Chartered Tax Institute of Malaysia (CTIM) welcomed the government’s agreement to exempt dividend incomes earned by limited liability companies and partnerships as it will continue to enhance investment by encouraging foreign-sourced dividend income to be remitted into Malaysia and to maintain the attractiveness of Malaysia as a location for regional offices.
For individual taxpayers, the FSI exemption will be given to all individuals except those in a partnership business in Malaysia.
For non-resident taxpayers (individuals, companies, and others), they remain exempted from income tax under Paragraph 28, Schedule 6 of the Income Tax Act,1967.
During the tabling of Budget 2022 on October 29, 2021, the government had proposed the withdrawal of the tax exemption on FSI received in Malaysia and FSI will be taxed from January 1, 2022. This had caused a stir among companies and individuals, especially those with significant investments overseas.
Many Malaysian resident taxpayers who were earlier caught in a dilemma on the prospect of their hard-earned income from overseas will be taxed come 1 January 2022 can now heave a big sigh of relief for at least the next 5 years.
The MoF also announced that FSI received in the year of assessment 2022 is also exempted from tax calculation for the purpose of Prosperity Tax or Cukai Makmur.
