Malaysia's Foreign Exchange Policy: A Founder's Guide to the FEP Notices

Ask a Malaysian founder about exchange control and you will usually get one of two answers, both wrong. The first is that Malaysia abolished exchange control in 1998 and there is nothing to think about. The second is that there is a thicket of approvals and you need a bank’s compliance department to touch anything.

The truth sits between them, and it is knowable. Bank Negara Malaysia publishes seven Foreign Exchange Policy Notices. They are not guidance. They are issued under ss.214(2), 214(5), 214(6) and 261 of the Financial Services Act 2013 and the mirroring provisions of the Islamic Financial Services Act 2013, and they work by granting approval in advance for transactions that Schedule 14 of those Acts would otherwise prohibit. Anything the Notices do not approve requires the Bank’s written approval, and proceeding without it is an offence under s.214(9).

Start here: the current Notices came into operation on 1 October 2025 and expressly revoked the Notices issued on 15 November 2024. Almost every founder-facing summary online describes the 2021 liberalisation package. Check the version before you rely on any number, including the ones in this article.

What the FEP actually regulates, and what it does not

The FEP does not tax anything, does not restrict how much profit leaves Malaysia, and does not cap the ringgit. What it regulates is a specific list of transaction types, grouped into seven Notices:

Notice	Subject	What a normal SME actually hits
1	Dealings in currency, gold and precious metals	Buying and selling FX, hedging forward
2	Borrowing, lending and guarantee	Shareholder loans, offshore facilities, guarantees
3	Investment in foreign currency asset	Setting up or funding a company abroad
4	Payment and receipt	Paying suppliers, opening FCAs, repatriation
5	Securities and financial instruments	Issuing shares or notes to non-residents
6	Import and export of currency	Carrying cash across the border
7	Export of goods	Receiving your export proceeds

Notices 5 and 6 rarely bite on an ordinary operating company. Notices 2, 3, 4 and 7 do, constantly, and usually without anyone realising it until a bank asks a question.

There is also a Preamble and Interpretation document. Treat it as the most important of the eight, because the definitions in it decide the answer far more often than the operative paragraphs do.

Bank Negara publishes topic-specific FAQ documents alongside the Notices on the same Notices index — separate documents, revised on their own schedule, covering areas such as buying and selling FX by residents and non-residents, borrowing by residents, guarantees, investing in foreign currency assets, payment in foreign currency, and export of goods. They are not a single consolidated FAQ; on a borderline transaction, check the current topic FAQ document that matches the relevant Notice before relying on a position.

Why residency is the master variable

Every rule in the FEP is expressed as something a Resident may do with a Non-Resident, or vice versa. If you get residency wrong, every downstream conclusion is wrong.

The Interpretation defines a Resident as:

• a citizen of Malaysia, excluding a citizen who has obtained permanent resident status in a country outside Malaysia and is residing outside Malaysia;
• a non-citizen 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; or
• the Government or any State Government.

Read the third limb again, because it is the one founders get wrong. Residency turns on incorporation, not ownership. A Sdn Bhd owned 100% by a Delaware corporation is a Resident. Its Delaware parent is a Non-Resident. A dividend from the Sdn Bhd to the parent is therefore a payment from a Resident to a Non-Resident, and Notice 4 governs it.

This is also not the same test as tax residence. Under s.8 of the Income Tax Act 1967 a company is tax resident where its management and control is exercised, which is why a Malaysian-incorporated company run entirely from abroad can be a Malaysian Resident for FEP purposes and a non-resident for tax. Two regimes, two tests, and they diverge.

The Non-Resident definition catches things people do not expect. It expressly includes an overseas branch, subsidiary, regional office, sales office or representative office of a resident company. Your own Jakarta branch is a Non-Resident counterparty to you.

The Labuan trap

Bank Negara has declared, by a separate instrument issued on 28 June 2013 and effective 30 June 2013, that all Labuan entities are Non-Residents for the purposes of ss.214 and 215 of the FSA, ss.225 and 226 of the IFSA, and the Notices. The only nuance is that for a Labuan entity carrying on Labuan banking or Labuan insurance or takaful business, the declaration takes effect upon licensing.

The consequence is easy to miss and expensive. A KL Sdn Bhd lending to its Labuan affiliate is a Resident lending to a Non-Resident. Money placed in a foreign currency account maintained with a Labuan entity is a Foreign Currency Asset Offshore — the Notices say so in terms — and therefore counts against your investment-abroad limit. A group that shuffles cash between its Malaysian and Labuan entities without tracking this can consume its annual headroom without a single ringgit leaving the country.

Domestic Ringgit Borrowing: the switch nobody explains

If residency is the first variable, Domestic Ringgit Borrowing is the second, and it is the one that decides how much your company may invest abroad.

