C4 EXCHANGE CONTROL
The information provided below acts as a quick reference guide outlining the more commonly used
Exchange Control of Malaysia Notices (ECM Notices) based on S. 39 of the Exchange Control Act 1953.
REMITTANCES ABROAD
Completion of Forms P (for payments abroad) and R (for receipts from abroad) by residents has been
discontinued. Instead, the information required in the Forms P and R will be provided by the remitting or
receiving banks to the Bank through an online system.
A resident is freely permitted:
1. to make payment in Ringgit (to be converted when remitting abroad) to a non-resident for any
purpose other than for international trade of goods and services or investments abroad. Payment in
Ringgit is however permitted for international trade in goods and services provided payments are
made or receipts are received through the non-resident’s external account;
2. to pay any amount in foreign currency to a non-resident for any purpose and for the settlement of
import of goods and services. Investments abroad would still be subject to rules on investments in
foreign currency assets. Generally, the rules relating to investments abroad include –
• ability to invest any amount abroad if funded from own foreign currency funds maintained
onshore or offshore or if funded by proceeds from listing of shares onshore and offshore,
• ability to invest any amount abroad from conversion of Ringgit up to:
(a) any amount for resident with no domestic credit facilities
(b) RM50 million per annum (on corporate group basis) for corporations with domestic credit
facilities and subject to having minimum shareholders’ funds of RM100,000 and in operation
for at least one year
(c) RM1 million per annum for individuals with domestic credit facilities;
3. to enter into a forward foreign exchange contract with licensed onshore banks to buy or sell foreign
currency against the Ringgit or another foreign currency to make payment to non-resident for the
purpose of –
(a) import or export of goods and services
(b) hedging foreign currency exposure of permitted investment abroad
(c) hedging committed capital inflow or outflow of funds;
4. to pay any amount in foreign currency to resident company for the settlement of import of goods and
services provided the foreign currency funds are sourced from the resident payer’s (with export
earnings) foreign currency accounts;
5. to pay any amount in foreign currency between resident participants undertaking commodity
murabahah* through resident commodity trading services providers;
6. to pay to non-residents for foreign currency-denominated derivatives (other than currency contracts)
transacted on overseas specified exchanges through resident futures brokers licensed under the
Capital Markets and Services Act 2007.
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Prior permission of the Controller of Foreign Exchange (Controller) is required:
1. for a resident –
(a) to pay any amount in Ringgit to a non-resident for international trade in goods and services if
settlement is not through the non-resident’s external account;
(b) to make payment to a non-resident for any spot or forward contract or interest rate swaps or
futures not transacted at a futures exchange in Malaysia;
2. for payments to Israel;
3. for a resident traveller to export Ringgit notes exceeding RM1,000 and foreign currency (including
traveller’s cheque) exceeding the equivalent of USD10,000;
4. for a non-resident traveller to export Ringgit notes exceeding RM1,000 and foreign currency
exceeding the amount of foreign currency brought into Malaysia.
Selected domestic institutions and residents are allowed to invest abroad (without prior approval) within a
broadly defined framework with effect from 1 April 2007. The framework sets limits on the amount that may
be invested abroad by unit trust management companies, insurance companies, and fund/asset managers
as well as stipulates compliance with guidelines issued by the relevant supervisory authority for each type of
establishment.
* The participants of commodity murabahah comprise financial institutions, companies or individuals, commodity brokers,
suppliers, buyers and trading service providers.
NON-RESIDENTS CONTROLLED COMPANIES
A non-resident controlled company (NRCC) means a corporation, company or branch operating in Malaysia,
controlled directly or indirectly by non-residents. A NRCC in Malaysia is permitted to:
1. obtain any amount in Ringgit or foreign currency of short term trade financing facilities; and
2. obtain domestic credit facilities locally without having to seek specific permission from the Controller.
