Malaysia has exempted qualifying unit trusts from capital gains and foreign income tax, issued the Income Tax (Unit Trust) (Exemption) Order 2024 and the Income Tax (Unit Trust in Relation to Income Received in Malaysia from Outside Malaysia) (Exemption) Order 2024 in the Official Gazette on 20 September 2024.

Income Tax (Unit Trust) (Exemption) Order 2024

The order exempts a qualifying unit trust resident in Malaysia from the payment of income tax in respect of any gains or profit received from the disposal of shares of a company incorporated in Malaysia which is not listed on the stock exchange and from the disposal of shares under section 15C the Act.

However, the exemption does not include a unit trust approved by the Securities Commission as a Real Estate Investment Trust or Property Trust Fund listed on Bursa Malaysia.

The exemption is applicable to disposals occurring from 1 January 2024 to 31 December 2028.

Income Tax (Unit Trust in Relation to Income Received in Malaysia from Outside Malaysia) (Exemption) 

The order exempts a qualifying unit trust from the payment of income tax in respect of the gross income from all sources of income under section 4 of the Act which is received in Malaysia from outside Malaysia in the basis period for a year of assessment.

The qualifying unit trust referred to shall be a unit trust resident in Malaysia managed by a management company. The qualifying unit trust has income received in Malaysia from outside Malaysia but does not include a unit trust approved by the Securities Commission as a Real Estate Investment Trust or Property Trust Fund listed on Bursa Malaysia.

The exemption is subject to the following:

  1. The gross income of the qualifying unit trust has been subjected to tax of a similar character to income tax under the law of the territory in which the income arises and the highest rate of tax of a similar character to income tax under the law of the territory in which the income arises at that time is not less than 15%; or
  2. The management company of the qualifying unit trust shall employ an adequate number of employees in Malaysia and incur an adequate amount of operating expenditure in Malaysia.

The exemption is valid from 1 January 2024 through 31 December 2026.