Malaysia's Foreign-Sourced Income Exemption Runs to 2036: What Expats Need to Know
Malaysia’s foreign-sourced income exemption for individuals does not end in 2026. The government announced a ten-year extension in Budget 2025, and the order making it law, P.U.(A) 451/2024, was gazetted on 24 December 2024. The exemption now runs to 31 December 2036. If you are a Malaysian tax resident and bring income from abroad into Malaysia, there is no year-end 2026 deadline to plan around.
Updated 19 October 2026: an earlier version of this post said the exemption ended on 31 December 2026. That date was replaced by the 2036 extension, and this post has been rewritten to match.
Key Takeaways
- Malaysia’s foreign-sourced income exemption for resident individuals runs to 31 December 2036, under P.U.(A) 451/2024, gazetted on 24 December 2024.
- There is no reason to rush remittances into Malaysia before the end of 2026.
- The exemption removes Malaysian tax only. The country where the income arises may still tax it.
- Conditions apply, and income from a partnership business in Malaysia is excluded, so check how your own income is treated.
What Is Malaysia’s Foreign-Sourced Income Exemption?
It is a tax exemption that lets Malaysian tax residents bring income earned abroad into Malaysia without paying Malaysian income tax on it, subject to conditions.
Until the end of 2021, Malaysia did not tax foreign income that residents brought into the country. From 1 January 2022, that income came within the scope of Malaysian tax. At the same time, the government exempted resident individuals for a period of five years, to 31 December 2026, subject to conditions. The Inland Revenue Board of Malaysia (LHDN) administers the exemption and publishes guidance on how it applies.
For a European expat in Kuala Lumpur, the income in question is typically a pension paid from home, dividends and interest from an investment account abroad, or rent from a property back in Europe.
How Long Does the Exemption Last Now?
The exemption for resident individuals now runs to 31 December 2036, ten years beyond the original end date.
Prime Minister and Finance Minister Anwar Ibrahim announced the extension in his Budget 2025 speech in October 2024. The order giving it legal effect, P.U.(A) 451/2024, was gazetted on 24 December 2024 and takes effect from 1 January 2027, the day after the original period ends. The conditions attached to the exemption did not change.
This gives anyone planning a long stay in Malaysia a decade of clarity. It does not say what happens after 2036. Malaysia has not announced whether the exemption will be extended again or allowed to lapse.
Who Does the Exemption Apply To?
It applies to individuals who are Malaysian tax residents, on foreign income they receive in Malaysia, except income from a partnership business in Malaysia.
Tax residency in Malaysia depends mainly on days of physical presence, not on your visa. The main test is 182 days or more in Malaysia in a calendar year, and the Income Tax Act 1967 has further tests for people who move in or out part way through a year. Holding an MM2H visa does not make you a tax resident on its own. It also does not stop you becoming one if you spend enough time in the country.
If you are not a Malaysian tax resident, your position is different, and the first step is to confirm your residency status for each year.
What Conditions Apply?
The exemption carries conditions set by the Ministry of Finance, with LHDN guidance on how they apply to each type of income.
Before relying on the exemption, check how each of your income streams is treated, with a Malaysian tax adviser where the amounts matter. Keep records that show where each payment came from and when it arrived in Malaysia. Those records answer most of the questions that come up later.
Does This Mean My Foreign Income Is Tax-Free?
Not necessarily. The exemption removes Malaysian tax, but the country where the income arises can still tax it under its own rules.
A UK pension paid to a Malaysian resident, for example, falls under both UK tax rules and the UK-Malaysia double taxation agreement. The same applies to a French or Dutch pension under those countries’ treaties with Malaysia. The exemption settles the Malaysian side. The home-country side still needs its own answer. Our post on UK pension tax when living in Malaysia, Singapore or the UAE covers the UK side in detail.
What Should Expats in Malaysia Do Now?
Review your income flows on a normal annual cycle. The 2026 deadline that drove last-minute planning no longer exists.
Start with a map of every income stream you bring into Malaysia: what it is, which country it comes from, and which account it lands in. Confirm your Malaysian tax residency each year. Then check the home-country tax position on each stream, because that is where most of the remaining tax sits.
If you plan to stay in Malaysia beyond 2036, treat the exemption as a ten-year horizon, not a permanent feature. A retirement plan that only works with the exemption in place should have a fallback.
Frequently Asked Questions
Does Malaysia’s foreign-sourced income exemption end in 2026?
No. The exemption for resident individuals was extended to 31 December 2036. The extension was announced in Budget 2025 and made law by P.U.(A) 451/2024, gazetted on 24 December 2024. It takes effect from 1 January 2027, so there is no gap between the old period and the new one.
Do I need to bring foreign money into Malaysia before 31 December 2026?
No. Because the exemption continues to 2036, the end of 2026 is not a deadline for remittances. Timing a large transfer still deserves thought for other reasons, such as exchange rates and the tax position in the country the money comes from, but the Malaysian exemption no longer forces a date.
Does an MM2H visa make me a Malaysian tax resident?
No. MM2H is an immigration status, not a tax status. Tax residency depends mainly on physical presence, with 182 days or more in a calendar year as the main test. Our post on MM2H tax implications explains how the programme and the general exemption fit together.
If I bring my UK pension into Malaysia, will it be taxed twice?
The Malaysian exemption removes Malaysian tax on qualifying foreign income, subject to its conditions. The UK side depends on the type of pension and the UK-Malaysia double taxation agreement. Check both sides before you draw a large sum, ideally with an adviser who works across both countries.
What happens to the exemption after 2036?
Malaysia has not said. The government could extend it again, change its conditions, or let it lapse. Anyone planning to stay in Malaysia beyond 2036 should build a plan that still works if the exemption ends.
Does the exemption cover income from a partnership business in Malaysia?
No. Income from a partnership business in Malaysia is excluded from the individual exemption and is taxed under the normal rules.