 > Frequently Asked Questions (FAQs) |
Frequently Asked Questions (FAQs)
Need help? Before you contact us for assistance, please go through the following frequently asked questions on foreign exchange administration applications and money changing services. It may save your time and effort.
Shortcuts:
- FAQs related to Foreign Exchange Administration
FAQs related to Foreign Exchange Administration
I. FAQs related to Resident Individuals | ^Return to FAQs Category
- Who can buy or sell foreign currency in Malaysia?
- Can I send money abroad through a licensed moneychanger?
- I am a resident in Malaysia. Can I pay another resident in foreign currency?
- Can I send money to my child who is studying overseas?
- If I am a resident with a child studying abroad, can I open a joint bank account with my child in an overseas bank?
- I am a resident individual and I have only one outstanding housing loan. How much ringgit can I convert for crediting into a foreign currency account for education/employment overseas?
- Do I need prior permission to open a foreign currency account?
- Can my wife and I maintain a joint foreign currency account with overseas bank for purposes other than education or employment?
- What is considered as domestic ringgit credit facility?
- As a resident individual, what type of foreign currency receipts from abroad can I keep in a foreign currency account with no limit?
- I am a resident individual and would like to invest in foreign currency products offered by a licensed onshore bank or licensed offshore bank in Labuan. Do I need to seek permission?
- Can I use my foreign currency funds and pay to licensed onshore banks for purchase of foreign currency investment products?
- I am a resident and I need to pay a non-resident for purchase of goods and services. Is there any restriction?
- Can I make a payment under guarantee to a non-resident?
- Do I need to seek permission to repay a loan I have obtained from a non-resident?
- Can I open a joint foreign currency account with bank in Malaysia or overseas?
- Do I need to register the opening of overseas accounts for education and employment purpose?
- Where can I seek more information on foreign exchange administration in Malaysia?
- How can I apply for permission to undertake transactions which requires approval?
-
Who can buy or sell foreign currency in Malaysia?
Licensed commercial banks or Islamic banks in Malaysia may buy or sell foreign currency other than the currency of Israel with a resident or non-resident in Malaysia or any party outside Malaysia.
An investment bank may also buy or sell foreign currency with their resident clients or any non-residents.
Licensed moneychangers are only permitted to buy and sell foreign currency notes against ringgit and buy any travellers' cheques.
Licensed offshore banks in Labuan may buy or sell foreign currency against another foreign currency with any non-resident clients.
- Can I send money abroad through a licensed moneychanger?
No. Any remittance abroad must be done through a licensed onshore bank or companies given permission to carry on remittance business. A licensed moneychanger in Malaysia is not permitted to conduct remittance activities under the Money-Changing Act 1998 as well as the Exchange Control Act 1953.
- I am a resident in Malaysia. Can I pay another resident in foreign currency?
- Effective 1 April 2007, a resident is allowed to pay another resident for settlement of foreign currency financial products offered onshore.
- Effective 7 January 2010, resident participants* undertaking commodity murabahah through resident commodity trading service providers are free to make payment in foreign currency between resident participants.
- However, payment in foreign currency between residents for other purpose requires the prior permission from the Controller.
* The participants of commodity murabahah comprise financial institutions, companies or individuals, commodity brokers, commodity suppliers, commodity buyers and commodity trading service providers.
- Can I send money to my child who is studying overseas?
Yes.
- If you have no domestic credit facility, you may convert any amount of ringgit into foreign currency and send to his/her bank account overseas.
- If you have domestic credit facility, you may convert up to USD50,000 equivalent into foreign currency for crediting into the overseas account and up to USD150,000 respectively for crediting into foreign currency accounts maintained with licensed onshore banks or licensed offshore banks in Labuan for education purposes.
- You would be required to show supporting documents to the remitting banks.
Domestic credit facilities exclude one housing loan, one vehicle loan and/or credit card/charge card facilities.
- If I am a resident with a child studying abroad, can I open a joint bank account with my child in an overseas bank?
Yes. You may open a joint bank account with your child with an overseas bank.
- I am a resident individual and I have only one outstanding housing loan. How much ringgit can I convert for crediting into a foreign currency account for education/employment overseas?
You may convert any amount of ringgit into foreign currency for crediting into a foreign currency account for education/employment overseas.
- Do I need prior permission to open a foreign currency account?
Residents are free to open foreign currency accounts (FCA) in Malaysia or overseas.
- Can my wife and I maintain a joint foreign currency account with overseas bank for purposes other than education or employment?
Yes. Resident individuals are freely allowed to open and maintain joint foreign currency accounts for any purpose with onshore or overseas banks.
- What is considered as domestic ringgit credit facility?
Domestic ringgit borrowing refer to any ringgit advances, loans, trade financing facilities, hire purchase, factoring facilities with recourse, financial leasing facilities, guarantee for payment of goods, redeemable preference shares or similar facilities in whatever name or form, except:
- Trade credit terms extended by suppliers for all types of goods and services
- Forward foreign exchange contracts entered into with licensed onshore banks
- Performance guarantees and financial guarantees
- One personal housing loan and one vehicle loan obtained from residents
- Credit card and charge card facilities
- Operational leasing facilities
- Factoring facilities without recourse; and
- Inter-company borrowings within a corporate group in Malaysia
- As a resident individual, what type of foreign currency receipts from abroad can I keep in a foreign currency account with no limit?
You may keep any amount of foreign currency receipts such as income/profit from investment/ rental/ proceeds from divestment of approved overseas investment or proceeds from approved foreign currency loans.
- I am a resident individual and would like to invest in foreign currency products offered by a licensed onshore bank or licensed offshore bank in Labuan. Do I need to seek permission?
If you have no domestic ringgit credit facility, you are free to invest any amount in foreign currency products offered onshore and offshore. Your investment can be funded by your existing foreign currency funds retained onshore or offshore or conversion of ringgit into foreign currency.
If you have domestic ringgit credit facility, you are free to invest in foreign currency products any amount of your existing foreign currency funds and convert up to RM1.0 million per calendar year, including for investment overseas.
- Can I use my foreign currency funds and pay to licensed onshore banks for purchase of foreign currency investment products?
Yes. Effective 1 April 2007, resident is allowed to pay another resident for settlement of foreign currency financial products offered onshore.
- I am a resident and I need to pay a non-resident for purchase of goods and services. Is there any restriction?
There is no restriction for a resident to pay a non-resident for purchase of goods and services. The payments can be made either in ringgit or foreign currency.
The resident can settle his trade payments or receipt with non-resident in ringgit arising from the import or export of goods and services as follows:
- Payment in ringgit by resident to the non-resident must be made into the External Account of the non-resident; or
- Receipt of ringgit by the resident from the non-resident can be effected from the External Account of the non-resident or an External Account of an appointed overseas branch of the same banking group of an onshore bank.
- Can I make a payment under guarantee to a non-resident?
For financial guarantee exceeding RM50 million equivalent in aggregate, it has to be registered and acknowledged by the Controller of Foreign Exchange prior to making any payment. There are no restrictions on payment under guarantee to a non-resident.
- Do I need to seek permission to repay a loan I have obtained from a non-resident?
You do not need to seek permission for repayment of a loan obtained from a non-resident if:
- The loan you have obtained is within the permitted limit; or
- You have obtained specific permission from the Controller for the loan from the non-resident.
The repayment should be made in accordance with the terms and conditions of the loan.
- Can I open a joint foreign currency account with bank in Malaysia or overseas?
Yes. Resident individuals are free to open joint foreign currency accounts onshore or offshore.
- Do I need to register the opening of overseas accounts for education and employment purpose?
No. Effective 1 October 2007, the requirement for registration of overseas account has been abolished.
- Where can I seek more information on foreign exchange administration in Malaysia?
You can obtain more information from Foreign Exchange Administration Department, Bank Negara Malaysia.
General information on foreign exchange administration policy could also be obtained at www.bnm.gov.my/fxadmin.
