Exemption Orders (“Orders”) for Foreign Sourced Income (“FSI”) Received in Malaysia

Further to the Ministry of Finance (“MOF”)’s announcement on 30 December 2021, the long awaited Orders on FSI received in Malaysia have been gazetted.

The following FSI which is brought into Malaysia from 1 January 2022 to 31 December 2026 will remain exempt from Malaysian income tax:
 

The exemption of the said foreign income would be subjected to the fulfillment of the following conditions:
 

Based on the Orders, the exemptions are subject to compliance with the conditions imposed by the MOF as specified in the guidelines to be issued by the Malaysian Inland Revenue Board (“MIRB”).  This will be particularly important in meeting the minimum 15% tax rate charged by the originating jurisdiction where dividends are paid to a Malaysian resident through intermediate holding companies.  The guidelines have not been issued by the MIRB to date.

Further, any deduction in relation to the income exempted shall be disregarded in ascertaining the chargeable income of the qualifying person.

The Orders may be accessed from the links above.