be well worth the effort. You can apply on this website if Malaysia ticks all the boxes as your ideal destination. So as the saying goes – seize the day and apply.
Yours in freedom,
Team Sovereign Man