HOW IS FOREIGN-SOURCED INCOME TREATED IN MALAYSIA?

How is foreign-sourced income treated in Malaysia? This is a question worth revisiting properly. Malaysia’s approach changed significantly in 2022 — the old blanket exemption many people still assume applies isn’t quite how the system works anymore. This article – although dated 2023 – has been rewritten with the latest updates as of 2026.

30-Second Read

• In New Zealand, you still need to file a tax return for the rental property, regardless of your tax residency status.
• Since the 2019–20 income year, residential rental losses have been ring-fenced. A loss can only offset other rental income, not your wages or other personal income. NZ rental losses can’t be offset against Malaysian tax either way.
• Malaysia removed its blanket exemption on foreign-sourced income from 1 January 2022. Foreign income is now taxable for residents in principle.
• Individuals currently still get a broad exemption on most foreign-sourced income, though — extended under Budget 2026 to 31 December 2036. This is a conditional, dated exemption, not a permanent feature. Worth checking the current position rather than assuming it stays this way indefinitely.
• Rental income you remitted into Malaysia would generally fall within this individual exemption today, but confirm your specific situation given how much this area has shifted.

New Zealand: Your Filing Obligations Don’t Change

As a rental property owner, you still need to file tax returns in New Zealand, regardless of your tax residency status. If the property is owned personally, the profit or loss splits according to the percentage specified in your Sale and Purchase Agreement. This needs to be stated in the agreement itself to be effective. Without it, the default is an equal split between however many owners are involved.

Since the 2019–20 income year, residential rental losses have been ring-fenced. A rental loss can’t be offset against other NZ income like wages or interest. It can only offset other rental income, carrying forward if there isn’t any. This is separate from whatever happens to that income once it reaches Malaysia, and unaffected by it.

You’ll also still have New Zealand filing responsibilities specific to non-residents — a non-resident personal tax return for the owners, alongside the standard rental income return.

Malaysia: A System That Genuinely Changed

For years, Malaysia operated on a territorial basis. Income earned and kept outside Malaysia simply wasn’t taxed, regardless of whether it was later brought into the country. That changed from 1 January 2022, when the blanket exemption on foreign-sourced income received in Malaysia by residents was removed. In principle, foreign-sourced income became taxable — including rental income from a NZ property, if remitted into Malaysia.

In practice, though, the government immediately introduced a transitional exemption for individuals. It covers most classes of foreign-sourced income, with an exception for partnership business income. That exemption has been extended more than once since 2022. Under Budget 2026, it now runs until 31 December 2036 for individual taxpayers specifically.

What this means practically: NZ rental income remitted into Malaysia by an individual resident is currently very likely to remain exempt from Malaysian tax — the same practical outcome as under the old system. The legal basis is now a conditional, dated exemption, though, rather than a permanent structural feature of Malaysia’s tax system. It’s worth checking your specific position with a Malaysian tax adviser, rather than assuming the exemption applies automatically or indefinitely. This matters particularly given how often this area has changed since 2022.

Because the income remains generally exempt for now, a NZ rental loss still can’t be offset against Malaysian tax. There’s no Malaysian tax liability for it to reduce.

Common Questions

Does Malaysia currently tax my NZ rental income? Generally not, if you’re an individual resident and the income falls within the current exemption. That rests on a conditional exemption extended to 31 December 2036, though, not a permanent rule — worth confirming your specific situation.

Can I offset a NZ rental loss against tax in Malaysia? No — since the income generally isn’t taxed there in the first place, there’s no Malaysian tax liability to offset it against.

Does this apply the same way to rental income received through a partnership? No — partnership business income is specifically excluded from the individual exemption, so it’s worth getting this checked if that applies to your situation.

What about other countries? See our guides for the UK, Australia, and Singapore.

Talk to EpsomTax.com About Your Cross-Border Position

Given how much Malaysia’s foreign income rules have shifted since 2022, this isn’t an area worth relying on outdated assumptions for. Contact EpsomTax.com to make sure your NZ filing obligations are covered correctly, and we can point you toward a Malaysian tax specialist to confirm your position there.