Episode Details

What Are the Conditions for Malaysia’s FSIE Exemption?

Malaysia’s foreign-sourced income (FSI) exemption is subject to specific conditions. A key requirement is that the qualifying foreign-sourced income has been subjected to tax in the country of origin.

This condition can generally be satisfied where:

• Income tax has been paid in the foreign jurisdiction;
• Withholding tax has been paid on the income; or
• No tax was imposed because of the foreign jurisdiction’s tax system, applicable taxable threshold, or specific tax incentives.

The exemption therefore does not necessarily require that foreign income has actually generated a tax payment in every case. The reason why no foreign tax was imposed can also be relevant.

Key takeaway: The Malaysian FSIE exemption depends not only on the income being foreign-sourced, but also on satisfying the applicable subject-to-tax condition and other requirements relevant to the taxpayer and type of income.