- How can I apply for permission to undertake transactions which requires approval?
Applicants are required to submit applications using forms available online in this website. To choose the application form, click here. For application which the available online forms do not apply, applicants may submit hardcopy application to the following address:
Director
Foreign Exchange Administration Department
Bank Negara Malaysia
Jalan Dato Onn
50480 Kuala Lumpur
Fax: 03-26943991
For a list of application forms and their user guides, click here.
II. FAQs related to Resident Companies | ^Return to FAQs Category
- Who can buy or sell foreign currency in Malaysia?
- Can a company in Malaysia send money abroad through a licensed moneychanger?
- Can a resident company pay another resident company in foreign currency?
- What are foreign currency financial products?
- As a resident company, we need to pay our overseas supplier for purchase of goods and services. Is there any restriction?
- My company and another resident company have been awarded a joint venture project in Malaysia. Can we open a joint bank account with licensed onshore banks to facilitate payments and receipts under this project?
- We are a foreign-owned company in Malaysia. We plan to secure foreign currency borrowing to finance our operations. Is there a limit on the amount that we can borrow?
- A resident company, has extended a corporate guarantee on behalf of its overseas subsidiary. Can payment be made under the guarantee to the non-resident lender if the subsidiary defaults its loan?
- Does my company need to seek permission to repay a loan obtained from a non-resident?
- My company has recently been granted an Operational Headquarters status by Malaysia Industrial Development Authority. Does my company need to obtain prior permission to obtain foreign currency borrowing?
- My company has a foreign currency loan obtained from a non-resident. Can we hedge the loan repayment and interest payment of this loan?
- What is considered as domestic credit facility?
- We are a company incorporated in Malaysia. Can we send money out to purchase shares in a company outside Malaysia?
- Do we have to register our investment in foreign currency assets?
- Our company is listed on the Main Board of Bursa Malaysia. We also have business presence in the Asian region. What is our foreign currency borrowing limit and overseas investment limit?
- Is a non-resident controlled company in Malaysia (NRCC) considered as a non-resident and is it subject to all foreign exchange administration rules in Malaysia?
- Does a NRCC still need to comply with the gearing ratio in obtaining domestic credit facilities? Do NRCCs need to get permission to obtain domestic credit facilities?
- I am a resident exporter with a foreign currency account. Can I use the funds in my foreign currency account to make import payments or other foreign currency payment obligations?
- Can a resident exporter who has opted to merge their export and non-export foreign currency accounts be allowed to open a separate non-export foreign currency account at the same time for other purposes?
- Is there a requirement to bring back my export proceeds within a certain period of time?
- Do I need to get the quarterly report on exports of my company audited and certified by an external auditor?
- Can I transfer funds in one foreign currency account to another foreign currency account?
- Can I transfer funds in my company's foreign currency account to another resident company's foreign currency account?
- Is there any restriction for a foreign company (non-resident) to invest in Malaysia and later transfer abroad any profits and divestment proceeds?
- Which sector of the economy would benefit most from the liberalisation of the rules relating to payment in foreign currency by a resident company with export earnings to another resident company for settlement of goods and services?
- My company has export earnings. Can my company use the foreign currency funds to pay another Malaysian company for settlement of goods and services?
- If I am NOT an exporter, can my company use the foreign currency proceeds received from a Malaysian company to pay another Malaysian company for settlement of goods and services?
- Would a company which exports only services and NOT goods be deemed as an exporter?
- Can a resident exporter pay in foreign currency to an INDIVIDUAL agent acting on behalf of a resident supplier?
- Can a Malaysian company with export earnings use permitted foreign currency trade financing facilities obtained from licensed onshore banks or non-resident banks to pay another Malaysian company for settlement of goods and services?
- Can a Malaysian company with export earnings pay in foreign currency for goods and services to another resident company through foreign currency accounts maintained overseas by both the payer and payee?
- Can a Malaysian company decline to accept payment in foreign currency from another Malaysian company?
- Why is the liberalisation on rules relating to payment in foreign currency by a resident company with export earnings to another resident company for settlement of goods and services only accorded to specific companies operating in Malaysia?
- Can a company WITH NO export earnings seek BNM's approval to pay in foreign currency to another Malaysian company?
- How can licensed onshore banks ensure compliance?
- Can a Malaysian company INVOICE its local customer in foreign currency for sales of goods and services?
- Can a Malaysian company WITH NO export earnings use foreign currency received from one resident company to pay to another Malaysian company to settle purchase of goods and services?
- Can a Malaysian company pay another Malaysian company in foreign currency for trade-related services such as insurance, fees and commissions?
- Can a resident payee use the foreign currency received from a resident exporter for investments in foreign currency assets?
- Can a Malaysian manufacturer which exports goods through a resident agent, receive payment for the goods in foreign currency from the agent?
- Can a Malaysian company with export earnings convert ringgit into foreign currency to settle for purchase of goods and services to another resident company if it has insufficient foreign currency funds?
- Can a Malaysian company with export earnings use foreign currency trade financing facilities obtained from licensed onshore banks to pay another Malaysian company for settlement of goods and services?
- Does a Malaysian company need to make any declaration to Bank Negara Malaysia prior to making a payment in foreign currency to another resident?
- Does Bank Negara Malaysia anticipate any significant surge in payments in foreign currency between residents?
- Where can I seek more information on foreign exchange administration in Malaysia?
- How can I apply to undertake transactions which require approval?
- Who can buy or sell foreign currency in Malaysia?
Licensed commercial banks or Islamic banks in Malaysia may buy or sell foreign currency other than the currency of Israel with a resident or non-resident in Malaysia or any party outside Malaysia.
An investment bank may also buy or sell foreign currency with their resident clients or any non-residents.
Licensed moneychangers are only permitted to buy and sell foreign currency notes against ringgit and buy any travellers' cheques.
Licensed offshore banks in Labuan may buy or sell foreign currency against another foreign currency with any non-resident clients.
- Can a company in Malaysia send money abroad through a licensed moneychanger?
No. Any remittance abroad must be done through a licensed onshore bank or companies given permission to carry on remittance business. A licensed moneychanger in Malaysia is not permitted to conduct remittance activities under the Money-Changing Act 1998 as well as the Exchange Control Act 1953.
- Can a resident company pay another resident company in foreign currency?
- Effective 1 April 2007, a resident is allowed to pay another resident for settlement of foreign currency financial products offered onshore.
- Effective 28 November 2007, a resident company with export earnings is allowed to pay another resident company for settlement of goods and services.
- Effective 7 January 2010, resident participants* undertaking commodity murabahah through resident commodity trading service providers are free to make payment in foreign currency between resident participants.
- Payment in foreign currency between residents for other purpose requires the prior permission from the Controller.
* The participants of commodity murabahah comprise financial institutions, companies or individuals, commodity brokers, commodity suppliers, commodity buyers and commodity trading service providers.
- What are foreign currency financial products?
Foreign currency financial products are investment products offered by licensed onshore banks or any institutions approved by Bank Negara Malaysia. Foreign currency financial products exclude deposits and loans.
- As a resident company, we need to pay our overseas supplier for purchase of goods and services. Is there any restriction?
There is no restriction for a resident to pay a non-resident for purchase of goods and services. The payments can be made either in ringgit or foreign currency.
The resident company can settle its trade payments or receipt with non-resident in ringgit arising from the import or export of goods and services as follows:
- Payment in ringgit by resident to the non-resident must be made into the External Account of the non-resident; or
- Receipt of ringgit by the resident company from the non-resident can be effected from the External Account of the non-resident or an External Account of an appointed overseas branch of the same banking group of an onshore bank.
- My company and another resident company have been awarded a joint venture project in Malaysia. Can we open a joint bank account with licensed onshore banks to facilitate payments and receipts under this project?
No. Resident companies are currently not allowed to open and maintain joint foreign currency accounts with licensed onshore banks or overseas banks.
