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
Foreign-sourced income for Malaysian tax residents, if brought into Malaysia, will be subject to Malaysian taxes;
If the foreign-sourced income is not brought into Malaysia, it will not be subject to Malaysian taxes;
All non-residents will continue to be exempted from tax under Schedule 6 paragraph 28;
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:
All sorts of foreign income generated by individuals (except for individuals carrying on business through partnerships in Malaysia); and
Dividend income earned by Companies and Limited Liability Partnerships.
The following orders have been gazetted on July 19 2022, as a result of the above announcement made by the Ministry of Finance on December 30 2021, concerning the tax exemption of particular forms of foreign-sourced income (FSI) received from January 1 2022 to December 31 2026:
Income Tax (Exemption) (No. 5) Order 2022
To provide an exemption of FSI for the individual resident in Malaysia who has income received in Malaysia from outside Malaysia;
To provide an exemption for dividends derived from overseas sources that are received by Malaysian resident businesses, limited liability partnerships (LLPs), and individuals in connection with a Malaysian partnership activity.
1. On 5 April 2022, the Minister, in the exercise of the powers conferred by paragraph 157(3)(b) of the Income Tax Act 1967 [Act 53], gazetted the Income Tax (Exemption) Order 2022 [P.U. (A) 96].
2. For the year of assessment 2022, the Minister grants an exemption from the application of the provisions of subparagraph 2(2) of Part I of Schedule 1 to the Act to a company in respect of its chargeable income in relation to any income received in Malaysia from outside Malaysia during the basis period.
1. The Malaysian Inland Revenue Board (IRBM) issued a media statement on 11 March 2022 in which it announced that the special income remittance program (PKPP) would be terminated with immediate effect.
2. You could be scratching your head, wondering what the point of this media statement is. So, allow me to explain everything to you.
1. If you are currently working abroad or have income abroad yourself, I’m sure you are getting chagrined as 2021 slowly draws to a close.
2. This is because the proposed amendments to Para 28 of the Sixth Schedule of the Income Tax Act 1967, when passed, will require income tax returns to be filed for income received in Malaysia originating overseas from 1 January 2022.
3. While you may have searched the internet for information on this, I think what you would like to know at the moment is what exactly constitutes a “remittance,” right? 4. Don’t worry, we’ll explain a little more in the following articles. 5. Join us on Telegram to stay up to date with the times – http://bit.ly/YourAuditor
1. Issue No. 103/2021: Finance Bill 2021 Highlights – No more Exemption on Foreign Sourced Income remitted to Malaysia [2021年财政法案亮点 – 源自外国汇入马来西亚的收入，不再获得豁免] https://lnkd.in/eCS24pA3
3. International Organizations involved In International Tax – OECD [涉及国际税收的国际组织 – 经合组织] https://lnkd.in/e_uDSM-S
4. International Organizations involved In International Tax – G 20 [涉及国际税收的国际组织 – G 20] https://lnkd.in/ehZnNjwh
5. International Organizations involved In International Tax – G20/OECD Inclusive Framework, World Bank Group & IMF [涉及国际税收的国际组织] https://lnkd.in/eKdW5UdE
6. International Organizations involved In International Tax – The UN [涉及国际税收的国际组织] https://lnkd.in/ermXNTq2
11. Special Income Remittance Programme to Malaysian Residents – No more Exemption on Foreign Sourced Income remitted to Malaysia [马来西亚居民收入汇款特别计划 – 源自外国汇入马来西亚的收入，不再获得豁免] https://lnkd.in/ez4bpY3W
1. In general, if you have foreign source income or profits from foreign gains and you bring them directly or indirectly to Malaysia so that you can benefit from the income or gains in Malaysia, you are considered to have made a remittance.
2. There is no definition of what constitutes a remittance in the Malaysian Act.
3. Thus, in practice, the Director-General of Inland Revenue applies the general taxation concept to foreign-source revenue and accounts for it appropriately.
1. Issue No. 103/2021: Finance Bill 2021 Highlights – No more Exemption on Foreign Sourced Income remitted to Malaysia [2021年财政法案亮点 – 源自外国汇入马来西亚的收入，不再获得豁免] https://lnkd.in/eCS24pA3
3. International Organizations involved In International Tax – OECD [涉及国际税收的国际组织 – 经合组织] https://lnkd.in/e_uDSM-S
4. International Organizations involved In International Tax – G 20 [涉及国际税收的国际组织 – G 20] https://lnkd.in/ehZnNjwh
5. International Organizations involved In International Tax – G20/OECD Inclusive Framework, World Bank Group & IMF [涉及国际税收的国际组织] https://lnkd.in/eKdW5UdE
6. International Organizations involved In International Tax – The UN [涉及国际税收的国际组织] https://lnkd.in/ermXNTq2
11. Special Income Remittance Programme to Malaysian Residents – No more Exemption on Foreign Sourced Income remitted to Malaysia [马来西亚居民收入汇款特别计划 – 源自外国汇入马来西亚的收入，不再获得豁免] https://lnkd.in/ez4bpY3W
1. Suppose we have remitted money from overseas to Malaysia. In that case, it can sometimes be difficult to distinguish between different types of income or earnings, especially if you have more than one type of income or gains in an account.
