Malaysia has extended the income tax exemption for qualifying foreign-sourced capital gains received in Malaysia by four years, with the relief now remaining available until 31 December 2030 under the Income Tax (Exemption) (No. 3) Order 2024 (Amendment) Order 2026.
Malaysia has published the Income Tax (Exemption) (No. 3) Order 2024 (Amendment) Order 2026 in the Official Gazette on 29 July 2026, under which the exemption period in the Income Tax (Exemption) (No. 3) Order 2024 has been extended from 31 December 2026 to 31 December 2030.
This change takes effect from 1 January 2027, ensuring the exemption continues without interruption after the original expiry date.
This follows the original Income Tax (Exemption) (No. 3) Order 2024, which exempted from capital gains tax any gains derived by companies, limited liability partnerships, trust bodies, and cooperative societies resident in Malaysia from the disposal of capital assets located outside Malaysia and received in Malaysia.
The Income Tax (Exemption) (No. 3) Order 2024 is a Malaysian legislative document that grants specific tax relief on foreign-sourced income. Effective from January 2024 through December 2026, the order allows resident companies, partnerships, trusts, and cooperatives to avoid paying taxes on gains from capital asset disposals occurring outside the country.
To qualify for this benefit, entities must demonstrate economic substance by maintaining sufficient staffing levels and operational spending within Malaysia.
Notably, the exemption excludes profits from intellectual property rights and does not apply to businesses in the banking, insurance, or transport sectors. This regulatory framework ensures that while certain foreign earnings are protected, participants must still fulfil their standard reporting and filing obligations under the Income Tax Act 1967.
The amendment order also revises the wording of the exemption provision with immediate effect. Specifically, it replaces the phrase “arising from outside Malaysia which is received in Malaysia” with “which is received in Malaysia from outside Malaysia” in subparagraph 2(1) of the principal Order.
By extending the exemption for a further four years, the Malaysian government provides greater certainty for eligible taxpayers receiving qualifying foreign-sourced capital gains in Malaysia, with the relief now remaining available until 31 December 2030.
