Who will be affected by the taxation of foreign source income?

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Malaysian Tax Residents Will Be Affected by the Taxation of Foreign Source Income

The proposed taxation of foreign source income (FSI) will specifically impact Malaysian tax residents. This change, announced in the Malaysian 2022 Budget, means that income derived from outside Malaysia but remitted into the country by residents will no longer be exempt from tax. Non-residents receiving FSI will continue to be exempt.
Malaysian Tax Residents Working Abroad

Individuals who are Malaysian tax residents but reside overseas and earn income there will be affected. For instance, a common scenario involves Malaysian tax resident individuals living in Johor Bahru who commute to work in Singapore and subsequently remit their employment income back to Malaysia. From January 1, 2022, this remitted income will be subject to Malaysian tax.
Malaysian Tax Residents with Overseas Investments

Malaysian tax resident individuals who own properties outside Malaysia and receive rental income from these properties will also be impacted. When this rental income is remitted to Malaysia, it will fall under the new tax regime. The proposal affects income remitted from overseas starting January 1, 2022.
Non-Residents' Foreign Source Income Remains Exempt

It is important to note that the new tax measures are exclusively targeted at Malaysian tax residents. Foreign source income received by individuals or entities classified as non-residents in Malaysia will continue to be exempt from Malaysian income tax. This ensures that the tax implications are confined to those considered residents for tax purposes within Malaysia.

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Who will be affected by the taxation of foreign source income?

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