2. Whenever you remit money to Malaysia from a bank account that contains income from multiple sources, you should first ensure that you have a clear record of it. This is because not all income remit to Malaysia from overseas will be taxed, for example, capital gains or remitting money back to Malaysia that you have previously sent out of Malaysia.
3. If you cannot provide valid evidence, this may work against you because it may result in your money being taxed for no reason and you paying higher taxes than others.
4. For this reason, without a thorough understanding of the Tax Law and the guidance of an experienced tax advisor, it might be difficult to avoid making remittances safely.
1. Issue No. 103/2021: Finance Bill 2021 Highlights – No more Exemption on Foreign Sourced Income remitted to Malaysia [2021年财政法案亮点 – 源自外国汇入马来西亚的收入，不再获得豁免] https://lnkd.in/eCS24pA3
3. International Organizations involved In International Tax – OECD [涉及国际税收的国际组织 – 经合组织] https://lnkd.in/e_uDSM-S
4. International Organizations involved In International Tax – G 20 [涉及国际税收的国际组织 – G 20] https://lnkd.in/ehZnNjwh
5. International Organizations involved In International Tax – G20/OECD Inclusive Framework, World Bank Group & IMF [涉及国际税收的国际组织] https://lnkd.in/eKdW5UdE
6. International Organizations involved In International Tax – The UN [涉及国际税收的国际组织] https://lnkd.in/ermXNTq2
11. Special Income Remittance Programme to Malaysian Residents – No more Exemption on Foreign Sourced Income remitted to Malaysia [马来西亚居民收入汇款特别计划 – 源自外国汇入马来西亚的收入，不再获得豁免] https://lnkd.in/ez4bpY3W
P/S: According to a press release issued by the Ministry of Finance on 30 December, the government has agreed to exempt overseas income from taxation until 31 December 2026, subject to certain conditions.
1. The Ministry of Finance issued a press release on 30 December 2021 in which the Government has agreed to exempt overseas income from taxation until 31 December 2026, subject to certain conditions: 👉 all sorts of foreign income generated by individuals; and
👉 Dividend income received by companies and limited liability Partnerships [LLPs].
2. This article was written before the press release was issued and has become less helpful with this press release, but can still be used as a reference for future reference
1. Issue No. 103/2021: Finance Bill 2021 Highlights – No more Exemption on Foreign Sourced Income remitted to Malaysia [2021年财政法案亮点 – 源自外国汇入马来西亚的收入，不再获得豁免] https://lnkd.in/eCS24pA3
3. International Organizations involved In International Tax – OECD [涉及国际税收的国际组织 – 经合组织] https://lnkd.in/e_uDSM-S
4. International Organizations involved In International Tax – G 20 [涉及国际税收的国际组织 – G 20] https://lnkd.in/ehZnNjwh
5. International Organizations involved In International Tax – G20/OECD Inclusive Framework, World Bank Group & IMF [涉及国际税收的国际组织] https://lnkd.in/eKdW5UdE
6. International Organizations involved In International Tax – The UN [涉及国际税收的国际组织] https://lnkd.in/ermXNTq2
11. Special Income Remittance Programme to Malaysian Residents – No more Exemption on Foreign Sourced Income remitted to Malaysia [马来西亚居民收入汇款特别计划 – 源自外国汇入马来西亚的收入，不再获得豁免] https://lnkd.in/ez4bpY3W
1. It was announced by the Ministry of Finance (MOF) in a press release that the government has agreed to exempt from taxation until December 31, 2026 :
👉 all sorts of foreign income generated by individuals, as well as
👉 dividend income earned by Companies and Limited Liability Partnerships.
2. However, this will be subject to the eligibility conditions stated in the guidelines to be issued later.
1. Issue No. 103/2021: Finance Bill 2021 Highlights – No more Exemption on Foreign Sourced Income remitted to Malaysia [2021年财政法案亮点 – 源自外国汇入马来西亚的收入，不再获得豁免] https://lnkd.in/eCS24pA3
3. International Organizations involved In International Tax – OECD [涉及国际税收的国际组织 – 经合组织] https://lnkd.in/e_uDSM-S
4. International Organizations involved In International Tax – G 20 [涉及国际税收的国际组织 – G 20] https://lnkd.in/ehZnNjwh
5. International Organizations involved In International Tax – G20/OECD Inclusive Framework, World Bank Group & IMF [涉及国际税收的国际组织] https://lnkd.in/eKdW5UdE
6. International Organizations involved In International Tax – The UN [涉及国际税收的国际组织] https://lnkd.in/ermXNTq2
11. Special Income Remittance Programme to Malaysian Residents – No more Exemption on Foreign Sourced Income remitted to Malaysia [马来西亚居民收入汇款特别计划 – 源自外国汇入马来西亚的收入，不再获得豁免] https://lnkd.in/ez4bpY3W
1. Although it is a high-risk job, many people still work hard every year to get on board and undergo various examinations and training to become crew members.
