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Cessation of the Special Income Remittance Programme (PKPP)
On 16 November 2021, the IRB issued a media release on the introduction of a Special Income Remittance Programme (PKPP) between 1 January 2022 and 30 June 2022, for Malaysian residents with income kept overseas to remit their money into Malaysia (see Tax Alert No. 25/2021). The PKPP was introduced following the Budget 2022 proposal that foreign-sourced income (FSI) earned by Malaysian tax residents and received in Malaysia would no longer be tax exempt from 1 January 2022. The proposal has since been enacted via the Finance Act 2021. Under the PKPP:
i) Gross income remitted into Malaysia would be subject to 3% income tax
ii) The taxpayer would need to indicate their intention to participate in the PKPP no later than 30 days from 30 June 2022
iii) The IRB would accept the taxpayer’s declaration in good faith and would not undertake any tax audits or investigations in respect of the declaration made under the PKPP
Other conditions also applied.
On 11 March 2022, the IRB issued another media release to announce the cessation of the PKPP on that date (i.e., on 11 March 2022). The IRB clarified that the PKPP was ceased following the Ministry of Finance’s announcement on 30 December 2021 that foreign-sourced dividend income of companies and limited liability partnerships, and all FSI of individuals (except individuals carrying out business in Malaysia through a partnership) will continue to be exempt from tax from 1 January 2022 to 31 December 2026, subject to conditions (see Special Tax Alert No. 1/2022). The conditions will be outlined in gazette orders to be issued in due course.
The IRB also stated in their 11 March media release that FSI that is not exempted from tax and received in Malaysia from 1 January 2022, will need to be reported in the income tax return form. Based on prevailing tax law, a flat income tax rate of 3% will be imposed on the gross amount of such FSI received in Malaysia from 1 January 2022 to 30 June 2022. With the cessation of the PKPP, such declarations would be subject to the usual scrutiny and audit by the IRB. From 1 July 2022 onwards, the prevailing tax rate of the taxpayer would apply.