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Ever received money from overseas and wondered, “Will this be taxed by LHDN?” You’re not alone! With cross-border transfers becoming more common—especially with family members working abroad, international clients, or even friends sending financial gifts — it’s important to understand how the Inland Revenue Board (IRB) in Malaysia views these transactions.
1. Gifts vs. Income: What’s the Difference?
When money lands in your Malaysian bank account, IRB doesn’t just care about how much—they care about why. Here’s the basic rule:
❗ Gifts are generally not taxable. Income is.
So what counts as a gift?
Usually not taxable:
One-off transfers from family or friends
Wedding gifts, birthday money, or red packets (angpao)
Financial support from parents or children
Usually taxable:
Payments for services rendered (even if from overseas!)
Business income disguised as “gift”
Recurring payments without a clear personal relationship
💡Tip: If you’re ever audited, you’ll need to prove the transfer is a genuine gift—so keep records like bank slips, personal messages, or a simple declaration from the sender.
3. What If I Receive Large Sums?
Let’s say your uncle Sam in Australia sends you RM500,000. Is it taxable?
Not if it’s a genuine gift. But that’s a red flag amount – IRB may want to verify:
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Who sent the money?
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Why was it sent?
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What’s your relationship?
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Is there a pattern of receiving money like this?
💡Tip: Document everything. If possible, get a signed letter from the sender confirming it’s a personal gift.
2. What About Remittances from Overseas?
Malaysia practices a territorial tax system. That means foreign-sourced income is generally not taxed unless it’s brought into Malaysia.
But this rule changed in 2022, and again in 2024. Here’s the current situation (as of YA 2024):
| Foreign Income Type | Taxable If Remitted? |
|---|---|
| Employment income | Yes |
| Dividends | Yes (with exemptions) |
| Interest / Rental | Yes |
| Gifts / Personal Transfers | No |
Important: If you’re claiming the money is a gift, you must prove it’s not income. Otherwise, IRB may assume it’s taxable foreign income.
For detailed rules on Foreign Source Income (FSI), refer to IRB’s guidelines on FSI exemption.
4. Common Scenarios in Malaysia
Here are some examples we’ve seen in practice:
| Scenario | Taxable? | Why |
|---|---|---|
| Your brother in Canada sends you RM10,000 to help with a wedding | No | One-off gift |
| A US-based client pays you monthly for freelance work | Yes | Business income |
| Your aunt gifts you RM100,000 to buy a car | No | Non-taxable gift |
| An ex-employer overseas sends you your last salary | Yes | Employment income |
5. What IRB Might Ask During an Audit
If your tax return is selected for audit and there are large incoming transfers, IRB may ask you for:
Bank statements
Letter or declaration from sender
Purpose of remittance
Proof of personal relationship (e.g. family tree, messages)
Warning: Misclassifying taxable income as a gift can lead to penalties and back taxes.
TL;DR – Quick Summary
Gifts and one-off personal transfers are generally not taxable in Malaysia.
Income, whether from local or foreign sources, is taxable if it’s brought into Malaysia.
Large or recurring remittances may trigger audit flags.
Always keep proper documentation to support your claims.