- We are a foreign-owned company in Malaysia. We plan to secure foreign currency borrowing to finance our operations. Is there a limit on the amount that we can borrow?
A resident company is free to borrow any amount in foreign currency from:
- Non-resident non-bank related companies *
- Other resident companies within the same corporate group** in Malaysia
- Licensed onshore banks; and
- Licensed International Islamic Banks
A resident company is also freely allowed to borrow in foreign currency up to the equivalent of RM100 million in aggregate on a corporate group basis from other non-residents, including through the issuance of foreign currency denominated bonds onshore and offshore
* A related company includes ultimate holding, parent/head office, subsidiary/ branch, associate or sister (common shareholder) company of a resident company
** Corporate group refers to a group of companies with parent-subsidiary relationship in Malaysia
- A resident company, has extended a corporate guarantee on behalf of its overseas subsidiary. Can payment be made under the guarantee to the non-resident lender if the subsidiary defaults its loan?
For financial guarantee exceeding RM50 million equivalent in aggregate, it has to be registered and acknowledged by the Controller prior to making any payment. There are no restrictions on payment under guarantee to a non-resident.
- Does my company need to seek permission to repay a loan obtained from a non-resident?
Your company does not need permission to repay a loan obtained from a non-resident if:
- the loan is within the permitted limits; or
- your company has obtained specific permission for the loan from the non-resident.
The repayment should be made in accordance with the terms and conditions of the loan.
- My company has recently been granted an Operational Headquarters status by Malaysia Industrial Development Authority. Does my company need to obtain prior permission to obtain foreign currency borrowing?
An Approved Operational Headquarters status company is freely allowed to borrow any amount of foreign currency credit facilities from licensed onshore banks, non-residents and through issuance of foreign currency bonds.
- My company has a foreign currency loan obtained from a non-resident. Can we hedge the loan repayment and interest payment of this loan?
Yes. Your company can hedge up to the full amount of committed exposure with authorised dealers in Malaysia. There is no restriction on the tenure of the forward contract.
- What is considered as domestic credit facility?
Domestic ringgit borrowing refer to any ringgit advances, loans, trade financing facilities, hire purchase, factoring facilities with recourse, financial leasing facilities, guarantee for payment of goods, redeemable preference shares or similar facilities in whatever name or form, except:
- Trade credit terms extended by suppliers for all types of goods and services
- Forward foreign exchange contracts entered into with licensed onshore banks
- Performance guarantees and financial guarantees
- One personal housing loan and one vehicle loan obtained from residents
- Credit card and charge card facilities
- Operational leasing facilities
- Factoring facilities without recourse; and
- Inter-company borrowings within a corporate group in Malaysia
- We are a company incorporated in Malaysia. Can we send money out to purchase shares in a company outside Malaysia?
There is no restriction for a Malaysian company without domestic ringgit credit facility to remit any amount of funds out for investments in foreign currency assets, which includes purchase of foreign securities, placement of funds and lending to non-residents as well as purchase of foreign currency products offered/ marketed by licensed onshore banks. The investment can be funded by the company's existing foreign currency funds or conversion of ringgit into foreign currency.
A company with domestic ringgit credit facility can invest any amount of its existing foreign currency funds or convert up to RM50 million per calendar year for investment abroad.
- Do we have to register our investment in foreign currency assets?
No. Effective 1 October 2007, the requirement for registration of investment in foreign currency assets has been abolished.
- Our company is listed on the Main Board of Bursa Malaysia. We also have business presence in the Asian region. What is our foreign currency borrowing limit and overseas investment limit?
A public listed company on the Main Board of Bursa Malaysia is allowed to obtain foreign currency credit facilities as follows:
- No limit for foreign currency borrowing obtained from non-resident non-bank related companies, other resident companies within the same corporate group in Malaysia, licensed onshore banks and licensed International Islamic Banks.
- Up to RM100 million equivalent in aggregate and on corporate group basis from other non-residents as well as through the issuance of foreign currency bonds onshore and offshore; and
- No limit if the foreign currency proceeds are arising from the listing of its shares on foreign stock exchange. The proceeds may be on lent to other resident company within the same corporate group in Malaysia.
- For overseas investment, if your company:
- uses own foreign currency funds placed onshore or offshore, your company is freely allowed to invest in any foreign currency assets;
- uses proceeds from the listing of shares through Initial Public Offering on the Main Board of Bursa Malaysia, your company is freely allowed to invest in foreign currency assets up to the full amount of the proceeds. The proceeds have to be converted into foreign currency prior to remitting them abroad;
- uses foreign currency credit facilities to finance investment in foreign currency assets, the investment limit is up to the full amount of permitted foreign currency borrowing;
- does not have any domestic ringgit credit facilities, your company is freely allowed to invest in any amount of foreign currency assets from the conversion of ringgit; and
- has domestic ringgit credit facilities, your company is allowed to invest up to RM50 million equivalent in aggregate on a corporate group basis per calendar year if the funds for the investment are sourced from the conversion of ringgit.
- Is a non-resident controlled company in Malaysia (NRCC) considered as a non-resident and is it subject to all foreign exchange administration rules in Malaysia?
No. A NRCC is a resident company and is subject to all foreign exchange administration rules like any other residents in Malaysia.
- Does a NRCC still need to comply with the gearing ratio in obtaining domestic credit facilities? Do NRCCs need to get permission to obtain domestic credit facilities?
No. With effect from 1 April 2005, NRCCs are free to obtain any amount of ringgit credit facilities from residents in Malaysia. The amount is subject to the lender's own internal assessment guidelines. NRCCs are no longer required to seek permission to obtain domestic credit facilities.
- I am a resident exporter with a foreign currency account. Can I use the funds in my foreign currency account to make import payments or other foreign currency payment obligations?
Yes, the funds in the foreign currency account may be used to meet any foreign currency payment obligations, such as import or services payments to non-residents including repayment of permitted foreign currency loans and permitted investments in foreign currency assets, including those marketed by licensed onshore banks.
The funds in foreign currency account may also be used to pay another resident company in foreign currency for settlement of goods and services.
- Can a resident exporter who has opted to merge their export and non-export foreign currency accounts be allowed to open a separate non-export foreign currency account at the same time for other purposes?
Yes. With effect from 1 April 2005, residents are free to open foreign currency accounts, onshore or offshore. However, export proceeds continue to be required to be brought back to Malaysia and retained with licensed onshore banks.
- Is there a requirement to bring back my export proceeds within a certain period of time?
Yes, you are required to repatriate receipts arising from export of goods when contractually due, which must not exceed 6 months from the date of export.
- Do I need to get the quarterly report on exports of my company audited and certified by an external auditor?
Only exporters with exports exceeding RM50 million in the previous calendar year are required to submit quarterly reports. These quarterly reports need only be certified by an authorised officer of the exporting company and need not be audited by an external auditor.
- Can I transfer funds in one foreign currency account to another foreign currency account?
Yes, residents with foreign currency accounts (FCA) maintained with licensed onshore banks may transfer funds from one FCA to another FCA as long as the two accounts belong to the same account holder.
- Can I transfer funds in my company's foreign currency account to another resident company's foreign currency account?
No. Transferring of foreign currency funds between two different account holders is not allowed. If the transfer is due to making foreign currency payment to another resident, then only resident company with export earnings is allowed to pay another resident company for settlement of goods and services.
- Is there any restriction for a foreign company (non-resident) to invest in Malaysia and later transfer abroad any profits and divestment proceeds?
No. There is no restriction for a non-resident to invest in Malaysia, whether to purchase ringgit assets, such as property in Malaysia or to subscribe or purchase securities in Malaysia.
There is no restriction for a non-resident to transfer abroad in foreign currency any profits or returns from their investment in Malaysia, including divestment proceeds.
- Which sector of the economy would benefit most from the liberalisation of the rules relating to payment in foreign currency by a resident company with export earnings to another resident company for settlement of goods and services?
