The purpose of this circular is to clarify the rules and procedures for the conversion of ringgit into foreign currency by non-residents for repatriation abroad.

There is no change in the policy governing the conversion of ringgit balances in external accounts into foreign currency by non-residents for repatriation abroad, for ringgit derived in the manner listed below. These types of funds continue to be freely convertible into foreign currency by external account holders for repatriation abroad.

1. Profits, dividends, capital and capital gains arising from foreign direct investment;

2. Profits and capital gains arising from exchange traded securities and derivatives on recognised exchanges; and

3. Salaries, wages, fees, commission, dividends, interest and rental earned.

Bank Negara Malaysia wishes to emphasise that the policy on foreign direct investors remains unchanged. In this regard, foreign direct investors are allowed to freely convert such ringgit funds into foreign currency for remittance abroad. The criteria to determine foreign direct investment is attached. Where there is a need to clarify, banking institutions should refer such cases to Bank Negara Malaysia for clarification and verification. Banking institutions should inform the applicants of the aforementioned policy of Bank Negara Malaysia on foreign direct investment and assure them that upon verification of the documentary proof, repatriation will be allowed. Bank Negara Malaysia will process these applications in an expeditious manner and will allow the repatriation of such funds as long as the applicants are genuine foreign direct investors.

For the items referred to in paragraph 2 (b) and (c) above, the remitting bank should exercise due diligence and care when processing applications from external account holders for the conversion of ringgit in the external accounts into foreign currency for repatriation abroad. Remitting banks should sight the necessary documentary evidence to substantiate the applications for repatriation of these types of funds before effecting the transactions.

The following are the guidelines on documentary evidence to be sighted:

1. Documentary evidence should be reflective of current market conventions/practices, for example, dividend vouchers for dividend payments;

2. Documentary evidence in the form of a letter of confirmation from a resident for funds (for example, for fees or commissions) paid or payable by a resident to an external account holder should be signed by the treasurer/financial controller/or persons of similar authority; and

3. Remitting banks must institute measures to ensure that documentary evidences provided by the applicants are used for one transaction only and not re-used to effect several transactions. Such measures could include "rubber stamping" documents to indicate that conversion to foreign currency has taken place.

Non-exchange traded transactions in ringgit assets referred to under paragraph 2 (b) and (c).

Please be informed that with immediate effect the conversion of ringgit derived from profits/capital gains into foreign currency by external account holders (non-residents) require the prior approval of the Controller of Foreign Exchange, where the profits/capital gains arise from non-exchange traded transactions in all ringgit assets, including transactions in unlisted shares [where such profits/capital gains are in excess of RM10,000 per transaction].

Applications for the conversion of ringgit into foreign currency for repatriation abroad arising from transactions referred to in paragraph 6 above should be submitted to the Controller of Foreign Exchange, supported by:

1. documentary evidence of the transactions; and

2. documentary proof that any tax payable on the capital gains or profits (where applicable) have been settled with the Inland Revenue authorities in Malaysia.

Given the above clarification of the rules and procedures, Bank Negara Malaysia’s earlier circular relating to ‘’Repatriation of dividends, interest, rental, fees, commissions or profits", reference KL.EC.100/7/1, dated 22 October 1998 is, hereby, withdrawn with effect from the date of this circular.

Controller of the Foreign Exchange
Bank Negara Malaysia
3 December 1998

Criteria to determine Foreign Direct Investments (FDIs)