Malaysia has gazetted an exemption for qualifying foreign-sourced dividend income received in the country from 1 January 2027 to 31 December 2030, subject to foreign tax or economic substance requirements, with exclusions for banking, insurance and sea or air transport businesses.
Malaysia has gazetted the Income Tax (Dividend Income Received in Malaysia from Outside Malaysia) (Exemption) Order 2026 on 22 October 2026, extending tax relief on foreign-sourced dividend income brought into the country.
The Order takes effect on 1 January 2027 and remains in force until 31 December 2030. Qualifying persons are exempt from paying income tax on gross dividend income derived from sources outside Malaysia that is received in/brought into Malaysia during the basis period for a year of assessment.
Eligible “qualifying persons”
The tax exemption applies to Malaysian-resident individuals receiving foreign dividends from a Malaysian partnership business, LLPs, companies, eligible Labuan companies electing to be taxed under the Income Tax Act 1967, co-operative societies and trust bodies.
Mandatory qualifying conditions
To qualify for the exemption, a person must comply with guidelines issued by the Director General of Inland Revenue under section 134A of the Act. They must either demonstrate that the foreign dividend income was subject to a tax similar to income tax in the originating jurisdiction, where the highest tax rate was at least 15%, or meet Malaysia’s economic substance requirements by maintaining an adequate number of employees and incurring an adequate amount of operating expenditure in the country.
Exclusions (non-application)
The exemption does not apply to persons engaged in banking, insurance, or sea or air transport.
Tax computation & filing obligations
Deductions related to exempt dividend income cannot be used to calculate chargeable income, and eligible persons must continue to meet their statutory obligations to file tax returns, submit financial statements and provide required information under the Income Tax Act 1967.