The liberalisation would benefit companies from all sectors of the economy as long as the paying resident companies have foreign currency earnings from the export of goods and services.
- My company has export earnings. Can my company use the foreign currency funds to pay another Malaysian company for settlement of goods and services?
Yes.
- If I am NOT an exporter, can my company use the foreign currency proceeds received from a Malaysian company to pay another Malaysian company for settlement of goods and services?
No. Prior permission of the Controller of Foreign Exchange is required.
- Would a company which exports only services and NOT goods be deemed as an exporter?
Yes.
- Can a resident exporter pay in foreign currency to an INDIVIDUAL agent acting on behalf of a resident supplier?
No, the flexibility is granted only for payments by a resident company directly to another resident company.
- Can a Malaysian company with export earnings use permitted foreign currency trade financing facilities obtained from licensed onshore banks or non-resident banks to pay another Malaysian company for settlement of goods and services?
Yes.
Note:
- Receiving bank would have to ensure that the resident payer is a company with export earnings if the funds are received direct from an overseas account
- Upon receiving the funds, the bank should record the purpose code as "17070-transfer of funds by non-bank resident from overseas account maintained by another non-bank resident"
- Can a Malaysian company with export earnings pay in foreign currency for goods and services to another resident company through foreign currency accounts maintained overseas by both the payer and payee?
Yes. (Note: The requirement for resident exporters to repatriate export proceeds within contract period which should not be later than six months from date of export and not placed in foreign currency accounts maintained overseas, remain unchanged)
- Can a Malaysian company decline to accept payment in foreign currency from another Malaysian company?
Yes, payment in foreign currency should be based on willing buyer willing seller arrangement.
- Why is the liberalisation on rules relating to payment in foreign currency by a resident company with export earnings to another resident company for settlement of goods and services only accorded to specific companies operating in Malaysia?
The liberalisation is accorded only to companies with export earnings to ensure that the paying companies have the ability to make such payments in foreign currency.
This will reduce the cost of doing business for businesses in the real sector and provide a more conducive business environment for Malaysian companies to enhance Malaysia's competitiveness.
- Can a company WITH NO export earnings seek BNM's approval to pay in foreign currency to another Malaysian company?
Yes. The application can be made by completing Form 4 online via BNM website www.bnm.gov.my/fxadmin. Consideration will be based on the merit of each case.
- How can licensed onshore banks ensure compliance?
The bank may apply the principle of "customer due diligence" when effecting payment for a Malaysian company. The bank could sight relevant documentary evidence to prove that the resident payer has export earnings.
- Can a Malaysian company INVOICE its local customer in foreign currency for sales of goods and services?
Yes. A resident company can invoice another Malaysian company in foreign currency for the settlement of goods and services.
- Can a Malaysian company WITH NO export earnings use foreign currency received from one resident company to pay to another Malaysian company to settle purchase of goods and services?
No. Only resident companies with OWN export earnings can pay another resident company in foreign currency for settlement of goods and services.
Payment in foreign currency between residents, however, is allowed only if the resident purchaser has export earnings.
- Can a Malaysian company pay another Malaysian company in foreign currency for trade-related services such as insurance, fees and commissions?
Yes, provided that the resident payer is a company with export earnings.
- Can a resident payee use the foreign currency received from a resident exporter for investments in foreign currency assets?
Yes. The resident payee is allowed to use own foreign currency funds, including foreign currency received from a resident exporter for payment of goods and services, for investment in foreign currency assets.
- Can a Malaysian manufacturer which exports goods through a resident agent, receive payment for the goods in foreign currency from the agent?
The resident agent can pay the manufacturer in foreign currency for the purchase of goods and services if the resident agent earns export income.
- Can a Malaysian company with export earnings convert ringgit into foreign currency to settle for purchase of goods and services to another resident company if it has insufficient foreign currency funds?
Yes. The Malaysian company can convert ringgit into foreign currency provided the conversion into foreign currency complies with the prevailing rules on investment in foreign currency assets.
Alternatively, the Malaysian company is free to pay the difference in ringgit equivalent.
Additional information
Current rule on investment in foreign currency assets allows:
- resident with no domestic ringgit borrowing to convert any amount of ringgit to foreign currency; and
- a resident with domestic ringgit borrowing to convert up to RM50 million equivalent in aggregate per calendar year on corporate group basis.
- Can a Malaysian company with export earnings use foreign currency trade financing facilities obtained from licensed onshore banks to pay another Malaysian company for settlement of goods and services?
Yes.
- Does a Malaysian company need to make any declaration to Bank Negara Malaysia prior to making a payment in foreign currency to another resident?
No. The Malaysian company needs to satisfy only the licensed onshore banks and provide any necessary documentation as required by the licensed onshore banks.
- Does Bank Negara Malaysia anticipate any significant surge in payments in foreign currency between residents?
No. Currently such transactions have already been allowed based on the merit of each case.
- Where can I seek more information on foreign exchange administration in Malaysia?
You can obtain more information from Foreign Exchange Administration Department, Bank Negara Malaysia.
General information on foreign exchange administration policy could also be obtained at www.bnm.gov.my/fxadmin.
- How can I apply to undertake transactions which require approval?
Applicants are required to submit applications using forms available online in this website. To choose the application form, click here. For application which the available online forms do not apply, applicants may submit hardcopy application to the following address:
Director
Foreign Exchange Administration Department
Bank Negara Malaysia
Jalan Dato Onn
50480 Kuala Lumpur
Fax: 03-26943991
For a list of application forms and their user guides, click here.
III. FAQs related to Non-Residents | ^Return to FAQs Category
- I am a non-resident. Can I transfer funds from investments in Malaysia to overseas?
- I am a non-resident with more than one External Account. Can I transfer the funds from one account to the other?
- Is there any restriction for a foreigner (non-resident) to invest in Malaysia and later transfer abroad any profits and divestment proceeds?
- Can a non-resident individual obtain a property loan to finance the purchase of a property as a personal investment and not for his own use?
- Is there a limit on the amount a non-resident could borrow for each property loan?
- How many property loans can a non-resident obtain in Malaysia?
- What other types of ringgit credit facilities can a non-resident obtain in Malaysia?
- What are ringgit financial products?
- I am a non-resident and residing overseas. I am interested to buy ringgit assets. Can I open a ringgit account with a bank in my home country which also has a presence in Malaysia and settle the purchase from this account.
- We, a non-resident corporation, plan to list our shares through Initial Public Offering on the Main Board of Bursa Malaysia. Are we allowed to repatriate all listing proceeds abroad?
- We are a company incorporated outside Malaysia. Can we transfer funds from our investments in Malaysia to overseas?
- Are non-residents allowed to sell forward foreign currency against ringgit for deposit into the External Account pending investment in Malaysia?
- Where can I seek more information on foreign exchange administration in Malaysia?
- How can I apply to undertake transactions which require approval?
- I am a non-resident. Can I transfer funds from investments in Malaysia to overseas?
There is no restriction on the repatriation of profits, commissions, dividends, fees, rental, royalties or proceeds from divestment of investments in Malaysia by a non-resident.
- I am a non-resident with more than one External Account. Can I transfer the funds from one account to the other?
Yes. Transfer of funds from an External Account to another External Account belonging to the same account holder is allowed.
- Is there any restriction for a foreigner (non-resident) to invest in Malaysia and later transfer abroad any profits and divestment proceeds?
No. There is no restriction for a non-resident to invest in Malaysia, whether to purchase ringgit assets, such as property in Malaysia or to subscribe or purchase securities in Malaysia.
There is no restriction for a non-resident to transfer abroad in foreign currency any profits or returns from their investment in Malaysia, including divestment proceeds.
- Can a non-resident individual obtain a property loan to finance the purchase of a property as a personal investment and not for his own use?
