Malaysia Imposes Exit Tax on Foreign Investments
by Bruce G. Leto, Esquire
On February 4, 1999, the government of Malaysia announced the imposition of a new tax on the repatriation of investments in that country. On February 10, 1999, Bank Negra Malaysia, the central bank of Malaysia, issued an interpretative release explaining the new tax. The new tax replaces the 12-month holding period imposed on September 1, 1998, under the exchange control rules governing the rinngit, the Malaysian currency. The old rules severely constrained, and in most cases prohibited, foreign investors, including U.S. mutual funds, from repatriating assets invested or held in Malaysia. As a consequence, mutual funds have been unable to convert the proceeds of the sale of their Malaysian securities into U.S. dollars. The stated goal of the new tax is to encourage long-term rather than short-term investments in Malaysian companies.