PURCHASE OF IMMOVABLE PROPERTIES BY NON-RESIDENTS
Residents (banks and non-banks) may extend any amount of Ringgit credit facilities to a non-resident to
finance or refinance the purchase or construction of immovable properties in Malaysia, excluding financing
for purchase of land only. However, all purchases are subject to the guidelines issued by the Foreign
Investment Committee (FIC), the latest being effective from 1 January 2010.
Foreign governments, agencies or national corporations of the foreign governments, Multilateral
Development Banks, Multilateral Financial Institutions or foreign multinational corporations may also issue
Ringgit or foreign currency denominated bonds in Malaysia to residents and non-residents based on the
merit of each case.
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BORROWINGS IN FOREIGN CURRENCY
Approval of the Controller is required for all foreign currency credit facilities obtained from non-residents and
authorised banks where the total of such borrowings within a group of companies exceeds the equivalent of
RM100 million.
Approval is normally dependent on the overall terms of the loan such as its purpose, amount, denomination,
rate of interest, repayment schedule, relationship between the lender and the borrower, etc. Certain financial
guarantees are not regarded as part of the RM100 million limit.
However, no approval is required if a resident company is to borrow in foreign currency from:
(i)
(ii)
(iii)
its non-resident non-bank related company**;
other resident companies within the same corporate group*** in Malaysia; and
licensed onshore banks**** and licensed International Islamic Banks.
However, where the non-resident non-bank related company is set up solely to obtain foreign currency loans
from a non-resident financial institution, the amount of borrowing from the non-resident non-bank related
company continues to be subject to the prevailing aggregate limit of RM100 million equivalent from nonresidents.
A resident company or an individual is free to refinance outstanding approved foreign currency borrowing,
including principal and accrued interest.
A resident individual may also obtain foreign currency up to an equivalent of RM10 million in aggregate from
licensed onshore banks, licensed International Islamic banks and non-residents (trade financing facility
obtained from non-resident banking institutions is capped at RM5 million).
There is no restriction for the resident to use the foreign currency credit facilities to finance its own activities
in and outside Malaysia.
A resident can freely repay the credit facilities.
** A related company includes the ultimate holding, parent/head office, subsidiary/branch, associate or sister (common
shareholder) company.
***Corporate group refers to a group of companies with parent-subsidiary relationship in Malaysia. A parent company is a
company that holds more than 50% share of another company, i.e. the subsidiary.
****Licensed onshore banks refer to licensed commercial banks, licensed Islamic banks and licensed investment banks.
BORROWINGS IN RINGGIT
Borrowing in Ringgit by a resident company is allowed, including through the issuance of Ringgitdenominated redeemable preference shares or loan stocks:
(i)
from its non-resident non-bank parent company to finance activities in the real sector in Malaysia
(no restriction ); and
(ii) from other non-resident non-bank companies and individuals for use in Malaysia (up to RM1 million
in aggregate).
Borrowing in Ringgit, by a resident individual is allowed up to RM1 million in aggregate from non-resident
non-bank companies and individuals for use in Malaysia.
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Licensed onshore bank and non-bank resident (individual or company) are free to extend credit facilities in
Ringgit to a non-resident (without any limit) to finance or refinance activities in the real sector (i.e. for the
purchase or construction of residential and commercial property in Malaysia not including the purchase of
land).
In addition, the licensed onshore banks are also allowed to appoint overseas branches of their banking
group to facilitate the settlement of any Ringgit assets of their non-resident clients, subject to conditions.
FOREIGN CURRENCY ACCOUNTS
Generally, residents are free to open foreign currency accounts (FCA) with licensed onshore and offshore
banks, and overseas banks. However, export proceeds must be credited into a FCA maintained with a
licensed onshore bank only. No specific prior permission is required to open the FCA. Funds in the account
can be used for any purpose and can be repatriated at any time.
