Tax Exemption on Foreign Sourced Income (FSI)

Tax Exemption on FSI Received by Resident Individuals

The Ministry of Finance (“MoF”) has agreed to exempt from tax all FSI derived by resident individual taxpayers, except for resident individuals carrying on business through a partnership. Non-resident taxpayers (i.e. individuals, corporates and others) will continue to be exempted from income tax under Paragraph 28, Schedule 6 of the Malaysian Income Tax Act 1967 (“ITA”).

Tax Exemption on Foreign Dividends

Income tax exemption on dividends will be granted to companies and Limited Liability Partnerships, while individuals will be tax-exempted for all types of income, including dividend income.

Tax Exemption on all FSI for Cukai Makmur (Prosperity Tax)

The MoF also announced that FSI received in YA 2022 will be excluded from the computation of tax in connection with the Prosperity Tax. This announcement addresses the concerns of multinational entities (“MNEs”) regarding the applicability of the Prosperity Tax at the rate of 33 percent on FSI remitted to Malaysia in YA 2022.