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. 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.
Following strong objections from DAP MPs, the Ministry of Finance (MOF) had relented for the time being to relax the tax treatment policy on foreign income by allowing individual income and all such dividend income to continue to be exempted. A country cannot have one country and two systems. Even though foreign sourced individual income is exempted for the being, there is no guarantee that it will not be subject to tax similar to foreign sourced income by companies after the next general elections.
Foreign income by companies brought into Malaysia during the period January 1, 2022 to June 30, 2022 will be taxed at a concession rate of 3%. After the expiry of the period, the original tax rate would apply according to the taxpayer category. In other words, a company bringing back earnings from Singapore will be taxed twice, once in Singapore and again in Malaysia.
Such tax exemption has been introduced to encourage remittances of foreign sourced income. Clearly the imposition of tax through a withdrawal of the 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.