This article discusses the Malaysian government's policy on taxing foreign-sourced dividends, highlighting discrepancies between initial intentions and implemented guidelines. While the Ministry of Finance initially announced tax exemption for all foreign-sourced dividends, subsequent Inland Revenue Board (IRB) guidelines introduced stringent conditions that contradict the original spirit of the policy.
, 2022, there was a press statement issued by the Ministry of Finance which indicated that foreign-sourced dividends will be tax exempt.“The government has agreed to exempt taxation on foreign-source income for resident taxpayers to ensure the smooth implementation of the tax initiative ....
The intention here was clearly to exempt foreign-sourced dividend income received in Malaysia. However, subsequently, when the IRB guidelines came out, the original intention of exempting dividends in totality appears to have been restricted with the requirement to comply with the stringent conditions which seems to be going against the spirit of the intention behind the press statement.
However, in many cases, dividends are received through companies in intermediate countries, such as Singapore or Hong Kong, China, where such income received may not be subject to taxation due to local legislation exempting such income. As the guidelines stand, they state that dividends received in Malaysia from such intermediate companies will be taxed. This is the problem.
However, when it comes to individuals receiving other types of income such as employment income, from a country which exempts such income from tax, or does not impose tax on such income, the income received from the foreign country is exempt.
Taxation Dividends Malaysia Foreign Income IRB Guidelines
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