One of the biggest advantages for Malaysian tax residents is the Foreign-Sourced Income (FSI) exemption,a tax benefit that encourages global investment and business expansion.
What Is FSI Exemption?
Foreign-Sourced Income refers to earnings you receive from outside Malaysia, such as dividends, branch profits, or business income generated abroad.
Under the current rules:
- Individuals who are Malaysian tax residents enjoy a full exemption on all types of foreign-sourced income. This means you don’t pay Malaysian tax on income earned overseas, helping you keep more of your global earnings.
- Companies can also benefit from an exemption on foreign dividend income until 2026, provided they meet certain economic substance requirements, meaning they must demonstrate genuine business activity in the foreign jurisdiction.
Why Is This Important?
This exemption encourages Malaysians and Malaysian companies to invest abroad without the worry of double taxation. It also helps promote cross-border trade and international business partnerships.
Key Considerations:
- For companies, ensure compliance with economic substance rules to qualify.
- This exemption currently applies until 2026 but keep an eye out for any updates from the government.
By leveraging the FSI exemption, Malaysian individuals and businesses can expand globally while enjoying significant tax relief at home.