Yes, the non-resident individual may obtain property loans for the purchase of commercial or residential property which is not for his own use.
- Is there a limit on the amount a non-resident could borrow for each property loan?
No, there is no limit on the amount for each property loan. It is subject to the bank's own internal and credit assessment guidelines.
- How many property loans can a non-resident obtain in Malaysia?
A non-resident is free to obtain any number of credit facilities from residents to finance the purchase or construction of residential or commercial properties in Malaysia.
- What other types of ringgit credit facilities can a non-resident obtain in Malaysia?
Non-residents (non-bank) are free to borrow any amount of ringgit from residents to finance real sector activities in Malaysia
- What are ringgit financial products?
Ringgit financial products are:
- any instruments traded on Bursa Malaysia;
- investment products offered by licensed onshore banks, insurance companies, takaful operators or unit trust companies; and
- ringgit bonds.
Ringgit financial products exclude:
- ringgit loan; and
- ringgit deposit.
- I am a non-resident and residing overseas. I am interested to buy ringgit assets. Can I open a ringgit account with a bank in my home country which also has a presence in Malaysia and settle the purchase from this account.
No. An appointed overseas branch of licensed onshore bank of the same banking group, however, can facilitate the settlement of ringgit assets for non-residents investors with firm underlying commitment. Payments for settlement of ringgit assets must be made in foreign currency equivalent to the ringgit amount quoted by the appointed overseas branch.
- We, a non-resident corporation, plan to list our shares through Initial Public Offering on the Main Board of Bursa Malaysia. Are we allowed to repatriate all listing proceeds abroad?
Yes. A non-resident corporation is allowed to utilise proceeds from the listing abroad. You company has to convert the proceeds into foreign currency prior to remitting them abroad.
- We are a company incorporated outside Malaysia. Can we transfer funds from our investments in Malaysia to overseas?
There is no restriction for a non-resident investor to repatriate funds out of Malaysia arising from sale of ringgit assets, profits, commissions, dividends, rental, fees, royalties or divestments of investments in Malaysia.
- Are non-residents allowed to sell forward foreign currency against ringgit for deposit into the External Account pending investment in Malaysia?
No. Non-residents are not allowed to sell forward foreign currency against ringgit for crediting into an External Account or sell forward ringgit funds in an External Account.
- Where can I seek more information on foreign exchange administration in Malaysia?
You can obtain more information from Foreign Exchange Administration Department, Bank Negara Malaysia.
General information on foreign exchange administration policy could also be obtained at www.bnm.gov.my/fxadmin.
- How can I apply to undertake transactions which require approval?
Applicants are required to submit applications using forms available online in this website. To choose the application form, click here. For application which the available online forms do not apply, applicants may submit hardcopy application to the following address:
Director
Foreign Exchange Administration Department
Bank Negara Malaysia
Jalan Dato Onn
50480 Kuala Lumpur
Fax: 03-26943991
For a list of application forms and their user guides, click here.
IV. FAQs related to Buying or Selling of Foreign Currency | ^Return to FAQs Category
- Who can I buy and sell foreign currency with in Malaysia?
- Is trading of foreign currency through the internet allowed?
- I work for an advertising company. We received a number of orders to design, print and distribute posters on behalf of a client, a company promoting training on foreign currency trading. Is such activity legal in Malaysia?
- My cousin has enticed me to invest in one of the schemes offered by his company, purportedly involving the buying and selling of foreign currency for investment purposes. Can a company offer such a scheme?
- I have heard about a scheme which offers foreign currency trading. Is this allowed? How does such a scheme operate?
- What are the risks involved if one participates in such an illegal scheme?
- What should I do if I am a victim of these schemes?
- Where can I obtain further information on illegal foreign currency trading?
- What is the penalty imposed by Bank Negara Malaysia on offenders of illegal foreign currency trading?
- Any guide to the general public on how to detect an illegal foreign currency trading operator?
- Where can I find the list of institutions permitted to conduct foreign currency business and remittances services in Malaysia?
- Who can I buy and sell foreign currency with in Malaysia?
You can buy or sell foreign currency only with authorised dealers and those entities permitted by Bank Negara Malaysia as stipulated under section 4 of the Exchange Control Act 1953.
Authorised dealers are licensed commercial banks and licensed Islamic banks. Please refer to website at http://www.bnm.gov.my under "Foreign Exchange Administration" for further details.
- Is trading of foreign currency through the internet allowed?
No. Residents are not allowed to trade currency through internet.
Residents are only allowed to buy or sell currencies in Malaysia with authorised dealers and those entities permitted by Bank Negara. Please refer to website at http://www.bnm.gov.my under "Foreign Exchange Administration" for further details.
- I work for an advertising company. We received a number of orders to design, print and distribute posters on behalf of a client, a company promoting training on foreign currency trading. Is such activity legal in Malaysia ?
Under section 4A of the Exchange Control Act 1953 (the ECA), it is an offence for any person, other than an authorised dealer to:
- issue or publish or facilitate the issuance or publication by any person of an advertisement containing an invitation or an offer to buy or sell foreign currency or information which is intended or might reasonably be presumed to be intended to lead directly or indirectly to the buying or selling of foreign currency; or
- aid or abet another person to do the above.
"Advertisement" means the disseminating or conveying of information, invitation or solicitation by any means or in any form, including by means of:
- print media
- posters, notices or signboards
- circulars, brochures, pamphlets or books
- letters addressed to individuals or bodies
- electronic media
You are advised to take the appropriate measures and action to ensure all advertisements issued through your company comply with the ECA
- My cousin has enticed me to invest in one of the schemes offered by his company, purportedly involving the buying and selling of foreign currency for investment purposes. Can a company offer such a scheme?
No. As stipulated under the Sections 4 and 4A of the Exchange Control Act 1953, it is an offence for any person other than authorised dealers to be involved in:
- buying or selling of foreign currency with any person
- conducting of any form of training, seminar, workshops which involve, or are preparatory to, buying or selling foreign currency
- issuing, publishing or facilitating the issuance or publication of an advertisement intended to lead to the buying, borrowing, selling or lending of any foreign currency
- I have heard about a scheme which offers foreign currency trading. Is this allowed? How does such a scheme operate?
Such foreign currency trading schemes are illegal and prohibited under section 4 of the Exchange Control Act 1953
The modus operandi of such illegal schemes/scams are typically as follows:
- Offer free training, seminars or workshops to lure investors, prior to inviting investors to set-up an online foreign currency trading account with a principal company (purported to have valid licence to trade foreign currency overseas)
- Provide convenient access to the principal company's website and trading facilities to facilitate online foreign currency trading by investors
- Recruit fresh graduates as marketing executives and encouraging them to get their family and friends to trade foreign currency
- Require investors to deposit an amount of money into a bank account to begin trading foreign currency, and subsequently, requesting for a top up on their initial investment ("margin call") to avoid losing their capital
-
What are the risks involved if one participates in such an illegal scheme?
Participation in such an illegal scheme is an offence under the Exchange Control Act 1953 and on conviction , is liable to a fine not exceeding RM1 million or to imprisonment for a term not exceeding five years or to both
In addition, in most cases, the victims of these schemes would have lost all their money.
It would be a lengthy and costly process for a participant to engage lawyers to bring a civil suit against the perpetrators.
Those who had acted as middle men or agents would run the risk of themselves or their family members being threatened or face physical harm when the scheme fails.
-
What should I do if I am a victim of these schemes?
You are advised to lodge a report at the nearest police station as well as to report to Bank Negara Malaysia as follows:
Bank Negara Malaysia
BNMTELELINK (Customer Service Call Centre)
Tel: 1-300-88-5465
Fax: 03-21741515
Email: bnmtelelink@bnm.gov.my
BNMLINK (Customer Service Walk-In-Centre)
Block D, Bank Negara Malaysia ,
Jalan Dato' Onn, 50480, Kuala Lumpur
(Business hours: Monday-Friday, 9.00 am - 5.00 pm)
- Where can I obtain further information on illegal foreign currency trading?
