Effective 1 January 2022, the tax exemption for foreign-sourced income ("FSI") received by Malaysian residents provided for under Para 28 was removed following the Budget 2022 made on 29 October 2021.
Hence, Foreign Income received in Malaysia which is eligible for the tax exemptions are as follows:
Foreign dividend income received in Malaysia by a resident company, resident LLP and resident individual in relation to a partnership business in Malaysia [P.U.(A) 235/2022].
All foreign income excludes income from a partnership business received in Malaysia by a resident individual [P.U.(A) 234/2022].
Below is a summary of the exemption of income tax payment for a qualifying individual's gross income from dividends earned in Malaysia but received outside the country, as stipulated under P.U.(A) 235/2022:-
CTIM Further Comment:
As mentioned in the scenario, BAT PLT will invest in some foreign companies and earn dividend income.
The dividend income earned by the partnership, BAT PLT, will be apportioned among the partners in the same way as profits. Please see the example below:
Please confirm that the foreign-source dividend income of RM25,000 received in Malaysia by Ben will be exempted under P.U. (A) 235/2022, where the relevant conditions are met.
IRBM's Feedback:
The determination of whether Ben is eligible for tax exemption under P.U. (A) 235/2022 depends on the type of partnership for BAT PLT.
If BAT PLT is a limited liability partnership (LLP), then the distribution received by partners will be subject to Paragraph 12C of Schedule 6.
If BAT PLT is a partnership registered under the Registration of Business Act 1956, then the understanding of CTIM is in order.
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