Legal Firm & Law Firm In Kuala Lumpur, Malaysia

Malaysia Currency and Exchange Control

Written by LYLu&Co | August 26, 2015

What is exchange control?

 

Malaysia Currency and Exchange Control comes in various forms imposed by the government to regulate the flow of money (foreign or local currency) in and out of the country.

What are the purposes of exchange control?

 

Reasons for such control, although quite varied for different countries, are generally accepted that it is used as a tool by the Controller of Foreign Exchange in the management of the economy,

  • To conserve foreign exchange
  • To improve balance of payments position
  • To restrict inessential imports and conspicuous consumption
  • To control outflow of capital
  • To maintain external value of the currency
  • To regulate foreign companies
  • To regulate export and transfer of securities

Governing Law in Malaysia:

 

Exchange control regime in Malaysia has progressively liberalised over the decade and with the enforcement of Financial Services Act 2013 (“FSA”) and the Islamic Financial Services Act 2013 (“IFSA”) (collectively referred to as the “Acts”), the regime is further simplified.

 

FSA and IFSA have come into effect on 30 June 2013, substituting and repealing the six pre-existing statutes including Exchange Control Act 1953.

 

With the coming into force of FSA and IFSA, Bank Negara Malaysia

(“BNM”), the Controller of Foreign Exchange in Malaysia, has issued the Foreign Exchange Administration notices to replace and revoke all previously issued Exchange Control Notices and related circular letters.

Exchange control under FSA:

 

Foreign Exchange Administration notices set out transactions that are allowed and written approval from BNM must be obtained if a person proposes to undertake or engage in transactions that are not permitted under FSA.

 

In granting any approval, BNM has the discretion to impose any requirement, restriction or condition.

 

Residents refers to:-

– Citizens of Malaysia (excluding persons who have obtained permanent resident status of a territory outside Malaysia and are residing abroad);

 

– Non-citizens who have obtained permanent resident status in Malaysia and are residing permanently in Malaysia; or

– Persons, whether body corporate or unincorporated, registered or approved by any authority in Malaysia.

 

Non-residents refers to:-

– Overseas branches, subsidiaries, regional offices, sales offices and representative offices of resident companies;

–  Embassies, Consulates, High Commissions, supranational or international organisations recognised by the Government of Malaysia; or

–  Malaysian citizens who have obtained permanent status of a territory outside Malaysia and are residing outside Malaysia.

 

  1. Dealings in Currency

 

Buying and Selling of Currency

 

 

Resident

 

Non-Resident

 

Allowed Requires Approval Allowed Requires Approval
Buy or sell ringgit against foreign currency with:  

 

 

(a) licenced money changers x   x  
 

(b) licensed onshore bank

x   x  
 (c) appointed overseas office

 

  x x  
Buy or sell foreign currency against another foreign currency  

 

 

(a) licensed money changers

 

x   x  
(b) licensed onshore bank

 

x   x  

 

A resident individual are not allowed to buy or sell foreign currency from or to any non-resident.

 

  1. Borrowing and Guarantees

 

Borrowing Resident

 

Allowed Requires Approval
In Ringgit by resident individual or resident entity from non-resident:

 

(a) Any amount up to RM 1 Million x  
(b) Exceeding RM1 Million   x
 

In foreign currency by resident individual from non-resident or licensed onshore bank:

 

(a) Any amount up to RM10 million x  
(b) Exceeding RM10 million   x
 

In foreign currency by resident entity from non-resident:

 

(a) Any amount up to RM100 million x  
(b) Exceeding RM100 million The RM100 million equivalent is based on the aggregate borrowing of the resident entity and other resident entities within its group of entities with parent-subsidiary relationship.

 

  x

 

Any proposed transaction falling within borrowing or lending of Ringgit Malaysia between non-residents would requires approval from BNM.

 

Guarantees Resident

 

Allowed Requires Approval
Financial guarantee obtained from non-residents:

 

(a) Any amount up to RM100 million x  
(b) Exceeding RM100 million equivalent in aggregate   x
Financial guarantee issued to non-residents:

 

 

(a) Any amount up to RM50 million x  
(b) Exceeding Rm50 million equivalent in aggregate   x

 

  1. Investment

 

3.1    Investments in foreign currency assets by residents

 

There is no limit for residents without domestic ringgit borrowing.

