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Malaysia Replaces Two-Tier Levy on Foreign Investments with Flat Rate
Washington, DC, September 21, 1999 - Bank Negara Malaysia (BNM), the central bank of Malaysia, announced a significant change in a press release today with respect to the Exchange Control of Malaysia (ECM). The ECM imposes levies on the repatriation by foreigners of proceeds from the sale of Malaysian securities.
The ECM draws a distinction between investments that were made on or before February 14, 1999 ("old money") and those that were made on or after February 15, 1999 ("new money"). According to the documents released yesterday by BNM:
- Old money is exempt from all levies and may be freely repatriated or transferred to the foreigner’s "new money" account (called a Special External Account or SEA); and
- Repatriations of new money will be subject to a standard levy of 10 percent of the amount of the repatriation attributable to profit (capital gains).
The latter point represents a significant change in the ECM regime. Prior to this announcement, foreign investors would pay a short-term rate of 30 percent of profits upon repatriating new money within 12 months of investment and a long-term rate of 10 percent of profits thereafter. The new regime does away with the two-tier system, applying the 10 percent rate to all repatriations of new money investments. These rules take effect immediately.