Domestic Ringgit Borrowing means any borrowing in ringgit obtained by a Resident from another Resident, plus any obligation the Notices deem to be one. A Resident Entity is also deemed to have Domestic Ringgit Borrowing when another Resident Entity with a parent-subsidiary relationship has one — so a subsidiary can inherit its parent’s status without borrowing anything itself.

Three things are expressly not Domestic Ringgit Borrowing:

1. borrowing obtained from another Resident Entity with a parent-subsidiary relationship;
2. borrowing obtained from its Direct Shareholder — defined as a shareholder with at least 10% effective shareholding in a Resident Entity; and
3. any facility used only for Sundry Expenses or Employees’ Expenses.

The Notices define both expenses. Sundry Expenses are small and infrequent expenses for office supplies, ancillary services such as software and online subscriptions, and other minor expenses to facilitate daily business operation. Employees’ Expenses are business-related expenses including travel, entertainment, health, insurance and takaful, excluding investment.

That third exclusion is the practically useful one. A corporate credit card used for SaaS subscriptions and staff travel does not, on the face of the Notices, give your company Domestic Ringgit Borrowing status. A term loan for a warehouse does.

Most published summaries treat Domestic Ringgit Borrowing as simply “do you have a bank loan”. The definition is narrower on shareholder and intragroup funding and broader on deemed group status than that shorthand suggests, and both directions matter.

Foreign currency accounts

Paragraph 16 of Notice 4 allows a Resident Entity to open and maintain a Foreign Currency Account with a licensed onshore bank or with a non-resident financial institution, subject to Part B of Notice 3. Individuals get a parallel permission under paragraph 14, including jointly with a non-resident individual.

The distinction that matters operationally is the one between the two account types the Interpretation names: a Trade FCA and an Investment FCA. The Notices repeatedly key an entitlement to which account the money sits in or moves to. For example, under Notice 4 the domestic foreign-currency payment allowed between a Resident exporter and a Resident entity in a Global Supply Chain requires that the payment be sourced from the payor’s Trade FCA or from a foreign currency trade financing facility, not from conversion of ringgit, and be credited into the payee’s Trade FCA.

Similarly, in Notice 3 the RM50 million annual limit bites on funds sourced from conversion of ringgit, from a Trade FCA, from certain foreign currency borrowing from a licensed onshore bank, and from asset swaps. Foreign currency genuinely sourced from outside Malaysia sits outside the limit entirely.

So the sentence “we hold USD onshore” is not a complete answer. Which FCA, and where the USD came from, is what a bank will actually ask.

Paying and receiving

The default rules in Notice 4 are more permissive than their reputation.

Resident to Non-Resident. Under paragraph 5, a Resident may make or receive payment in foreign currency to or from a Non-Resident for any purpose, subject to compliance with the other Notices. The three exclusions are all derivatives cases, not trade cases. Paying your Vietnamese contractor in USD needs no approval.

Resident to Resident. This is the restrictive direction. Payment in foreign currency between two Residents is allowed only for a listed set of purposes: between immediate family members; for education, employment or migration outside Malaysia; transactions with a licensed onshore bank or licensed international takaful operator in the conduct of its foreign currency business; and a short list of settlements including the Global Supply Chain case above. Two Malaysian companies invoicing each other in USD for ordinary domestic trade is not on the list.

Non-Resident repatriating from Malaysia. Part E of Notice 4 allows a Non-Resident to repatriate funds from Malaysia, including income earned and proceeds from divestment of a Ringgit Asset, on two conditions: the repatriation is made in foreign currency, and the conversion of ringgit into foreign currency is undertaken in accordance with Part B of Notice 1.

There is no cap and no approval. But note what the first condition means in practice: the FEP contemplates that money leaving Malaysia leaves in foreign currency. A non-resident shareholder asking for a ringgit transfer to an offshore ringgit account is asking for something the Notices do not approve in that form.

Investing abroad

This is where the numbers live, and where the Domestic Ringgit Borrowing switch pays off. Notice 3 Part B governs a Resident Entity.

Without Domestic Ringgit Borrowing, a Resident Entity may invest in Foreign Currency Asset up to any amount. No cap, no approval, no annual reset.

With Domestic Ringgit Borrowing, the entity may invest:

• any amount using foreign currency funds sourced from outside Malaysia, except proceeds of Export of Goods;
• any amount using foreign currency funds from an approved foreign currency borrowing under Part B of Notice 2;
• any amount using foreign currency borrowed from a licensed onshore bank for Direct Investment Abroad; and
• otherwise, RM50 million equivalent per calendar year, aggregated across the entity and other Resident Entities with a parent-subsidiary relationship, where the funds come from conversion of ringgit, from a Trade FCA, from foreign currency borrowing from a licensed onshore bank for purposes other than Direct Investment Abroad, or from swapping a ringgit-denominated financial asset for one in a Labuan entity or outside Malaysia.