Information on the illegal foreign currency trading is available in the banking information website at http://www.bankinginfo.com.my
- What is the penalty imposed by Bank Negara Malaysia on offenders of illegal foreign currency trading?
Pursuant to the Exchange Control Act 1953, any person involved in illegal foreign currency trading shall, on conviction, be liable to a fine not exceeding RM1 million or to imprisonment for a term not exceeding five years or to both.
- Any guide to the general public on how to detect an illegal foreign currency trading operator?
Members of the public are advised to be careful and not fall prey to operators of these illegal schemes.
The guides on how to detect illegal operators and warning signs for investors can be obtained from the website, http://www.bankinginfo.com.my under "Help & Advice/Helpful Guides/Financial Scams"
In general, the illegal operators normally:
- Place attractive advertisements to lure others to listen to their convincing but bogus marketing plan
- Have their headquarters overseas
- Have impressive offices and IT facilities
- Conduct training to prospective employees on the principles of foreign exchange trading and hands-on exercises on foreign currency dealing using dummy or fake transactions under an environment controlled by the operator. Normally, all such dummy transactions will result in profits
- Hire employees based on commission and they are not given a proper employment letter or contract stipulating the employment terms and conditions.
Before employees can start dealing, they are required to look for potential investors and collect deposits from them. Otherwise, they risk losing their jobs.
They will try to impress potential investors:-
- With the marketing strategy of the company which promises quick and high returns
- By portraying a professional and reputable image with smart-looking employees, a high-tech office layout and advanced IT facilities. In some cases, investors are even allowed to operate their account via internet
- With tools of the trade e.g. a news screen showing movements in exchange rates to give the impression that a professional and legitimate business is being conducted. These facilities are merely cosmetic and do not reflect an actual foreign currency trading office.
Investors can either trade using their trading accounts with the company or through dealers appointed by the company. Investors are also required to sign a business contract which is normally entered between the investors and the company. In most instances, the operators will inform the investors that they will have to send such contracts to its company's headquarters based overseas for signing. However, such contracts are usually left unsigned. As such, in the event the investors are not happy with the transaction, no action can be taken against the company as there is no binding contract between them.
- Where can I find the list of institutions permitted to conduct foreign currency business and remittances services in Malaysia?
The list of institutions which are permitted to conduct foreign currency business and remittance services in Malaysia is available from Bank Negara Malaysia's website at http://www.bnm.gov.my under "Foreign Exchange Administration".
V. FAQs related to recent liberalisation of Foreign Exchange Administration Rules on 18 August 2010 | ^Return to FAQs Category
- What is the objective of this liberalisation?
- Where can a non-resident obtain ringgit to facilitate the trade settlements?
- Does a non-resident need to open an External Account to make payment to a resident?
- How can a non-resident make payment in ringgit to a resident exporter?
- Can a non-resident make payment in ringgit through an overseas bank other than an appointed overseas branch within the same banking group of an onshore bank?
- Does a non-resident require an External Account to receive payment in ringgit?
- What can the non-resident do with the funds in the External Account?
- Can a non-resident hedge his ringgit receivables and payables?
- How much can a resident company borrow foreign currency from overseas?
- What is the objective of allowing a resident to enter into anticipatory hedging on current account transactions ?
- What is the objective of this liberalisation?
The liberalisations aim to achieve greater efficiency in the conduct of international trade in line with the country's strong inter-linkages with the regional and global economies, as well as to promote a conducive business environment and reduce the cost of doing business in Malaysia.
This is achieved by:
(a) Giving the flexibility for a resident to determine the currency of settlement for international trade of goods and services which will facilitate the management of currency mismatches and reduce currency conversion cost. The settlement can now be conducted in ringgit in addition to foreign currency;
(b) Abolishing the limits on foreign currency borrowing by a resident company from its non-resident (non-bank) related companies to promote effective management of financial resources, within the corporate group; and
(c) Abolishing the threshold for a resident to undertake anticipatory hedging of current account transaction with an onshore bank to enhance effective risk management.
A. Settlement of International Trade of Goods and Services in Ringgit
- Where can a non-resident obtain ringgit to facilitate the trade settlements?
A non-resident can obtain ringgit from the following sources:
(a) the non-resident's own ringgit account (*External Account) maintained with an onshore bank;
(b) sale of foreign currency into ringgit with an onshore bank or an appointed overseas branch within the same banking group of an onshore bank; or
(c) ringgit trade financing facility from an onshore bank.
* A ringgit account maintained in Malaysia with an onshore bank to retain ringgit funds belonging to a non-resident.
- Does a non-resident need to open an External Account to make payment to a resident?
The non-resident may choose to open an External Account with an onshore bank or transact through the External Account of an appointed overseas branch within the same banking group of an onshore bank to facilitate the settlement for trade of goods and services with a resident.
-
How can a non-resident make payment in ringgit to a resident exporter?
The payment in ringgit can be effected as follows:
(a) Payment from the non-resident's own External Account; or
(b) Payment through the External Account of an appointed overseas branch or through a non-resident financial institution.
In the case of payment through an External Account of the non-resident financial institution, the ringgit payment can be effected only if the onshore bank or the appointed overseas branch is able to verify that the purpose is for settlement of goods or services between a resident and a non-resident.
- Can a non-resident make payment in ringgit through an overseas bank other than an appointed overseas branch within the same banking group of an onshore bank?
Yes, provided the onshore bank who is providing ringgit to an overseas bank, is able to verify that the payment in ringgit is for settlement of goods or services between a resident and a non-resident.
- Does a non-resident require an External Account to receive payment in ringgit?
Yes.
-
What can the non-resident do with the funds in the External Account?
A non-resident can use its ringgit funds in the External Account, among others, to pay for goods and *services in Malaysia or to purchase **ringgit assets in Malaysia.
The non-resident may also convert the ringgit into foreign currency with an onshore bank or an appointed overseas branch within the same banking group of the onshore bank for repatriation abroad.
* Services include:
- Transportation, travel; or
- Business services (merchanting trade, consultation, legal, accounting, communication, education, medical, construction, insurance).
**Ringgit assets include:
- Ringgit-denominated securities including bills of exchange, private debt securities, Cagamas bonds or notes, Malaysian Government Securities, Treasury Bills, shares and warrants;
- Derivatives traded on Bursa Malaysia and OTC derivatives (excluding OTC derivatives and structured products which tantamount to lending or borrowing of ringgit between residents and non-residents);
- Fixed deposits and negotiable instruments of deposits denominated in ringgit;
- Immovable properties in Malaysia; and
- Other fixed assets in Malaysia.
- Can a non-resident hedge his ringgit receivables and payables?
Yes. The non-resident is free to hedge his ringgit receivables and payables with an onshore bank or an appointed overseas branch within the same banking group of an onshore bank.
B. Borrowing in foreign currency by resident
- How much can a resident company borrow foreign currency from overseas?
A resident company can borrow:
(a) any amount of foreign currency from its overseas non-bank related companies. This is to facilitate efficient management of financial resources within the corporate group; and
(b) up to RM100 million in aggregate from other non-residents, including non-resident financial institutions.
C. Hedging of current account transactions
- What is the objective of allowing a resident to enter into anticipatory hedging on *current account transactions ?
The flexibility to allow a resident to hedge any amount of his anticipated current account transactions with an onshore bank is to enhance effective risk management. (Previously the resident can hedge anticipated current account transactions only up to the cumulative amount in the preceding 12 months.)
* Current account transactions are trade activities in goods and services, income and current transfers as defined in the Balance of Payment Manual, 5th Edition, 1993, International Monetary Fund.
VI. FAQs related to Liberalisation of Foreign Exchange Administration Rules on Direct Investments Abroad, Inter-Company Loans and Foreign Currency Trade Financing | ^Return to FAQs Category
- When will the liberalisation of foreign exchange administration rules on direct investments abroad, inter-company loans and foreign currency trade financing be effective?