Ringgit can be converted for credit into FCAs up to:
1. any amount for resident with no domestic credit facilities;
2. RM1 million in a calendar year for resident individual with domestic credit facilities;
3. RM50 million in a calendar year (on a corporate group basis) for resident corporation with domestic
credit facilities;
4. the full amount of proceeds from the listing of shares through an Initial Public Offering on the Main
Board of Bursa Malaysia;
5. an additional USD150,000 from Onshore Bank, USD150,000 from Labuan Bank and USD50,000
from Overseas Bank for resident individuals with domestic credit facilities for the purposes of
education and employment abroad.
A resident fund manager, nominee company, trust company, legal firm or stockbroking company is allowed
to open FCAs to maintain funds for a non-resident or another resident on a segregated basis.
Resident exporters are allowed to retain any amount of their foreign currency export proceeds without
converting into Ringgit. These proceeds are however required to be deposited in a FCA or a multi-currency
account maintained with any of the licensed onshore banks.
There are no restrictions on the maintenance of a FCA by a non-resident.
NON-RESIDENT’S ACCOUNTS
An External Account is a Ringgit account belonging to a non-resident or where the beneficiary of the funds in
the account is a non-resident.
A non-resident may open and maintain any number of External Accounts with any onshore financial
institution. There is no restriction on the amount of Ringgit funds to be retained in the External Accounts.
Ringgit funds in an External Account can be used for payment to residents for purchase of Ringgit assets or
services provided in Malaysia. Funds in the External Account can be converted into foreign currency with the
licensed onshore banks and repatriated at any time.
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EXPORTS FROM MALAYSIA
Only exporters with annual gross exports exceeding RM50 million need to submit quarterly reports to the
Central Bank of Malaysia.
MSC STATUS COMPANIES
MSC status companies are exempted from the exchange control requirements by the Controller. However,
such exemptions do not extend to dealings with specified persons, comprising the residents or institutions of
Israel, or the Israeli currency.
ENTITIES IN LABUAN
A Labuan entity incorporated or registered under the Labuan Companies Act 1990 is declared as a nonresident for foreign exchange administration purposes and is free to undertake the following:
1. Obtain any amount of foreign currency credit facilities.
2. Invest any amount of foreign currency assets.
3. Enter into foreign exchange contracts involving foreign currencies with licensed onshore banks in
Labuan and any overseas counterparty.
4. Buy or sell foreign currency (other than currency of the state of Israel) against the Ringgit with
licensed onshore banks for permitted purposes.
5. Maintain external accounts with licensed onshore banks to facilitate the defrayment of statutory and
administrative expenses in Malaysia.
6. Receive payments in Ringgit from residents arising from fees, commissions, dividends or interest
from deposit of funds with onshore financial institutions.
7. Transact in Ringgit financial (investment) products with licensed onshore banks or resident brokers
for its own account or on behalf of its non-resident clients.
In addition, a Labuan insurance entity is allowed to receive reinsurance premiums and pay claims arising
from reinsurance of domestic insurance business in Ringgit.
REGIONAL DISTRIBUTION CENTRES AND INTERNATIONAL PROCUREMENT
CENTRES
A Regional Distribution Centre and an International Procurement Centre are subject to policies applicable to
residents.
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APPROVED OPERATIONAL HEADQUARTERS
An Approved Operational Headquarters (OHQ) is subject to policies applicable to a resident. In addition, an
OHQ is allowed to:
1. Invest any amount in foreign currency assets to be funded with own foreign currency funds or
borrowing.
2. Obtain any amount of foreign currency credit facilities from licensed onshore banks in Malaysia and
from any non-resident, provided the OHQ does not on-lend to, or raise the funds on behalf of, any
resident.
3. Utilise proceeds of any amount from the issuance of ordinary shares through initial public offering on
the Main Board of Bursa Malaysia for investment in foreign currency assets.
4. Free to lend foreign currency sourced from listing of shares on foreign stock exchanges to other
resident companies within the same corporate group in Malaysia.
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