The Expat’s Guide To MM2H Tax Exemptions In 2025
You’ve probably heard the updated Malaysia My Second Home (MM2H) program grants a tax exemption on income from overseas sources.
It sounds good, but ‘income from overseas sources’ is broad enough to make anyone a bit skeptical—surely this can’t apply to all forms of income!
The short answer is you’re right—the MM2H tax exemption doesn’t apply to all overseas income. However, it applies to most—enough that for practical purposes the statement is true.
If you’re satisfied, our list of MM2H pros and cons covers other key parts of the program.
We’re guessing you still want to learn more, though, so keep reading for full details!
What overseas income is tax-exempt?
All MM2H pass holders enjoy tax exemption on the following forms of income from overseas.
| Category | Income Type | Description |
| Investment-Related Income | Dividends | Earnings from shares in a company. |
| Interest | Income from bank deposits, bonds, or loans. | |
| Discounts | Earnings from financial instruments purchased at a discount. | |
| Property & Intellectual Property Income | Rents | Income from leasing property. |
| Royalties | Earnings from intellectual property rights (e.g., copyrights, patents, trademarks). | |
| Premiums | One-time payments related to property rights or lease agreements. | |
| Retirement & Periodic Payments | Pensions | Retirement benefits received regularly. |
| Annuities | Fixed payments received periodically from an investment or insurance plan. | |
| Other Periodical Payments | Regular payments not classified under other categories. | |
| Other Gains & Profits | Miscellaneous Gains & Profits | Any gains or profits that do not fit into the previous categories but are still considered taxable income. |
Additionally, if the cash initially deposited to meet MM2H fixed deposit requirements come from an overseas source, that too is tax exempt.
What overseas income is not tax-exempt?
Platinum MM2H pass holders can work and do business in Malaysia, and all overseas income generated in the course of employment or industry is subject to income tax in Malaysia.
A pass holder who resides in Malaysia for 182 days or more in a calendar year is subject to resident tax rates. Less than that and they are subject to non-resident tax rates.
Meanwhile, a foreign-owned company is subject to a flat 24% corporate income tax rate.
This is why it’s often better to go into business together with a trusted local partner–but that’s a story for another article!
Why does it work like this?
Only the Malaysian government knows for sure, but if we had to guess, it’s because the MM2H program is meant for expats looking to retire in Malaysia, not those actively working.
That’s why overseas investment, property, and retirement-related income gets a tax exemption, but income earned through active employment or business is taxed.
We see it as the government saying MM2H holders should retire quietly, but if they insist on working, then pay up!
After all, this is only possible with a Platinum pass, significantly pricier than the next tier down.
Your next steps
Here are some additional resources to learn more about the MM2H program:
- Dedicated guides to Platinum, Gold, Silver, and SEZ categories
- An MM2H application checklist so you know what documents are needed
For anything else, you’re welcome get in touch with us–we hope to see you in Malaysia 🙂
Let MISHU help with your MM2H application
Not all MM2H agents are created equal – some leave you more confused! Let us connect you to one who will make the process as straightforward and hassle-free as possible.