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Exemption Orders - Foreign-Sourced Income


Before the 1st of January 2022, Foreign sourced income remitted back to Malaysia was exempt from taxation per Schedule 6 paragraph 28 of the Income Tax Act 1967 (ITA).

Budget 2022

The amendment to Schedule 6 paragraph 28 proposed by the Budget 2022 to take effect on 1 January 2022 will remove the exemption for foreign-sourced income for Malaysian tax residents.

The Finance Act of 2021 has adopted this proposal.

As a result of the Finance Act 2021
  1. Foreign-sourced income for Malaysian tax residents, if brought into Malaysia, will be subject to Malaysian taxes;

  2. If the foreign-sourced income is not brought into Malaysia, it will not be subject to Malaysian taxes;

  3. All non-residents will continue to be exempted from tax under Schedule 6 paragraph 28;

  4. The territorial basis of taxation, which has been used in Malaysia for a very long time, will now be replaced by a territorial and remittance basis due to this change.

Ministry of Finance (MOF)'s Press Release

It was announced by the Ministry of Finance (MOF) in a press release on December 30 2021, that subject to the eligibility conditions stated in the guidelines; the government has agreed to exempt from taxation until December 31, 2026:

  1. All sorts of foreign income generated by individuals (except for individuals carrying on business through partnerships in Malaysia); and