As global work and investments become increasingly common, many Malaysians earn income beyond our borders. Whether it’s dividends from overseas companies, profits from a business abroad, or gains from selling foreign assets and how these are taxed in Malaysia is always a key concern.
In Budget 2026, the government announced an important update: the continuation and extension of the tax exemption on foreign-sourced income (FSI) and gains. This move aims to keep Malaysia attractive for global investors, businesses, and professionals working across borders.
What Counts as Foreign-Sourced Income?
Foreign-sourced income (FSI) refers to income earned outside Malaysia and later brought into Malaysia by a tax resident. Common examples include:
- Dividends from foreign investments
- Profits from overseas businesses
- Capital gains from the sale of foreign assets
Under certain conditions, this income can be exempt from Malaysian income tax, especially when it has already been taxed in the country of origin.
Before vs After Budget 2026
Before Budget 2026:
Under the Budget 2022 framework, Malaysia temporarily reinstated the tax on foreign-sourced income received by residents, but an exemption period was granted until 31 December 2026. This covered:
- Individuals – exemption on foreign-sourced income taxed abroad
- Companies and LLPs – exemption only for foreign-sourced dividends, not capital gains
This created some uncertainty, especially for businesses and investors with long-term overseas assets.
After Budget 2026:
Budget 2026 provides greater clarity and longer relief:
- Individuals: Exemption continues until 31 December 2036
- Companies, LLPs, cooperatives & trusts: Exemption on foreign-sourced dividends and capital gains extended until 31 December 2030
This means both individuals and corporate taxpayers now enjoy an extended timeline and broader scope of exemption.
Tips for Taxpayers
If you earn or invest abroad, here are a few practical steps to stay compliant:
- Keep documentation – proof of foreign tax paid and evidence of the income’s origin.
- Declare exempt income – even if tax-free, include it in your Malaysian tax return.
- Confirm residency – exemptions apply only to Malaysian tax residents.
- Track deadlines – remember: 2036 for individuals, 2030 for companies and LLPs.
With Budget 2026, Malaysia demonstrates its commitment to supporting global mobility and cross-border investment while maintaining a fair and transparent tax system.
For Malaysians with overseas income, this extension provides both peace of mind and opportunity to bring foreign earnings home, invest locally, and grow with confidence.