Foreign Exchange Controls ( F E C )

Foreign Exchange Controls

A non-resident is permitted by the Controller of Foreign Exchange to undertake direct or portfolio investment in Malaysia but subject to certain guidelines.

In February 1999, as a further easing of the exchange control rules, Bank Negara Malaysia announced that all foreign investments in properties are excluded from the levy on profits, which are realised and repatriated. The following are excluded:

For funds which came in before 15 February 1999, no levy is imposed on the repatriation of the original capital amount invested.
For funds which came in on or after 15 February 1999, the principal is allowed to be repatriated without any levy. The profits will be subject to a levy of 10% if profits are repatriated 12 months from the date the profits are made. However, no levy is imposed on profits made from the investment in properties, upon repatriation.
Consequently, the levy is only imposed on investments in shares, bonds and other financial instruments. This levy does not apply to profits from FDI. The amount of levy would depend on the duration the funds are held in Malaysia.

Determination of the levy:

These new measures are aimed to encourage portfolio investors to take a longer term view of their investments in Malaysia and to attract new funds into the country, while at the same time discouraging short-term flows. The 2001 Budget proposed that only portfolio profits repatriated within a 12 month period are subject to a 10% exit levy. The 10% levy will no longer be imposed for any profit repatriated after a year. However, the effective date of commencement is yet to be announced. This proposal intends to encourage new capital inflows into the country.

The levy would be imposed only on any gains over and above the initial sum brought in up to the point of repatriation. Any subsequent losses are not eligible for rebate but can be offset against any subsequent gains.

The levy is to be paid to the following institutions:

All commercial banks
Bank Islam Berhad
Arab Malaysian Merchant Bank Berhad
Aseambankers Malaysia Berhad
Commerce International Merchant Bankers Berhad
Malaysian International Merchant Bankers Berhad
Perwira Affin Merchant Bank Berhad
RHD Sakura Merchant Bankers Berhad

A non-resident traveller visiting Malaysia is permitted to carry with him/ her any amount of traveller's cheques denominated in foreign currencies and foreign currency notes, but is required to declare to the authorities the amounts carried by him/ her into Malaysia. However, a non-resident traveller leaving Malaysia is only permitted to carry with him/ her traveller's cheques denominated in foreign currencies and foreign currency notes up to the amount that he/ she brought into Malaysia. In addition, a non-resident traveller visiting or leaving Malaysia is permitted to carry with him/ her Ringgit currency notes up to RM 1,000 only.