[World Tax News] Malaysia Offers Tax Exemption to Qualifying Trusts on Foreign Income Received Within Country and More

Editorial Team – [2024] 167 taxmann.com 115 (Article)

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1. Malaysia offers tax exemption to qualifying trusts on foreign income received within the Country

Malaysia published the Income Tax (Unit Trust) (Exemption) Order 2024 and the Income Tax (Unit Trust concerning Income Received in Malaysia from Outside Malaysia) (Exemption) Order 2024 in the Official Gazette.

The first order exempts qualifying unit trusts resident in Malaysia from income tax on any gains or profits from the disposal of unlisted shares of a Malaysian-incorporated company, as well as from the disposal of shares under section 15C of the Income Tax Act 1967 (i.e., shares in a controlled company outside Malaysia). However, this exemption does not apply to unit trusts approved as Real Estate Investment Trusts (REITs) or Property Trust Funds listed on Bursa Malaysia. The exemption is effective for disposals between 1 January 2024 and 31 December 2028.

The second order exempts qualifying unit trusts from income tax on gross income from all sources under section 4 of the Act received in Malaysia from abroad during the basis period for a given assessment year. The exemption is subject to the following conditions:

• The gross income of the qualifying unit trust must have been subject to a tax similar to income tax in the jurisdiction where the income was generated, and the highest tax rate in that jurisdiction must not be less than 15%; or
• The management company of the qualifying unit trust must employ an adequate number of employees in Malaysia and incur sufficient operating expenses within Malaysia.

However, this order does not apply to a qualifying unit trust carrying on the business of banking, insurance, sea transport or air transport. The exemption period covers income received between 1 January 2024 and 31 December 2026.

Source: Income Tax (Unit Trust) (Exemption) Order 2024
Income Tax (Unit Trust in Relation to Income Received in Malaysia from Outside Malaysia) (Exemption) Order 2024

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