Two definitions carry weight here. Direct Investment Abroad means an investment producing at least 10% equity ownership or control of a non-resident entity or a Labuan entity, or inter-company lending within the group to such an entity, or capital expenditure in an unincorporated venture or project abroad where the investor contributes at least 10% of project cost, is entitled to at least 10% of profits, or has management control. Foreign Currency Asset Offshore — which the Notices flag was previously called “Investment Abroad” — is drawn very widely, and includes deposits in a foreign currency account maintained outside Malaysia or with a Labuan entity, borrowing given to a non-resident, and working capital arising from setting up a business arrangement abroad.

For a resident individual, sole proprietorship or general partnership the equivalent figure in Part A is RM1 million equivalent per calendar year, aggregated across the individual and any sole proprietorship or general partnership they own, with a carve-out for real estate abroad acquired for education, employment or migration.

The structural insight worth acting on: the limit is a funding-source rule, not a size-of-investment rule. An entity with Domestic Ringgit Borrowing that funds an overseas subsidiary out of genuinely offshore foreign currency, or out of an onshore bank facility drawn specifically for Direct Investment Abroad, is not constrained by the RM50 million figure at all.

Borrowing

Notice 2 Part B governs a Resident Entity, and it splits sharply by currency and by who the lender is.

Ringgit from a Non-Resident. Any amount is allowed to finance a Real Sector Activity in Malaysia from a Non-Resident within the entity’s group, including a non-resident direct shareholder — excluding a non-resident financial institution and excluding a non-resident special purpose vehicle used to raise money from outside the group. Otherwise the ceiling is RM1 million in aggregate, computed across the entity and other Resident Entities with a parent-subsidiary relationship. Separately, any amount may be borrowed from a Multilateral Development Bank or a Qualified Development Financial Institution, and ringgit may be raised from non-residents through redeemable preference shares or bonds and sukuk within the stated conditions.

Real Sector Activity is defined: construction or purchase of residential or commercial property (excluding land not to be used for construction or production), or production or consumption of goods or services — expressly excluding financial services activity and the purchase of securities or financial instruments.

Foreign currency. A Resident Entity may borrow in foreign currency in any amount from a licensed onshore bank, from an entity within its group, or from its direct shareholder, and through issuing foreign currency bonds or sukuk to another Resident. From anyone else — a non-resident outside the group, a non-resident financial institution, or a non-resident SPV raising money outside the group — the ceiling is RM100 million equivalent in aggregate, again on a parent-subsidiary group basis.

The shape of this rule is the point. Shareholder and intragroup funding is essentially unlimited; third-party offshore leverage is capped. Bank Negara’s concern is aggregate external foreign currency exposure, not related-party funding of your own business. A foreign parent capitalising a Malaysian subsidiary through a shareholder loan is doing something the FEP approves without limit.

Note also what “Borrowing” excludes in the Interpretation: a trade credit term extended by a supplier, a non-financial guarantee, an operational leasing facility, a factoring facility without recourse, and specified individual credit-card and residential or vehicle facilities. Ordinary supplier payment terms are not borrowing.

Export proceeds

Notice 7 is short and it is the Notice most often breached unknowingly, because it imposes an obligation rather than granting a permission.

A Resident exporter shall receive the proceeds of its Export of Goods in Malaysia:

• in ringgit or foreign currency, placed in a ringgit account or Trade FCA maintained with a licensed onshore bank;
• in full value, excluding only the approved deductions listed in Appendix A and amounts under the approved offsetting or writing-off arrangements in Appendix B; and
• earlier than or in accordance with the payment date of the export contract, which shall not exceed six months from the date of shipment. Where an Appendix C circumstance applies, proceeds may be received up to 24 months from shipment.

Appendix A’s approved deductions are the commercially normal ones: agency commission including advertising or promotion, handling charges including freight and insurance, administrative error, discount by the exporter, quality or quantity claims, short-shipment, shut-out, write-off arising from fraud, value-added input the exporter does not own, and buyer liquidation.

Appendix C’s extension circumstances split into two. First, delays outside the exporter’s control — buyer in financial difficulty, buyer cancelling, delaying, disputing or not responding, foreign exchange restrictions in the buyer’s country, quality or quantity claims, or fraud. Second, goods exported on credit terms of up to 24 months for consignment sale, or goods involving testing and commissioning.

Appendix B is the one worth knowing about, because it solves a real cash-management problem: an exporter may receive less than full value where it offsets its export proceeds against its own imports of goods and services, a buyer’s warranty claim, its own dividend payment, other current account transactions, or repayment of a foreign currency borrowing obtained under Notice 2. Netting a dividend to a foreign parent against receivables from that parent is contemplated by the Notices.

