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Finance Act 2021 has been gazetted on Schedule 6, Para 28

Updated: Sep 12, 2022

Taxation Technie Series 2

🤦‍♂Dec 31, 2021 Latest Update

Finance Act 2021 has been gazette on Schedule 6, Para 28

The Federal Gazette published the Finance Act 2021 on 31st December 2021. On 1st January 2022, the majority of the Act’s provisions went into effect. Some of the policies such as Schedule 6, Para 28 of Income Tax Act 1967 are included in Malaysian budget for 2022 were specifically prescribed by the Act.


The law on Foreign Source Income up until 31st December 2021, offer a larger tax exemption that also applied to people. Prior to 1st January, Schedule 6 paragraph 28 was as follow:

“Income of any person, other than a resident company carrying a business related to banking, insurance or sea or air transport, for the basis year of assessment derived from sources Malaysia and received in Malaysia, will be exempted from tax”

The new paragraph 28 of Schedule 6 introduced via Section 27 of the Finance Act 2021 as follow:

“28. The income arising from sources outside Malaysia and receive in Malaysia by any person who is not resident in Malaysia.”

Originally, any person means tax and non-tax resident (other than the resident company stated before) in Malaysia will be exempted from tax on foreign source income.

The amendment now restricted the tax exemption to foreign source income received by only non-resident Malaysia.

In response to this modification, the Inland Revenue Board (IRB) launched a Special Income Remittance Programme (PKPP) on 16th November 2021. Subject to specific terms and conditions, the foreign source income transferred during the PKPP period of 1st January 2022 to 30th June 2022 shall be taxed at 3%. According to the IRB, foreign source of income reported under PKPP will be accepted if it is done so in good faith, and as a result, the IRB will not conduct anu additional tax audit on such remittance.

So, what about the latest announcement form the Ministry of Finance mean that tax resident in Malaysia will be exempted from foreign sources of income. Therefore, which one should we follow, The Ministry of Finance or the Finance Act 2021❓

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