KUALA LUMPUR (Dec 31): The Chartered Tax Institute of Malaysia (CTIM) has welcomed the government's move to exempt foreign-sourced income (FSI) of individual resident taxpayers from tax.

Noting that the exemption is also extended to foreign-sourced dividend incomes earned by limited liability companies and partnerships, CTIM said this will continue to enhance investment by encouraging foreign-sourced dividend income to be remitted into Malaysia.

It will also help maintain the attractiveness of Malaysia as a location for regional offices, CITM president Farah Rosley said in a statement.

During the tabling of Budget 2022 on Oct 29, the government proposed the withdrawal of the tax exemption on FSI received in Malaysia with effect from Jan 1, 2022.

"This had caused a stir among companies and individuals, especially those with significant investments overseas," said Farah.

"Many Malaysian resident taxpayers who were earlier caught in a dilemma on the prospect that their hard-earned income from overseas will be taxed come Jan 1, 2022 can now heave a big sigh of relief for at least the next five years," she added.

The Ministry of Finance, in its announcement on Thursday (Dec 30), said that for individual taxpayers, the FSI exemption would be given to all individuals except those in a partnership business in Malaysia, until 2026.

For non-resident taxpayers, they remain exempted from income tax.

The ministry also said that FSI received in the year of assessment 2022 is exempted from tax calculation for the purpose of Cukai Makmur (Prosperity Tax).