Since 2022, Malaysian law has treated foreign income that a tax resident brings into the country as taxable. For a retiree living on a pension from home, a ministerial order made the same year matters more. It exempts resident individuals from that tax on one condition, and it has since been extended by ten years.
This page covers what the law and the Inland Revenue Board of Malaysia (LHDN) publish, read on 9 October 2026. It is not tax advice and cannot tell you what you will owe. Your own pension’s treatment also depends on the country paying it and on any tax treaty between that country and Malaysia.
The rule, and the exemption on top of it
The change came through paragraph 28 of Schedule 6 to the Income Tax Act 1967, amended by the Finance Act 2021. LHDN’s guideline on income received from abroad says that from 1 January 2022, generally, all types of foreign income received in Malaysia by a resident are subject to tax, including pension, annuity or periodic payments.
The Income Tax (Exemption) (No. 5) Order 2022, P.U.(A) 234/2022, gazetted on 19 July 2022, exempts a resident individual from income tax on foreign income from all sources under section 4 of the Act, received in Malaysia. The one exclusion is income from a partnership business in Malaysia. A pension is not partnership income, so it is inside the exemption.
The order says nothing about age, nationality or visa. Its “qualifying individual” is an individual resident in Malaysia who has income received in Malaysia from outside Malaysia. An MM2H pass holder qualifies on the same terms as anyone else, and so does a resident with no long-stay pass.
Read the end date in the gazette, not the guideline
The original order was deemed to have effect from 1 January 2022 until 31 December 2026. That date has moved.
- 18 October 2024. The Budget 2025 speech announced that the exemption for foreign-sourced income that has been subject to income tax in the source country and is received by individuals in Malaysia would be extended from 31 December 2026 to 31 December 2036.
- 11 December 2024. The Minister of Finance II made the Income Tax (Exemption) (No. 5) Order 2022 (Amendment) Order 2024, P.U.(A) 451/2024, which replaces “31 December 2026” with “31 December 2036” in the original order.
- 24 December 2024. The amendment was gazetted, according to the Attorney General’s Chambers’ federal legislation portal.
- 1 January 2027. The amendment comes into operation, so the 2036 date takes over on the day the old one would have lapsed.
The extension has been in the gazette since December 2024. Only its start date lies ahead.
LHDN’s guideline has not caught up. The newest version on its guidelines page is the third edition, published on 20 June 2024, six months before the amendment was made. It still says the exemption runs from 1 January 2022 until 31 December 2026. The order hands the detailed conditions to that guideline, so the guideline is the document to read for what qualifies. For how long, the gazetted order is the later document and the one with the force of law.
The exemption remains a fixed-term order and is not part of the Act. Malaysia’s tax and accounting institutes asked for the foreign income exemptions to be made permanent. The Ministry of Finance replied, in the Budget 2025 joint memorandum LHDN publishes, that they are granted for a fixed period so the government can assess their effectiveness. Diary 31 December 2036 and check it again as it approaches.
The condition: it must have been taxed where it arose
The order requires the exempt income to have been subjected to tax of a similar character to income tax in the territory where it arises. It defers to LHDN’s guideline for what that means. The guideline accepts two kinds of case.
- Tax was imposed in the country of origin, as income tax or withholding tax.
- Tax was not imposed, for one of three reasons: the country’s tax system does not tax that income; the individual’s income was below the level at which tax becomes payable there; or the income was exempted through a tax incentive.
The guideline’s examples show how wide the second case is. A Malaysian resident’s employment income from Brunei, which Brunei does not tax, is exempt when brought into Malaysia. So is a Singapore retirement fund withdrawn and brought into Malaysia after the job ends, because savings in an approved Singapore retirement fund are tax-exempt in Singapore.
The guideline does not address a pension that the paying country leaves untaxed because its tax treaty with Malaysia gives Malaysia the right to tax it. A treaty is not one of the three reasons listed, and the guideline does not say whether “the country’s taxation system” includes one. If your pension is paid gross for that reason, put the question to LHDN in writing before you rely on the exemption.
Resident, by days in the country
The exemption is for residents, and residence for Malaysian tax is a count of days. Under section 7 of the Income Tax Act, an individual is resident for a year if they are in Malaysia for 182 days or more in that calendar year, in one stay or several. Part of a day counts as a whole day.
Section 7 has three other routes to residence, which matter in a year of arrival or departure.
- A shorter stay counts if it links to a run of 182 or more consecutive days in Malaysia in the year before or the year after.
- 90 days in the year counts if, in any three of the four years before, you were resident or spent 90 days or more in Malaysia.
- A year counts if you are resident in the following year and were resident in each of the three years before it.
A visa or pass does not appear in the test. An MM2H participant who spends most of the year abroad may not be resident, and a long-stay visitor who stays 182 days is.
A non-resident is covered more simply. Paragraph 28 of Schedule 6, as it now reads, exempts income arising outside Malaysia and received in Malaysia by any person who is not resident, with no condition about tax abroad. The condition in the order applies only once you become resident.
Malaysia’s pension exemption is written for Malaysian pensions
Paragraph 30 of Schedule 6 exempts pensions derived from Malaysia, paid at 55 or at a compulsory retirement age, or earlier for ill health, for a former employment exercised in Malaysia, and paid under a written law or from an approved scheme.
A pension earned through a career abroad and paid from abroad is not derived from Malaysia, so paragraph 30 does not reach it. Its route to exemption is the order above.
How the money arrives does not change the answer
LHDN’s guideline defines “received in Malaysia” broadly: transferred or brought in as cash or by electronic funds transfer. Its list of electronic transfers covers bank transfers, debit, credit and charge cards, e-money, crypto-assets, stablecoins and central bank digital currency. On that definition, paying for groceries in Malaysia with a card drawn on a foreign pension account brings that income in, as a wire transfer does.
The method does not affect whether the income is exempt, which turns on whether it was taxed where it arose. It does decide how many ringgit arrive. Wise uses the mid-market exchange rate and shows its fee separately, so the ringgit figure is known before the money leaves. Using Wise or any other provider makes no difference to how the pension is taxed.
On the return form
The order states that the exemption does not release anyone from a requirement to submit a return or furnish information. The guideline asks that exempt foreign income be declared on the return form, giving:
- the type and amount of the foreign income;
- the country where it arose;
- the amount of tax imposed there, or that the income is not subject to tax there;
- where an incentive or exemption applied abroad, the confirmation letter or approval from that country’s tax authority.
Keep the documents behind those figures in case of audit, and get them each year: a notice of assessment from the paying country, a withholding statement, or a letter confirming an exemption.
The guideline’s one worked example that converts currency uses an exchange rate on the date of remittance, without saying whose rate. Keep the date and rate of each transfer with your tax papers, whoever moves the money. With Wise, that is the rate shown when you confirm the transfer.
If the condition is not met, the income is taxable at the rates that apply to the rest of your income. Tax already paid abroad can then be credited under sections 132 and 133 of the Act, bilaterally where there is a tax treaty and unilaterally where there is not. The credit has to be claimed within two years after the end of the year of assessment, and any credit above the Malaysian tax on that income is lost.
Related guides
- Thailand went the other way: since 2024 it taxes foreign income its residents earn and bring in, as set out in Thailand’s tax on remitted foreign income.
- What MM2H asks of you before any of this applies: MM2H for retirees.
- Whether a pension paid in another currency clears a visa’s threshold: how the exchange rate decides a pension test.
See what your pension is worth in ringgit before you move it (affiliate link)