December 21, 2019 - BY Admin

Update on Budget 2022 Proposals

We are pleased to provide you the following important updates from the Ministry of Finance (“MOF”) on the following Budget 2022 proposals :-

1. Taxation of Foreign Sourced Income Received in Malaysia

It was proposed in Budget 2022 that the exemption of foreign sourced income received by any person (other than resident companies carrying on the business of banking, insurance or sea or air transport) under paragraph 28, Schedule 6 of the Income Tax Act, 1967 (“ITA”) be removed for Malaysian residents. This proposed removal is effective 1 January 2022 and the Finance Bill 2021 which amends the above under the ITA has been passed by the Parliament.

In response to the feedback received from various parties, the MOF has announced on 30 December 2021 that the following foreign sourced income received from 1 January 2022 to 31 December 2026 shall continue to be exempted from income tax subject to conditions* which will be set out in the guidelines to be issued by the Inland Revenue Board (“IRB”):

Category of Taxpayer Type of Income Exempted from Tax
Resident Companies and Limited Liability Partnerships Dividend income
Resident Individuals (Except for resident individuals who carry on business through a partnership) All classes of income

* the conditions to be imposed on the above exemptions are likely to be aimed at ensuring compliance with the EU Council requirements (ie. to prevent double non-taxation).

All income derived from sources outside Malaysia and received in Malaysia by non-residents (individuals, companies and others) shall continue to be exempted from income tax under the amended paragraph 28, Schedule 6 of the ITA.

The MOF has also stated that foreign sourced income received in the year of assessment 2022 is excluded from the computation of tax for the purpose of Cukai Makmur.