 

Residents with domestic ringgit borrowing are allowed to invest:-

 

Resident Individual Resident Entity
 

· No limit if funded by own foreign currency funds;

· Up to full amount of permitted foreign currency borrowing; and

· Up to RM1 million in aggregate per calendar year if funded from conversion of Ringgit

 

· No limit if funded with own foreign currency funds e;

· Up to the full amount of permitted foreign currency borrowing; and

· Up to RM50 million equivalent in aggregate on corporate group basis per calendar year if funded from conversion of ringgit

• Up to the amount of the proceeds sourced from the listing of shares through initial public offering on:

–      Bursa Malaysia; or

–      foreign stock exchanges

 

 

3.2    Investment in foreign currency assets by resident institutional investors

 

 

Unit Trust Management Companies

 

 

 

 

· Ringgit or foreign denominated funds:-

 

–      100% of NAV attributed to non-residents & residents without domestic ringgit borrowing;

–      100% of NAV for resident clients with domestic ringgit borrowing to be invested in Shariah compliant funds; or

 

–      50% of NAV attributed to residents with domestic ringgit borrowing to be invested in conventional funds.

 

 

Fund Management Companies

 

· Ringgit or foreign denominated funds:-

 

–      100% of total funds to non-resident clients

–      100% of total funds managed for residents without domestic ringgit borrowing

–      100% of total funds for resident clients with domestic ringgit borrowing to be invested in Shariah compliant assets

–      50% of total funds managed for residents with domestic ringgit borrowing to be invested in conventional assets.

 

 

Insurers

 

· Ringgit or foreign denominated funds:-

 

–      100% of NAV investment-linked funds marketed non-residents

–      100% of NAV of investment-linked funds offered to non-residents and residents without domestic ringgit borrowing; or

–      50% of NAV of investment-linked funds offered to residents with domestic ringgit borrowing

 

 

3.3    Investments in Malaysia by non-residents

 

Non-residents are free to invest in any form of ringgit assets in Malaysia and also free to remit out divestment proceeds, profits, dividends or any income arising from investments in Malaysia.

 

  1. Payment

 

  Resident Non-Resident
Allowed Requires Approval Allowed Requires Approval
Make or receive payments in Ringgit:
(a) between resident

 

x   x  
(b) to or from a non-resident x   x  
Make or receive payments in foreign currency:

 

(a) between resident   x x  
(b) to or from a non-resident x   x  

 

Payment in Ringgit by the resident to the non-resident must be made into an external account of the non-resident or an external account of a non-resident financial institution.

 

A non-resident require an external account to receive payment in Ringgit.

 

Approval is required for payment between residents in foreign currency for purposes other than:-

 

  • settlement of any securities, Islamic securities, financial instrument or Islamic financial instrument denominated in foreign currency approved by Bank Negara Malaysia;
  • settlement of derivatives denominated in foreign currency, other than currency derivatives, transacted on a specified exchange under the Capital Markets and Services Act 2007 between the resident and a resident futures broker;
  • settlement of commodity murabahah transactions through resident commodity trading service providers;
  • for education and employment overseas; and
  • for any purpose by a resident individual to another resident immediate family member (comprises spouse, parents, children and siblings).

 

Prior permission of BNM is required if the payment is made to Israel.

 

  1. Securities

 

  Resident Non-Resident

 

Allowed Requires

Approval

Allowed Requires Approval
Issuance of Securities:-
–      Denominated in ringgit x     x
–      Denominated in foreign currency x   x  

 

  1. Import and Export of Currency

 

  Resident

 

Non-Resident

 

Allowed Requires Approval Allowed Requires Approval
Bringing into and taking out of Malaysia foreign currency including traveller’s cheques

 

 

X

 

 

 

X

 

 

Bringing into and taking out of Ringgit on person or in baggage up to USD10,000

 

 

X

   

X

 
Bringing into and taking out of Ringgit on person or in baggage above USD10,000

 

   

X

   

X

 

There is no limit for resident or non-resident traveller to carry foreign currency. Declaration have to be made at the customs only if the total amount exceed USD 10,000 equivalent.

 

  1. Export of Goods

 

Only exporters with annual gross exports exceeding RM50Million need to submit quarterly reports to BNM.

 

  Resident  
Allowed Requires Approval  
1.Export Proceeds

 

 
(a) Received in full within a period of 6 month

 

x  
(b) Export proceed later than 6 months

 

  x
(c) Offset against payments to non- resident

 

  x  
2.Settlement

 

 
(a) Receive from non-residents in Ringgit

 

x    
(b) Receive from non-residents in foreign currency

 

x    
(c) Pay to non- resident in Ringgit

 

x    
(d) Pay to non-residents in foreign currency x    

 

 

  1. Entities in Labuan

 

All Labuan entities are declared non-residents for FEA purposes. As such, all foreign exchange rules in relation to a non-resident will apply to a Labuan entity.

 

Declaration of non-resident status for Labuan entities which carry on Labuan banking business, Labuan insurance or takaful business will take effect upon licensing of such businesses under the relevant Acts.

 

Penalty imposed on Offenders of Illegal Foreign Currency Trading:

 

Any person involved in illegal foreign currency trading shall, on conviction, be liable to a fine not exceeding RM50 million or to imprisonment for a term not exceeding ten years or to both.

 

For consultation on Malaysia Currency and Exchange Control, please proceed to send in your enquiry by clicking here.

Comments are closed.