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Company Tax in Malaysia
Malaysia has a taxation system like any other jurisdiction. If you have incorporated a company and it is managed in Malaysia, all the income derived in Malaysia is taxable. Company income that is taxable includes, but not limited to:
- Business profits
Meanwhile, there is an exemption for foreign-sourced income unless your business activities are shipping, insurance, air transport or banking.
What is the Corporate Income Tax Rate in Malaysia?
For a resident company in Malaysia, the standard corporate tax rate is 24%.
The tax rate is reduced to 17% (from 18%) for companies with paid-up capital of <RM2.5 million). The Corporate Income Tax is chargeable on the first RM600,000 according to the year-of-assessment (YA) 2020. Following a 24% taxation will be charged with any excess income.
What are some other taxes in Malaysia?
For business incorporated in Malaysia, here are some taxes that business owners should take note of:
- Sales & Services tax (SST)
- Digital Services tax
- Personal Income tax
- Withholding Tax
- Stamp Duty
Unlike some of the other jurisdictions, there is no capital gains tax levied in Malaysia for investments or capital assets. However, there is a “Real Property Gains Tax” (RPGT) of 30% for the profits from a real property sale, within 3 years of acquisition.
As for Withholding Tax, the rate will be:
- 15% on interest paid to a non-resident (except reduced by a tax treaty).
- 10% on royalties
- 10% on technical and non-technical service fees
- No Withholding Tax on dividends
EPF, SOCSO & EIS in Malaysia
Employers and employees must contribute to the Social Security Organization (SOCSO), Employees Provident Fund (EPF), and Employment Insurance System (EIS) in Malaysia.
How does the sales and services tax (SST) work?
Sales tax is levied on goods manufactured or imported at a standard rate of 5% or 10%, excluding live animals, antibiotics, vegetables, etc.
Meanwhile, the service tax is at a standard rate of 6%, which applies to accommodation, food and beverages, telecommunication, and other professional services.
As for restaurants, a threshold of RM1.5 million per annum of taxable service and goods is required to register for the sales and service tax (SST) in Malaysia.
Double Taxation in Malaysia
One reason why you should incorporate a business in Malaysia is double taxation practice with over 70 tax treaties with other jurisdictions. Companies are eligible for the foreign tax credits, but the credits shouldn’t exceed the Malaysian payable tax on foreign income.
How to File Your Corporate Income Tax in Malaysia?
Although you can opt for self-assessment and filing for tax in Malaysia, you will need to ensure that your company is tax compliant.
All tax returns need to be filed within seven months of the fiscal year-end and file a separate tax return. Companies can also choose to pay corporate in advance, in a 12-month instalment.
Any company tax incentives in Malaysia?
Sectors such as healthcare, venture capital, hospitality, manufacturing, energy conservation, tourism, IT, biotech, etc. are entitled to apply for company incentives given by the government. Tax incentives including:
- Tax holidays of up to 10 years to pioneer status firms
- Investment tax allowance of between 60% to 100%
- Reinvestment allowances of 60% on capital investments and capital reinvestment allowances
- Automation equipment allowances
- Accelerated capital allowances
Company taxation services in Malaysia
Ensuring your business is tax compliant is critical in managing your business financial planning. Your company will suffer from heavy penalties due to noncompliance issues and result in losing control of your cash flow.
Therefore, engaging an experienced local tax consultant will be beneficial to your business management. With professional taxation planning based on your company structure and needs, you will be able to gain an accurate tax audit and investigation, tax filing and advisory, getting the most out of the tax incentives, allowing you to have better control of your business cash flow.