Direct investments abroad
What is the significance of the policy liberalisation on direct investments abroad? - How will this policy be implemented?
- With this liberalisation, does the qualified resident company need to seek permission of Bank Negara Malaysia for each direct investment activity?
- Does this mean that once Bank Negara Malaysia notifies the qualified resident company, it can freely undertake investment in foreign currency assets?
- A company which has 3% equity ownership in a non-resident company intends to increase its equity investment. Is the additional equity investment considered direct investment abroad?
Can the resident company freely invest in foreign currency assets if it does not have domestic ringgit borrowing?
Inter-Company Loans
-
What is the significance of the liberalisation of foreign exchange administration rules on inter-company loans?
- What are the details of the liberalisation on inter-company loans effective 1 June 2011?
What is deemed as an associate company? - Can a resident company borrow in foreign currency from another resident company which holds less than 10% of its equity?
- Can the resident company convert ringgit into foreign currency to lend to its resident related company?
- Can a resident company repay its foreign currency borrowing from another related resident company in ringgit?
- Where can the non-resident company source ringgit to lend to its related resident company?
- Can a resident company borrow in ringgit from its non-resident related company that is solely set up to obtain foreign currency loans from a non-resident financial institution?
- Can the ringgit loan proceeds obtained from the non-resident related company be used for any purpose?
Foreign Currency Trade Financing
- With the liberalisation, can a resident company obtain any amount of foreign currency trade financing from a non-resident financial institution?
- When will the liberalisation of foreign exchange administration rules on direct investments abroad, inter-company loans and foreign currency trade financing be effective?
The flexibility will be effective from 1 June 2011.
Direct investments abroad
- What is the significance of the policy liberalisation on direct investments abroad?
The policy liberalisation on direct investments abroad is to support the private sector's expansion of their operations outside Malaysia. This is in line with Bank Negara Malaysia's efforts to facilitate regional integration and will also encourage foreign direct investments into Malaysia as the liberalisation will benefit both resident-owned and foreign multinational corporations in Malaysia. '
- How will this policy be implemented?
The flexibility to undertake any amount of direct investments abroad will be granted to resident companies that meet prudential requirements set by Bank Negara Malaysia as follows:
(a) good corporate governance on investment decision-making process;
(b) meets disclosure and reporting requirements set by Bank Negara Malaysia; and
(c) robust internal risk management.
Bank Negara Malaysia will notify the qualified resident companies and issue a written permission to facilitate direct investments abroad by these resident companies.
- With this liberalisation, does the qualified resident company need to seek permission of Bank Negara Malaysia for each direct investment activity?
No. There is no further permission required from Bank Negara Malaysia for qualified resident companies. Upon notification by Bank Negara Malaysia, the qualified resident company is free to undertake any amount of direct investment abroad and will only be required to provide information on each investment exceeding RM50 million equivalent for monitoring purposes.
- Does this mean that once Bank Negara Malaysia notifies the qualified resident company, it can freely undertake investment in foreign currency assets?
Yes, provided the investments are only for direct investments. Direct investments abroad comprise:
(a) investment of least 10% equity ownership or control of a non-resident company;
(b) inter-company lending to non-resident related companies; or
(c) capital expenditure in unincorporated entities, including branches or projects by agreement where no establishment is created as follows:
(i) where capital contribution is at least 10% of project cost;
(ii) where the resident is entitled to at least 10% of profits from the unincorporated entity or project; or
(iii) where the resident has management control of the unincorporated entity or project.
Investments in other foreign currency assets by the qualified resident company will continue to be subject to an aggregate limit of RM50 million equivalent per calendar year on a corporate group basis for resident companies with domestic ringgit borrowing.
This includes investment in the following foreign currency assets:
(a) foreign currency securities (including foreign currency equity investment of less than 10% ownership);
(b) foreign currency deposits;
(c) foreign currency loans to unrelated companies;
(d) all approved foreign currency-denominated products offered by the licensed onshore banks, licensed International Islamic Banks, Bursa Malaysia and any residents approved by Bank Negara Malaysia; and
(e) exchange traded foreign currency-denominated derivatives (excluding currency contracts) transacted through resident futures brokers.
- A company which has 3% equity ownership in a non-resident company intends to increase its equity investment. Is the additional equity investment considered direct investment abroad?
It is a direct investment abroad provided the increase in equity investment will result in at least 10% equity ownership of the non-resident company.
- Can the resident company freely invest in foreign currency assets if it does not have domestic ringgit borrowing?
Yes. Currently, resident companies that do not have domestic ringgit borrowing on a corporate group basis are free to undertake any amount of investments in foreign currency assets.
Inter-Company Loans
- What is the significance of the liberalisation of foreign exchange administration rules on inter-company loans?
The liberalisation on the rules on inter-company loans between residents as well as between residents and non-residents will reduce the cost of doing business through efficient management of financial resources between related companies.
- What are the details of the liberalisation on inter-company loans effective 1 June 2011?
Effective 1 June 2011, resident companies may undertake inter-company loans as follows:
(a) Any amount in foreign currency between resident related companies, including associate and sister companies; and
(b) Any amount in ringgit from their non-resident non-bank related companies, including the issuance of ringgit-denominated debt securities, to finance activities in the real sector in Malaysia.
- What is deemed as an associate company?
An associate company is a company that has between 10% and 50% shareholding relationship with the resident company.
- Can a resident company borrow in foreign currency from another resident company which holds less than 10% of its equity?
A resident company can only borrow in foreign currency from its resident related companies as follows:
(a) Ultimate holding company;
(b) Parent or head office
(c)Branches (unincorporated entities);
(d) Subsidiaries (companies that are more than 50% owned by the resident company);
(e)Associate companies (companies that have between 10% and 50% shareholding relationship with the resident company); and
(f)Sister companies (common shareholders).
- Can the resident company convert ringgit into foreign currency to lend to its resident related company?
Any conversion of ringgit into foreign currency will be subject to the prevailing rule on investment in foreign currency assets. The flexibility which allows a resident company to lend foreign currency to its resident related company is intended to enable the resident companies to manage their existing foreign currency funds between related companies to reduce the cost of doing business.
- Can a resident company repay its foreign currency borrowing from another related resident company in ringgit?
Yes. A resident company can repay the foreign currency borrowing from its related resident company in ringgit or in foreign currency. This has been liberalised since May 2008.
- Where can the non-resident company source ringgit to lend to its related resident company?
The non-resident company can source ringgit from the following:
(a) Existing ringgit funds from the External Account of the non-resident company maintained with an onshore bank;
or
(b) Conversion of foreign currency into ringgit undertaken by the non-resident company with an onshore bank.
- Can a resident company borrow in ringgit from its non-resident related company that is solely set up to obtain foreign currency loans from a non-resident financial institution?
Borrowings in ringgit from the non-resident related company which is solely set up to obtain foreign currency loans from a non-resident financial institution continues to be subject to the prevailing rules on ringgit borrowings by residents from non-residents.
- Can the ringgit loan proceeds obtained from the non-resident related company be used for any purpose?
The ringgit loan proceeds obtained from the non-resident related company can only be used to finance activities in the real sector in Malaysia. These are activities where there is production of goods and services, except financial services (such as financial leasing services or investment and portfolio management services). For example, a loan to finance the expansion of the resident company's production line is considered borrowings to finance an activity in the real sector.
Foreign Currency Trade Financing
- With the liberalisation, can a resident company obtain any amount of foreign currency trade financing from a non-resident financial institution?
Residents may obtain foreign currency borrowing, including foreign currency trade financing, in aggregate up to RM100 million equivalent for resident companies on a corporate group basis and RM10 million equivalent for resident individuals.
VII. FAQs related to recent liberalisation of Foreign Exchange Administration Rules on 30 January 2012 | ^Return to FAQs Category
- Can a resident buy and sell foreign currency against another foreign currency for any purpose?
