The Malaysian Insight

PUTRAJAYA must review the proposal to withdraw the tax exemption for foreign-sourced income (FSIE) in the Finance Bill, or DAP will not support the bill, said Lim Guan Eng today.

He said the policy is “uncompetitive” and will harm the long-term financial interests and investment attractiveness of the country.

“DAP MPs will oppose the Finance Bill to be debated next week unless there is clarity that the FSIE will not be withdrawn or is substantially reviewed to not affect hard-working individuals and companies wanting to bring back foreign earnings into the country.”

He said the proposal is also unfair on individuals working overseas due to better jobs and pay prospects.

The FSIE withdrawal includes remittances for dividends of companies and individuals, interest income, rentals or gains on disposal of properties overseas and children working abroad who send living expenses to their parents back home.

“For all the negative impacts on financial attractiveness, the Finance Ministry estimates that a mere RM1.2 billion in revenue can be collected by taxing foreign-sourced income next year,” said the former finance minister.

Is this additional amount in revenue worth losing out to neighbouring countries that have a more attractive tax regime, he asked.

From January 1 next year, under the Income Tax Act (ITA) 1967, the FSIE will be withdrawn, meaning that foreign-sourced income – whether from any business, employment or in the form of dividend, royalties, interests or rentals – remitted into the country will be subject to Malaysian tax.

The exemption has been in place for companies since 1998 and for individuals since 2004, in a bid to encourage remittance of such income.

Lim questioned the sincerity of the Inland Revenue Board (IRB), which said it will not audit, investigate or penalise those who sign up for its Special Income Remittance Programme that will run from January 1 to June 30 next year.

A tax rate of 3% (gross) will be imposed on income brought in during the period as proposed under the Finance Bill 2021.

The income must be brought in or remitted within the period to be eligible for the programme, and taxpayers must make payments according to normal payment arrangements set for the assessment year 2022 or 2023, whichever is applicable.

“IRB said it will not carry out an audit review or investigation, or impose a penalty on income brought in during this period, but will accept it in good faith,” said Lim.

“No one believes in the commitment of the board, which has a record of breaking its promises under the current administration.” – December 11, 2021.