The Government gazetted the Income Tax (Dividend Income Received in Malaysia from Outside Malaysia) (Exemption) Order 2026 [P.U.(A)367/2026] on 22 October 2026. This order comes into operation on 1 January 2027 and remains in force until 31 December 2030.
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Previous Gazetted Orders
The exemption was previously granted under the Income Tax (Exemption) (No. 6) Order 2022 [P.U.(A) 235/2022], gazetted on 19 July 2022, which applied from 1 January 2022 until 31 December 2026. This Order was amended by P.U.(A) 157/2024, gazetted on 12 June 2024, which extended the exemption to eligible Labuan entities and restated the qualifying conditions as alternatives, with effect from 1 January 2022.
The new Order continues the exemption for a further four years, from 1 January 2027 until 31 December 2030, and extends the qualifying persons to include co-operative societies and trust bodies.
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Qualifying Persons
To qualify for this exemption, a person must be resident in Malaysia and receive dividend income arising from outside Malaysia that is brought into Malaysia. The person must be one of the following:
(1)
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an individual who received dividend income in relation to a partnership business in Malaysia;
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(2)
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a limited liability partnership which is registered under the Limited Liability Partnerships Act 2012;
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(3)
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a company incorporated under the Companies Act 2016;
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(4)
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a Labuan entity incorporated under the Labuan Companies Act 1990 that has made an election under section 3A of the Labuan Business Activity Tax Act 1990 to be taxed under the Income Tax Act 1967 (“the Act”);
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(5)
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a co-operative society; or
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(6)
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a trust body.
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The exemption does not apply to a person carrying on the business of banking, insurance or sea or air transport.
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Qualifying Conditions
A qualifying person must comply with the conditions imposed by the Minister, as specified in the guidelines issued by the Director General of Inland Revenue under Section 134A of the Act. The person must satisfy either of the following conditions:
(1)
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the foreign-sourced dividend income has been:
(a) subject to tax in a similar manner in the country of origin; and
(b) subject to tax at a rate of not less than 15%;
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or
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(2)
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the qualifying person fulfils the economic substance requirements by:
(a) employing an adequate number of employees in Malaysia; and
(b) incurring an adequate amount of operating expenditure in Malaysia.
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Tax Treatment and Compliance Obligations
In ascertaining the chargeable income of a qualifying person, any deductions relating to the exempted income must be disregarded. Furthermore, the qualifying person is still required to submit returns, statement of account, or other information under the Act.
For further information, please visit the official website of the Inland Revenue Board of Malaysia at
https://www.hasil.gov.my/en
KAIZEN Group, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professional accountants in Kaizen for further clarification.
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