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    GMS Flashalert Distancepost

    Malaysia – Tax Exemption on Certain Foreign-Source Income until 2026

    GMS Flash Alert 2022-010 | 14 January 2022

    The revocation of the tax exemption on foreign-source income received in Malaysia by Malaysian tax residents as proposed in the Budget 2022 was gazetted on 31 December 2021.

    At the same time, Malaysia’s Minister of Finance (“MOF”) has issued a media release dated 30 December 2021, to state that foreign-source income received by individual tax residents in Malaysia will be tax exempt from 1 January 2022 to 31 December 2026.1  This is subject to eligibility conditions that will be detailed in the guidelines to be issued by the Malaysian Inland Revenue Board (“MIRB”).

    Why this matters

    From the mobility perspective, this could be a welcome move for resident individual taxpayers who intend to remit foreign-source income into Malaysia after 31 December 2021 or outbound assignees for whom a part of their remuneration is credited by the Malaysian company in their account in Malaysia.

    Extension of Tax Exemption on Foreign-Source Income

    The government has now agreed to extend the tax exemption on foreign-source income received by resident taxpayers.

    Subject to conditions – which would be detailed in the guidelines from the MIRB – the following foreign-source income received in Malaysia from 1 January 2022 to 31 December 2026, will remain exempt from Malaysian income tax:

    Category of Resident Taxpayers

    Type of Foreign Income Exempted

    Companies / Limited Liability Partnerships

    Dividend Income

    Individuals (except for individuals who carry on business through a partnership)

    All classes of income

    Source: KPMG in Malaysia

    Individual resident taxpayers will be exempted from tax on income received in Malaysia that is sourced from outside Malaysia, except those carrying out partnership business in Malaysia, whereby they will be subject to Malaysian income tax on the foreign-source income received in Malaysia.  Nonresident taxpayers (individuals, companies, etc.) remain exempted from Malaysian tax on the foreign-source income received. 

    KPMG Note

    It appears the government has considered the feedback provided by various parties on this matter, especially in terms of the ways individuals will be impacted. 

    As the guidelines have not been issued by the MIRB yet, it remains to be seen what the eligibility conditions will be for the foreign-source income to be exempt from Malaysian tax. 

    For the time being, individual taxpayers have more time to plan on the timing of remitting their foreign-source income into Malaysia.

    Contacts

    yen-ping-long
    Yenping Long

    Partner, Global Mobility Services

    KPMG in Malaysia

    chooi-lian-fong
    Chooi Lian Fong

    Associate Director, Global Mobility Services

    KPMG in Malaysia

    chong-eng-wee
    Chong Eng Wee

    Director, Global Mobility Services

    KPMG in Malaysia

    Additional Resources

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    Footnote

    1  The media release can be found at: “MOF’s Media Release” (in Malay).

    Disclaimer

    The information contained in this newsletter was submitted by the KPMG International member firm in Malaysia.

    GMS Flash Alert is a Global Mobility Services publication of the KPMG LLP Washington National Tax practice. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

    © 2024 KPMG Tax Services Sdn Bhd., a company incorporated under the Malaysian Companies Act 1965 and a member of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.