Foreign-Sourced Income - Tax Treatment Update

Income tax exemption orders of specific types of foreign-sourced income have been gazetted on 19 July 2022

Foreign-sourced income exempted from income tax:

1. Resident individuals (excluding a source of income from a partnership business in Malaysia, which is received in Malaysia from outside Malaysia in the basis period for a year of assessment) > All sources of income under section 4 of the Income Tax Act 1967

2. Resident individual (in respect of dividend income received through a partnership business in Malaysia), resident companies and LLPs > Dividend income that is received in Malaysia from outside Malaysia > Resident companies carrying on the business of banking, insurance, sea or air transport, continue to be expected to be taxed on income from wherever derived

Additional notes: Companies and Limited Liabilities Partnerships (LLPs) will continue to be subject to tax on other forms of foreign-sourced income other than dividend income (e.g. royalty, interest, etc) which is received in Malaysia from outside Malaysia from 1 January 2022 based on the following income tax rates:

i. Amounts received from 1 January 2022 to 30 June 2022 – 3% gross – under Special Income Remittance Programme (“SIRP”)

ii. Amounts received after 30 June 2022 – prevailing income tax rate

Sources: Income Tax (Exemption) (No. 5) Order 2022 - https://lom.agc.gov.my/.../akta/outputp/1737434/PUA234.pdf Income Tax (Exemption) (No. 6) Order 2022 - https://lom.agc.gov.my/.../1737431/PUA%20235%20(2022).pdf

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Foreign-source income - Tax Treatment.pdf

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