Borrowing in US dollars from an offshore lender against Bursa shares brings three things a ringgit loan does not: Bank Negara Malaysia's foreign exchange policy, which caps some residents' foreign-currency borrowing from non-residents; Malaysian withholding tax on interest paid to a non-resident lender; and currency risk when the loan is repaid.
Key takeaways
- Limits for residents. An individual may borrow up to RM10 million equivalent in foreign currency, in aggregate, from licensed onshore banks and non-residents; a company up to RM100 million equivalent from non-residents outside its group.
- Approval above the limits. Borrowing beyond them needs Bank Negara Malaysia's prior approval.
- Withholding tax. Interest paid to a non-resident lender bears 15% Malaysian withholding tax, or a lower treaty rate, deducted by the payer.
- Currency risk. A weaker ringgit raises the loan-to-value and the cost of repayment even if the share price holds.
- Onshore conversion. Ringgit is converted, and currency risk hedged, only through licensed onshore banks.
Does Bank Negara's foreign exchange policy limit how much I can borrow from an offshore lender?
Yes, above set thresholds. A resident individual may borrow in foreign currency up to RM10 million equivalent in aggregate from licensed onshore banks and non-residents, and a resident company up to RM100 million equivalent from non-residents outside its group; borrowing above these limits needs Bank Negara's prior approval.
The limits come from Notice 2 (Borrowing, Lending and Guarantee) of Bank Negara Malaysia's Foreign Exchange Policy Notices, in their current form since 1 October 2025. Borrowing from immediate family members is allowed in any amount, and an application to exceed the limits is made to Bank Negara through its online submission portal.
Two further rules shape an offshore loan. A foreign-currency loan from a non-resident financial institution must be disbursed and repaid in foreign currency. And a resident may buy or sell foreign currency against ringgit only with licensed onshore banks or licensed money changers, not with the offshore lender itself.
Do the rules differ for individuals and companies?
Yes. An individual's foreign-currency borrowing from licensed onshore banks and non-residents shares one RM10 million limit, with only immediate family unlimited, while a company may borrow any amount from licensed onshore banks, its own group and its direct shareholders, with the RM100 million limit applying to other non-residents.
For a company, the RM100 million limit is counted across resident companies in a parent-subsidiary relationship, so a family holding company and its resident subsidiaries share one limit. A direct shareholder is one with an effective shareholding of at least 10%. For an individual, the RM10 million limit includes foreign-currency borrowing by any sole proprietorship or general partnership the individual owns.
Residence follows the policy's own definitions. A resident includes a Malaysian citizen (other than one who holds permanent residence abroad and lives there), a foreigner with Malaysian permanent residence who ordinarily lives in Malaysia, and a body corporate incorporated or registered in Malaysia. A lender based abroad is a non-resident, as are all Labuan entities under the policy.
What withholding tax applies to interest paid abroad, and who bears it?
Interest paid to a non-resident lender is subject to Malaysian withholding tax of 15%, or a lower rate under a tax treaty with the lender's country. The Malaysian payer must deduct it and pay it to the Inland Revenue Board within one month of paying or crediting the interest.
The rule is section 109 of the Income Tax Act 1967, which applies whether or not the tax was actually deducted. For the lender, the Inland Revenue Board treats it as a final tax. Late payment increases the amount due by 10%, and a business cannot deduct the interest as an expense until the tax has been paid.
Who bears the cost commercially is a matter for the facility agreement. Many cross-border facilities include a tax gross-up clause, under which the borrower pays enough extra for the lender to receive the full interest after withholding, so the tax becomes the borrower's cost. Terms vary by facility, and a tax adviser should confirm the position before signing.
| Feature | Ringgit loan, onshore lender | Foreign-currency loan, offshore lender |
|---|---|---|
| Foreign exchange policy | The foreign-currency borrowing limits do not apply. | Counts towards the RM10 million (individual) or RM100 million (company, outside its group) aggregate limit; beyond it, Bank Negara's prior approval. |
| Withholding tax on interest | No section 109 withholding, which applies to interest paid to non-residents. | 15% of gross, or a lower treaty rate, deducted by the payer and paid within one month. |
| Currency risk | None: the loan and the shares are both in ringgit. | The loan is in dollars and the shares in ringgit, so a weaker ringgit raises the loan-to-value and the cost of repaying. |
| Conversion and hedging | Not needed. | Conversion and forward hedging only with licensed onshore banks; a loan from an offshore bank is disbursed and repaid in foreign currency. |
| Documentation | A Malaysian facility agreement and share charge. | Typically the lender's own facility agreement, often under foreign law, with a tax gross-up clause, alongside the charge over the Bursa shares. |
How does currency risk work when the loan is in dollars and the shares are in ringgit?
The loan is owed in dollars but the shares are valued in ringgit, so a weaker ringgit raises the loan-to-value even if the share price is unchanged, and raises the ringgit cost of repaying. A falling share price and a falling ringgit together bring a margin call closer.
If the share price falls at the same time as the ringgit, the two effects compound, and the buffer behind the advance has to absorb both. Residents may hedge the exposure with forward contracts, but only with licensed onshore banks, and only for a firm commitment or an anticipated need under Notice 1 of the Foreign Exchange Policy Notices.
Our notes on margin calls and forced sale and on recourse profiles explain what happens if the cushion runs out and how any shortfall is treated. If you are weighing a sale instead of a loan, see capital gains tax on Bursa shares.
What else do borrowers ask about foreign-currency loans?
01Does the RM10 million limit include my borrowing from Malaysian banks?
02Can an offshore lender lend me ringgit instead?
03Do I need Bank Negara's approval to repay a foreign-currency loan?
04Is withholding tax lower for lenders in some countries?
This note is general information on Bank Negara Malaysia's Foreign Exchange Policy Notices in force from 1 October 2025 and on Malaysian withholding tax. It is not legal or tax advice. Bank Negara updates the notices and its FAQs from time to time, so confirm the current position with your Malaysian counsel and tax adviser before borrowing.