Appendix D takes certain exports out of paragraph 1 altogether: goods under a border trade agreement, and goods not for sale — gifts, donations, personal effects, business samples, goods exported for processing, testing, repair, exchange or exhibition that will return to Malaysia, and a non-resident’s goods leaving after an exhibition or at the end of a lease.

The two reporting duties

Part C imposes obligations most SMEs never encounter but should check:

• where a Resident exporter’s annual gross Export of Goods exceeded RM250 million equivalent in the preceding year, it shall submit a report on Export of Goods to the Bank via bnm.my/fep as and when required by the Bank; and
• where proceeds are not received within 24 months from shipment, the exporter shall notify the Bank of the outstanding proceeds within 21 days after the end of each calendar year, again via bnm.my/fep.

The second duty has no revenue threshold. A small exporter with one bad debt older than 24 months has a filing obligation.

Hedging

Notice 1 lets a Resident buy or sell foreign currency against ringgit for its own account on a spot basis with a licensed onshore bank without further condition, and on a forward basis with a licensed onshore bank provided the transaction is on a Firm Commitment or Anticipatory basis, and is terminated when the firm commitment ceases to exist or the anticipated transaction does not materialise.

Anticipatory is defined generously — a projected current account transaction based on previous track record or supporting documents, or a projected financial account transaction supported by documents. An exporter with an order book can hedge it. What is not permitted is a forward position with no underlying at all.

Buying or selling one foreign currency against another with a licensed onshore bank is unrestricted on either spot or forward basis under paragraph 5.

Restricted currencies and specified persons

Separate from the seven Notices, Bank Negara’s Direction on Dealings with Specified Person and in Restricted Currency, which came into effect on 3 January 2022, prohibits any dealing with a Specified Person or in a Restricted Currency. It is issued under ss.216(1) and 261 of the Financial Services Act 2013 and ss.227(1) and 272 of the Islamic Financial Services Act 2013, with the Minister’s approval in the national interest, and it replaced an earlier Direction issued 30 April 2020.

A Restricted Currency is the legal tender of Israel, including any right, instrument or digital representation of it. A Specified Person is the State of Israel, its citizens or permanent residents, and any entity incorporated or formed in Israel — including that entity’s direct subsidiaries or branches outside Israel. The Direction prohibits any dealing with a Specified Person and any dealing in a Restricted Currency, bars opening an account for either without the Bank’s prior written approval, and carves out certain international trade in goods and services. Because this instrument sits outside the Notices, a counterparty that clears every FEP Notice test can still be caught by it.

Common mistakes

Assuming a foreign-owned Sdn Bhd is a non-resident. It is a Resident. This single error inverts the analysis for borrowing, investing and payments, and it is the most common one in the market.

Treating tax residence and FEP residence as the same test. They are different tests in different statutes and they routinely give different answers for the same company.

Forgetting Labuan is offshore for FEP. Cash parked in a foreign currency account with a Labuan entity is a Foreign Currency Asset Offshore. Groups with a Labuan treasury or holding vehicle burn investment headroom they did not know they were spending.

Reading the RM50 million and RM100 million limits as company-level. Both are computed in aggregate across Resident Entities with a parent-subsidiary relationship. A group with several Malaysian companies shares one bucket.

Assuming Domestic Ringgit Borrowing means any bank loan. Shareholder and intragroup ringgit funding is excluded, as is a facility used only for sundry or employees’ expenses — while a sister company’s borrowing can be attributed to you through the deemed rule.

Missing the six-month export proceeds clock. It runs from the date of shipment and it is an obligation, not a permission. Long credit terms to a friendly overseas buyer can put you offside without any bank flagging it.

Citing the 2021 liberalisation package. The Notices in force came into operation on 1 October 2025 and revoked the 15 November 2024 set. Figures repeated from older articles should be re-read against the current PDF before use.

What’s next

Work through your own position in this order. Establish the residency of every entity you transact with, including your own overseas branches and any Labuan vehicle. Then determine whether your Malaysian entity, or any Resident entity in a parent-subsidiary relationship with it, has Domestic Ringgit Borrowing — and check the three exclusions before you conclude that it does. Those two answers set almost every limit that applies to you.

Then map your actual flows against the right Notice: supplier and shareholder payments to Notice 4, offshore funding to Notice 2, any overseas subsidiary or offshore deposit to Notice 3, and export receivables to Notice 7 with its six-month clock and its two reporting duties.

Where a transaction is not approved by the Notices, the route is a written approval from the Bank, requested through the FEP Public Portal enquiry form at fep.bnm.gov.my or in writing to the Director, Jabatan Dasar Pertukaran Asing. Do that before the transaction, not after a bank declines to process it.