- Does the liberalisation include trading of foreign currency against ringgit?
- What are the prevailling rules on the buying and selling of foreign currency against ringgit by resident?
- Can a resident buy and sell foreign currency with a non-resident or a resident other than a licensed onshore bank?
- Can a resident buy and sell foreign currency through a resident or a non-resident intermediary?
- Can a resident individual trade in foreign currency against another foreign currency with a licensed onshore bank?
- Can a resident buy or sell foreign currency against another foreign currency with a licensed onshore bank on both spot and forward basis?
- How can the resident fund the foreign currency trading activities?
- What are the prevailing rules on investment in foreign currency assets?
- Can a resident trade in any foreign currency with a licensed onshore bank?
- Who are the licensed onshore banks?
- What is a ringgit-denominated interest rate derivative?
- Is the conversion through swap of an existing ringgit or foreign currency debt obligation into another foreign currency debt obligation considered as foreign currency credit facility?
- Can the conversion through swap of an existing ringgit debt obligation lead to actual delivery of foreign currency at the inception of the transaction?
- Can a resident convert through swap his existing foreign currency debt obligation with a licensed onshore bank into another foreign currency debt obligation with a non-resident bank or vice versa?
- Can a resident convert through swap his existing ringgit debt obligation into a foreign currency debt obligation with a non-resident bank?
- What are the prevailing rules on foreign currency credit facilities obtained by a resident?
A. Buying and Selling of Foreign Currency against another Foreign Currency
1. Can a *resident buy and sell foreign currency against another foreign currency for any purpose?
Yes. With this liberalisation, a resident is allowed to buy and sell foreign currency against another foreign currency for any purpose including for trading. However, such transactions shall only be undertaken with a licensed onshore bank.
* Resident means-
A citizen of Malaysia, excluding a citizen who has obtained permanent resident status in country or territory outside Malaysia and is residing outside Malaysia; Non-citizen of Malaysia who has obtained permanent resident status in Malaysia and is ordinarily residing in Malaysia; A body corporate incorporated or established, or registered with or approved by any authority in Malaysia; An unincorporated body registered with or approved by any authority in Malaysia; The Government or any State Government; or Any other person as may be specified by the Bank to be a resident.
|
2. Does the liberalisation include trading of foreign currency against ringgit?
No. The liberalisation is only for transactions involving foreign currency against another foreign currency for any purpose.
3. What are the prevailling rules on the buying and selling of foreign currency against ringgit by resident?
A resident is only allowed to buy and sell foreign currency against ringgit with a licensed onshore bank-
(a) on spot basis for:
- current account transactions; and
- permitted financial account transactions
(b) on forward basis for:
- committed and anticipated current account transactions;
- committed financial account transactions (except for foreign currency deposits), subject to prevailing rules on investment in foreign currency assets and foreign currency credit facilities; and
- hedging foreign currency exposures of permitted investment in foreign currency assets, other than foreign currency deposits.
4. Can a resident buy and sell foreign currency with a non-resident or a resident other than a licensed onshore bank?
No. Any transaction relating to buying and selling of foreign currency shall only be undertaken with a licensed onshore bank.
Licensed money changers and approved remittance service operators are only allowed to buy and sell foreign currency with residents and non-residents on cash basis.
5. Can a resident buy and sell foreign currency through a resident or a non-resident intermediary?
No. Any transaction relating to buying and selling of foreign currency shall only be undertaken directly with a licensed onshore bank.
6. Can a resident individual trade in foreign currency against another foreign currency with a licensed onshore bank?
Yes. However a licensed onshore bank in offering the product to any resident including an individual is required to ensure that the resident meets the suitability assessment as specified under the relevant guidelines issued by Bank Negara Malaysia.
7. Can a resident buy or sell foreign currency against another foreign currency with a licensed onshore bank on both spot and *forward basis?
Yes. The resident may buy or sell foreign currency against another foreign currency with a licensed onshore bank on both spot and forward basis.
* Forward means the purchase or sale of foreign currency for delivery after two business days, including outright forward contracts, swaps, futures, options, financial derivatives or any other arrangement to obtain a foreign currency, whether settlement is to be made in full or on a net basis.
|
8. How can the resident fund the foreign currency trading activities?
The resident can fund the foreign currency trading activities from-
(a) their own existing foreign currency funds of any amount;
(b) the conversion of ringgit on spot basis with a licensed onshore bank. The conversion, however, is subject to the prevailing rules on investment in foreign currency assets; or
(c) permitted foreign currency credit facilities.
9. What are the prevailing rules on investment in foreign currency assets?
The prevailing rules on investment in foreign currency assets are as follows-
Source of funds |
Investment in foreign currency assets |
Investment funded through conversion of ringgit into foreign currency |
-
Resident without domestic ringgit credit facilities are allowed to convert any amount of ringgit
-
Residents with domestic ringgit credit facilities are allowed to convert ringgit subject to the limits as follows-
-
Individual: up to RM1 million equivalent in aggregate per calendar year;
-
Company: up to RM50 million equivalent in aggregate per calendar year on a corporate group basis
|
Investment using own existing foreign currency funds placed onshore or offshore |
|
Investment funded by proceeds from listing of shares through initial public offerings onshore and offshore |
|
10. Can a resident trade in any foreign currency with a licensed onshore bank?
Yes, except in the currency of Israel.
11. Who are the licensed onshore banks?
The licensed onshore banks are-
- licensed commercial banks in Malaysia;
- licensed Islamic banks in Malaysia; and
- licensed investment banks in Malaysia.
B. Ringgit-denominated interest rate derivative
12. What is a ringgit-denominated interest rate derivative?
Ringgit-denominated interest rate derivatives include interest rate futures, options and swaps.
C. Swapping of Ringgit or Foreign Currency Debt Obligation into another Foreign Currency Debt Obligation for Asset Liability Management
13. Is the conversion through swap of an existing ringgit or foreign currency debt obligation into another foreign currency debt obligation considered as foreign currency credit facility?
Yes. The conversion of an existing ringgit or foreign currency debt obligation into another foreign currency debt obligation will be considered as foreign currency credit facility and be subject to the prevailing rules on foreign currency credit facilities obtained by a resident.
14. Can the conversion through swap of an existing ringgit debt obligation lead to actual delivery of foreign currency at the inception of the transaction?
No. The conversion through swap of an existing ringgit debt obligation should not lead to actual delivery of foreign currency at the inception of the transaction.
Example:
A resident exporter due to receive foreign currency export proceeds periodically and has an existing ringgit loan from a licensed onshore bank can now enter into the swap transaction to convert the ringgit debt obligation into foreign currency debt obligation with a licensed onshore bank to match the foreign currency export receivables. However, there shall be no delivery of foreign currency at the inception of the transaction.
15. Can a resident convert through swap his existing foreign currency debt obligation with a licensed onshore bank into another foreign currency debt obligation with a non-resident bank or vice versa?
Yes. The conversion, however, is subject to the prevailing rules on foreign currency credit facilities obtained by a resident.
16. Can a resident convert through swap his existing ringgit debt obligation into a foreign currency debt obligation with a non-resident bank?
No. All conversion through a swap involving a ringgit debt obligation must be undertaken with a licensed onshore bank and shall be subject to prevailing rules on foreign currency credit facilities.
17. What are the prevailing rules on foreign currency credit facilities obtained by a resident?
The prevailing rules on foreign currency credit facilities are as follows-
Borrower |
Lender |
Limit |
Resident company |
Licensed onshore banks, International Islamic banks, resident related companies and non-resident non-bank related companies |
No limit |
Other non-resident including financial institutions |
Up to RM100 million equivalent in aggregate per corporate group |
Resident individual |
Licensed onshore banks, International Islamic banks and any non-residents |
Up to RM10 million equivalent in aggregate |
|
