Since 1 January 2022, foreign income received in Malaysia by a resident has been taxable, following an amendment made by the Finance Act 2021. HASiL's Guidelines on Tax Treatment in Relation to Income Received from Abroad (Amendment) explain the position and the exemptions that apply, subject to conditions.
The exemption for foreign dividends
According to the guidelines, foreign dividend income received in Malaysia by a resident company, resident limited liability partnership or resident individual in relation to a partnership business in Malaysia from 1 January 2022 until 31 December 2026 is exempt from tax, but only if the conditions are met. The exemption is therefore not automatic.
Two routes to qualify
The guidelines set out two alternative conditions, and the recipient may choose which one to comply with:
- the participation exemption requirements: the dividend satisfies the foreign-tax test described in the guidance, including qualifying underlying tax and specified deemed-satisfaction cases, and the relevant country’s headline tax rate is at least 15%; or
- the economic substance requirements set out in the guidelines.
This foreign-dividend exemption excludes residents carrying on banking, insurance, sea transport or air transport businesses. If neither route is satisfied, the exemption does not apply to that dividend.
Check the rules for the receipt date
The June 2024 dividend guidance describes the exemption through 31 December 2026. Budget 2026 proposed a further extension, so a dividend received after that date should be checked against the applicable dividend exemption order and any updated HASiL guidance before a claim is made. Do not assume that rules for dividends and foreign capital gains are interchangeable. Separately, HASiL’s foreign-capital-gain guidelines dated 29 September 2026 confirm a conditional exemption through 31 December 2030 for that category of gains.
Group structures raise related questions; see our article on the consolidation exemption for holding companies, and our article on capital gains tax on unlisted shares.
This article is general information only. Requirements depend on each company's circumstances; please refer to HASiL's official guidance, and see Saifudin & Co's tax advisory and compliance services if you would like assistance.