Malaysia’s Inland Revenue Board has revised its guidelines on the tax treatment of foreign capital gains remitted to Malaysia, clarifying exemptions available through 2030, economic substance requirements, foreign tax credit relief, and mandatory reporting and record-keeping obligations for resident entities.
The Inland Revenue Board of Malaysia (IRBM) has issued amended technical guidelines dated 29 September 2026 on the tax treatment of gains from the disposal of foreign capital assets received in Malaysia.
Prior to 1 January 2024, gains from the disposal of foreign capital assets brought into Malaysia were not subject to tax.
To clarify the operational mechanics and regulatory obligations, the Inland Revenue Board of Malaysia (IRBM) issued updated technical guidelines titled “Tax Treatment on Gains from the Disposal of Foreign Capital Assets Received in Malaysia from Outside Malaysia (Amendment)” on 29 September 2026.
The updated guidelines replace the versions published in March and April 2024 and clarify the capital gains tax exemption for gains from the disposal of capital assets located outside Malaysia and received by Malaysian-resident companies, limited liability partnerships, trust bodies, and cooperative societies.
These guidelines replace earlier editions and incorporate key policy updates regarding exemption extensions, entity coverage, unit trust rules, and double taxation relief.
Scope of chargeable persons, assets, and remittances
CGT applies to gains from foreign capital assets disposed of on or after 1 January 2024 and remitted into Malaysia. The tax applies to resident entities, specifically companies, limited liability partnerships (LLPs), trust bodies, and co-operative societies. It explicitly includes Labuan entities that elect or are subject to tax under the ITA. However, residents carrying on banking, insurance, sea transport, or air transport businesses are excluded from this framework.
Foreign capital assets encompass movable and immovable property physically situated outside Malaysia—such as land, buildings, plant, machinery, vehicles, and non-Malaysian company shares. It also includes foreign intellectual property (IP) rights owned by Malaysian residents.
Funds are defined as “received in Malaysia” when transferred or brought into the country via cash (coins, notes, cheques) or electronic funds transfers, which cover bank transfers, payment cards, e-money, digital assets (stablecoins, cryptoassets), and Central Bank Digital Currencies (CBDCs).
Tax exemption criteria and economic substance requirements
Malaysia exempts qualifying gains from the disposal of foreign capital assets received between 1 January 2024 and 31 December 2030, excluding gains from foreign intellectual property rights.
To qualify, resident companies, limited liability partnerships, trust bodies, and cooperatives must meet Malaysian economic substance requirements by employing adequate qualified staff and incurring sufficient local operating expenditure.
Outsourcing is permitted subject to monitoring and compliance requirements. Unit trust funds qualify for exemption if the foreign income was taxed abroad at a headline rate of at least 15% or the fund management company meets the economic substance requirements in Malaysia.
Expense deductions and foreign tax credit relief
Foreign gains remitted to Malaysia are classified strictly as net income. Consequently, no further acquisition, disposal, or administrative expenses can be deducted once funds are remitted into Malaysia.
To prevent double taxation, taxpayers can claim foreign tax credits under sections 132 (Bilateral Credit) or 133 (Unilateral Credit) of the ITA, in accordance with Public Ruling No. 3/2026.
- Bilateral Credit applies where Malaysia has a Double Taxation Agreement (DTA) with the foreign jurisdiction. The credit is capped at the lower of foreign tax paid or the proportion of Malaysian tax attributable to that foreign income.
- Unilateral Credit applies to non-DTA jurisdictions and is capped at the lower of half the foreign tax payable or the Malaysian tax chargeable on that foreign income.
Unutilized foreign tax credits cannot be carried forward to subsequent assessment years. All tax credit claims must be submitted in writing to the Director General within two years after the end of the relevant Year of Assessment.
Tax reporting and record keeping
Even if a foreign capital gain is eligible for full tax exemption, taxpayers are legally required to report the transaction in their Income Tax Return Form (ITRF) for the corresponding Year of Assessment. Reporting must detail the income type, source country, foreign tax paid, and exemption grounds. Furthermore, supporting documentation—such as foreign tax assessment notices and official payment receipts—must be retained for auditing under sections 82 and 82A of the ITA.
