Relocating to Malaysia in 2026: MM2H, Exempt Foreign Income and a Low Cost of Living

Malaysian tax residence is determined by reference to physical presence: a person's status for a year of assessment depends on the number of days spent in the country, with the threshold set at 182 days³.

The income tax scale is progressive and has numerous brackets. The first bracket is taxed at 0%⁴, and the top marginal rate, applicable above the last threshold, reaches 30%⁵.

Corporate income tax is 24%⁶ under the general regime, with reduced rates applying to small companies subject to conditions on capital and turnover.

Dividends and foreign income

Dividends received by individuals are taxed at 2%⁷ on the portion of dividend income exceeding more than 100,000⁸ ringgit.

This tax is recent and modest, but it marks a shift: the country was long presented as not taxing dividends at shareholder level. Plans built on this feature deserve to be reviewed.

The treatment of foreign-source income received by a Malaysian resident has been subject to successive reforms; the current position is now documented. According to the Ministry of Finance (tax measures of the 2026 budget), foreign-source income received in Malaysia by a resident individual is exempt, at the rate of 0%⁹, from 1 January 2022 to 31 December 2036, under the conditions set by the tax authority. The exemption does not cover income derived from an activity carried on through a partnership. This is the decisive point for an expatriate receiving income from outside Malaysia.

Malaysia also applies a largely territorial tax system, which explains its historical appeal. But territoriality is not an exemption: it shifts the question to the source of the income and its possible connection to the territory. Income received abroad but derived from an activity carried on from Malaysia does not call for the same analysis as a dividend paid by a foreign company to a passive shareholder.

The main route for a non-employed foreign resident is the Malaysia My Second Home programme, MM2H, administered by the Malaysian authorities and structured in categories.

Each category is based on a fixed deposit placed with an approved Malaysian financial institution. It amounts to $150,000¹⁰ for the entry category and reaches $1,000,000¹¹ for the highest category.

In addition to this deposit, there is a property purchase requirement: after obtaining approval, the participant must buy and hold a residence worth at least MYR 600,000¹².

The programme also distinguishes applicants by age, with a threshold at more than 50 years¹³, and includes variants specific to certain special economic zones.

It is important to be clear about what the MM2H is and is not. It is a long-term, renewable residence permit, subject to financial obligations maintained throughout its duration. It is neither a work permit, nor a route to citizenship, nor a tax regime.

The monthly income requirements, the validity periods by category and the annual presence obligations do not appear in the source extracts available to us: we do not quantify them.

The programme also has a regional dimension to take into account: certain special economic zones apply lighter conditions, in return for settling within a defined area. The choice between a national category and a regional variant is therefore made on location as much as on amount.

Purchase by a foreigner is possible but subject to a minimum price threshold, set by each federal state. Malaysia being a federation, the rules vary from one state to another, and this point is systematically underestimated.

For an MM2H participant, the relevant threshold is that of the programme: MYR 600,000¹². The purchase is not an investment option; it is a condition for maintaining the status.

Two consequences follow. The property acquired is tied up for as long as the status is sought, which rules out reasoning in terms of liquidity. And the market accessible to foreigners is bounded from below, which concentrates foreign demand on a specific segment and supports its prices.

There is also the distinction between land titles, some land being reserved, which restricts the supply genuinely open to a foreign buyer beyond the price criterion alone.

We do not publish Malaysian transfer duties, the real property gains tax, or the minimum price thresholds by state: they vary and we have no consolidated, dated official source.

For a comparable level of services, Malaysia offers one of the best value propositions in Southeast Asia for a foreign resident: well-developed infrastructure, a reputable private healthcare system and widespread use of English.

We do not publish a typical monthly budget: we have not found an official Malaysian series measuring a basket of expenses comparable to that of an expatriate.

Three items drive a budget. Housing, which varies greatly between Kuala Lumpur, Penang and Johor. International schooling, a major item for families and often decisive in the choice of city. And private health insurance, the quality of private clinics explaining why few foreign residents rely on the public sector.

A fourth point weighs more heavily than elsewhere: the MM2H fixed deposit ties up capital whose return is lower than it would be elsewhere. This opportunity cost is a recurring cost of the status, rarely included in comparisons.

One last factor affects the comparison with neighbouring countries: Malaysia subsidises part of its energy, which keeps fuel and electricity prices low. These schemes are regularly reformed, and their evolution directly affects a resident's budget.

1. Choose the target MM2H category, as it determines the deposit, and therefore most of the costing;
2. check the federal state of settlement: the minimum price threshold, the availability of titles open to foreigners and local rules depend on it;
3. place the fixed deposit with an approved institution, an operation that requires opening a local account beforehand;
4. carry out the property purchase after approval, in compliance with the applicable threshold;
5. treat the tax question separately: the MM2H says nothing about the treatment of income, and the status of the foreign income regime must be verified at the date of the project.

The sequence is constrained by the programme itself: the purchase takes place after approval, not before. Signing a preliminary agreement beforehand risks leaving you holding a property without the status that justified it.

We do not publish processing times: we have no official, quantified and dated source for the processing of MM2H applications.

• The MM2H has been suspended and then overhauled several times, with financial conditions significantly raised. Accounts from former participants describe a programme that no longer exists in that form.
• The deposit and the property purchase are conditions for maintaining the status, not only for entry: the capital remains tied up throughout the duration of the status.
• Real estate rules fall under the federal states: a threshold valid in Kuala Lumpur is not necessarily valid in Penang or Johor.
• The taxation of dividends above more than 100,000⁸ ringgit marks the end of an exemption often presented as a given.
• Foreign-source income of resident individuals is exempt until 31 December 2036, excluding partnership income: a deadline to factor into any long-term plan.

Finally, Malaysia illustrates a risk specific to residence programmes backed by a deposit: it is not the country that changes, but the programme. A redesigned scheme may alter the amount tied up, the duration of the permit or the physical presence requirements, for new applicants and, at times, when existing permits are renewed.