There is a surprising last-minute twist to foreign Sourced income.
During the tabling of Budget 2022, the government had proposed the withdrawal of the tax exemption on FSI received in Malaysia, which had caused a stir among companies and individuals, especially those with significant investments abroad.
The twist only for individual?
The Ministry of Finance (MOF) on 30th December 2021 said the government has agreed to exempt all types of foreign incomes of individuals from foreign-sourced tax and has also extended the exemption to dividend incomes earned by limited liability companies and partnerships.
In a statement, it said this would be subject to the eligibility criteria which will be detailed in the Inland Revenue Board’s guidelines. So it is still too early to celebrate. Since there seems to be a further condition to this so call exemption.
Only for individual taxpayers, the government will still provide FSI exemption, limited to all individuals. However, this does not include an exemption for those who conduct business partnerships in Malaysia, which will still be subjected to tax on foreign-sourced income (FSI) received.
It said the exemption would be effective from January 1, 2022 until Dec 31, 2026.
Non-resident categories (individuals, companies, etc) remain eligible for income tax exemption.
“At the same time, we are pleased to announce that FSI received in the year of assessment 2022 is exempt from tax calculation for the purpose of Cukai Makmur,” said the finance ministry. Since Cukai Makmur only affects the blue-chip company, this definitely is a piece of good news for the mega-companies.
Let us be on the lookout for the guideline. I am definitely eager to see what are the condition attached.
Source: The Edge
There is a lot of confusion lately regarded FSI. To separate the truth from fiction, read this article: “You See FSI Not a Real U-Turn“.