2. How should sailors and seafarers be treated for income tax purposes when they sail for long periods, perhaps passing through or staying in several different countries during their voyage.
3. The income derivation rule for an individual exercising employment aboard a ship is specifically addressed under s 13(2)(e) of the Income Tax Act 1967
4. However, income derived by individual exercising employment aboard a ship operated by the owner of a Malaysian flagship is given exemption under Paragraph 34, Schedule 6
5. On December 9, 2016, the Inland Revenue Board of Malaysia (IRB) released Public Ruling No. 12/2016, which clarified the tax treatment of income generated by individuals who work onboard ships.
1. Issue No. 103/2021: Finance Bill 2021 Highlights – No more Exemption on Foreign Sourced Income remitted to Malaysia [2021年财政法案亮点 – 源自外国汇入马来西亚的收入，不再获得豁免] https://lnkd.in/eCS24pA3
3. International Organizations involved In International Tax – OECD [涉及国际税收的国际组织 – 经合组织] https://lnkd.in/e_uDSM-S
4. International Organizations involved In International Tax – G 20 [涉及国际税收的国际组织 – G 20] https://lnkd.in/ehZnNjwh
5. International Organizations involved In International Tax – G20/OECD Inclusive Framework, World Bank Group & IMF [涉及国际税收的国际组织] https://lnkd.in/eKdW5UdE
6. International Organizations involved In International Tax – The UN [涉及国际税收的国际组织] https://lnkd.in/ermXNTq2
11. Special Income Remittance Programme to Malaysian Residents – No more Exemption on Foreign Sourced Income remitted to Malaysia [马来西亚居民收入汇款特别计划 – 源自外国汇入马来西亚的收入，不再获得豁免] https://lnkd.in/ez4bpY3W
1. The Malaysian Government achieves tax jurisdiction through a series of territorial tax regimes, which means that：
👉 only income accruing in or derived from Malaysia has been taxed,
👉 Income derived from foreign sources is tax-exempt [(Schedule 6 para 28 of the Income Tax Act 1967 (ITA)], except for income received from the shipping and aviation industries, as well as the banking and insurance industries.
2. The recent Budget 2022 revealed a proposal to repeal the tax exemption on income derived from overseas sources and received in Malaysia by Malaysian residents under Paragraph 28, Schedule 6 of the Income Tax Act (ITA) 1967, effective January 1, 2022.
3. As a result, residents will be taxed on income derived from foreign sources and received in Malaysia.
4. However, it is critical to keep in mind that：
👉 Income earned overseas but not transferred to Malaysia by a Malaysian tax resident is not taxed.
👉 Non-Malaysian tax residents are likewise exempt from tax on income remitted from outside.
👉 exemption of income derived by individual exercising employment aboard a ship operated by an owner of a Malaysian flagship under Paragraph 34, Schedule 6 of the Act, remains unchanged.
5. On December 9, 2016, the Inland Revenue Board of Malaysia (IRB) released Public Ruling No. 12/2016, which clarified the tax treatment of income generated by individuals who work onboard ships.
1. Issue No. 103/2021: Finance Bill 2021 Highlights – No more Exemption on Foreign Sourced Income remitted to Malaysia [2021年财政法案亮点 – 源自外国汇入马来西亚的收入，不再获得豁免] https://lnkd.in/eCS24pA3
3. International Organizations involved In International Tax – OECD [涉及国际税收的国际组织 – 经合组织] https://lnkd.in/e_uDSM-S
4. International Organizations involved In International Tax – G 20 [涉及国际税收的国际组织 – G 20] https://lnkd.in/ehZnNjwh
5. International Organizations involved In International Tax – G20/OECD Inclusive Framework, World Bank Group & IMF [涉及国际税收的国际组织] https://lnkd.in/eKdW5UdE
6. International Organizations involved In International Tax – The UN [涉及国际税收的国际组织] https://lnkd.in/ermXNTq2
11. Special Income Remittance Programme to Malaysian Residents – No more Exemption on Foreign Sourced Income remitted to Malaysia [马来西亚居民收入汇款特别计划 – 源自外国汇入马来西亚的收入，不再获得豁免] https://lnkd.in/ez4bpY3W
![28: Termination of Special Income Remittance Program [Program Khas Peremitan Pendapatan (PKPP)]](https://ccs-co.com/wp-content/uploads/86f27c_af52e66892a24d8e98f732cffb72fd2cmv2.png)
