KUALA LUMPUR (Dec 30): The Inland Revenue Board (IRB) has announced additional tax exemption eligibility requirements for eligible taxpayers with overseas dividend income received in Malaysia from Jan 1, 2022 to Dec 31, 2026.
The dividend income abroad must comply with the substantive economic conditions, it said in a statement on Dec 30.
IRB said the amendment of this provision is to provide equitable tax treatment on the foreign income with the income accrued in or derived from Malaysia in line with the country’s commitment towards compliance with international tax best practices.
Foreign income received in Malaysia which is exempted from tax from Jan 1, 2022 until Dec 31, 2026 are as follows:
- For company, LLP, and individual partner in relation to a partnership business in Malaysia: i) their dividend income has been subjected to tax in the country of origin, (ii) the highest tax rate (headline tax) in the country of origin is not less than 15%, and (iii) comply with the economic substance requirements.
- For individuals: the income (all types of income except partnership income) has been subjected to tax in the country of origin.
IRB said the additional qualification requirements, which are economic substantive requirements, are as follows:
- A resident company, a resident PLT (limited liability partnership) or a resident individual is in contact with a partnership business in Malaysia is considered to have a substantive economy if it:
- employ a sufficient number of workers with qualifications required to carry out certain economic activities in Malaysia, and
- make sufficient operating expenses to run certain economic activities in Malaysia.
In accordance with these additional terms, amendments to the Treatment Guidelines Tax Related to Income Received from Abroad have been uploaded to HASiL Official Portal on Dec 29, 2022 and Guidelines dated Sept 29, 2022 are cancelled. Click here for the latest guidance for taxpayers' reference.
The guideline is issued pursuant to the amendment of Paragraph 28 of Schedule 6, Income Tax Act 1967 (ITA 1967) by Finance Act 2021 [Act 833] which stipulates that foreign income received in Malaysia by a person who is resident will be taxable effective from Jan 1, 2022.
Therefore, for the Income Tax Return Form (BNCP) submitted on or before Dec 29, 2022, the taxpayer must submit a BNCP amendment if substantive qualification requirements are not complied with and no penalty will be imposed.
Any questions and feedback related to this matter can be submitted to IRB through:
- Hasil Care Line at 03-8911 1000 / 603-8911 1100 (overseas)
- HASiL Live Chat, and
- Feedback Form on IRB's official portal at quick link https://maklumbalaspelanggan.hasil.gov.my/MaklumBalas/ms-my/