KUALA LUMPUR, March 12 ― The Malaysian government may have exempted individuals in the country who are earning foreign-source from paying tax, but this may only be temporary, according to DAP leader Lim Guan Eng.
The former finance minister said that there was “no guarantee that it will not be subject to tax similar to foreign sourced income by companies after the next general elections”.
“The announcement by the Inland Revenue Board (IRB) that the Special Income Remittance Programme (PKPP) for Malaysian tax residents with foreign sourced income ends on March 11 only reinforces the unjustifiable imposition of tax on income earned overseas or in Singapore by Malaysian companies and brought back to Malaysia or Johor,” he said in a statement.
The Opposition lawmaker noted that the Finance Ministry had “relented for the time being” by relaxing the tax treatment policy on foreign-sourced income after strong objections from DAP MPs.
“DAP had opposed the withdrawal of the tax exemption on foreign-sourced income (FSIE) as uncompetitive, unfair and harmful to the long term investment attractiveness and financial interests of Malaysia,” the Bagan MP added.
The DAP secretary-general claimed he had been blamed for imposing “new” taxes during the recent political campaigning in the run-up to the Johor state election, which is today.
He noted that the tax exemption was introduced to encourage remittances of foreign sourced income, Lim said imposing tax by cancelling tax exemption is short-sighted and will do the opposite.
“Yet there are some irresponsible quarters who try to blame such ‘new’ taxes on me even though I have not been Finance Minister for two years.
“Since these irresponsible quarters are unable to justify such ‘new’ taxes especially in Johor with many Malaysian companies operating in Singapore, the government might as well restore the tax exemption on foreign sourced income,” he said.
When tabling Budget 2022 in October last year, Lim’s successor Tengku Datuk Seri Zafrul Abdul Aziz said the government proposed to start imposing tax on residents in Malaysia on foreign-sourced income that are received in Malaysia starting from January 1, 2022
Following the government’s announcement which effectively amounted to a cancellation of tax exemption on Malaysians who brought back money they had earned overseas into Malaysia, the IRB had then in November 2021 offered the Special Income Remittance Programme (PKPP) scheme that was set to run from January 1 to June 30 this year, with a special tax rate of three per cent on foreign-sourced income that Malaysia individual and corporate residents brought back during that period.
On December 30, the Finance Ministry was reported saying that the Malaysian government had agreed to grant tax exemption from January 1, 2022 to December 31, 2026 on foreign-sourced income for Malaysia resident taxpayers.
The tax exemption from 2022 to 2026 is on all types of income for individuals except for those in a business partnership in Malaysia, while the tax exemption on dividends will be given to companies or limited liability partnerships.
Yesterday, the IRB announced that it had decided to end the PKPP scheme that was offered, following the Finance Ministry’s December 30 announcement on the five-year tax exemption on foreign sourced income for Malaysia tax residents.
