Expanding a business to Malaysia offers great opportunities, but understanding the country’s tax system is crucial for compliance and tax optimization. Malaysia imposes various taxes on corporate income, goods and services, employment, and cross-border transactions, which foreign businesses must be aware of when operating in the country.
This guide provides an overview of corporate tax, indirect taxes, withholding tax, personal taxation, and tax incentives available for foreign businesses.
At Amaze Advisory, we help foreign businesses navigate Malaysia’s tax system efficiently, ensuring compliance and tax optimization.
1. Overview of Malaysia’s Tax System
Malaysia follows a territorial tax system, meaning only income derived from Malaysia is taxable. However, certain types of foreign-sourced income may be subject to taxation.
Key Tax Authorities in Malaysia:
- Inland Revenue Board of Malaysia (LHDN) – Oversees corporate tax, withholding tax, and personal income tax.
- Royal Malaysian Customs Department (RMCD) – Manages Sales and Service Tax (SST), import duties, and excise duties.
Malaysia also offers tax incentives to attract foreign investment in sectors like manufacturing, technology, and export-driven industries.
2. Corporate Tax in Malaysia
(A) Corporate Income Tax (CIT)
| Non resident companies | 24% |
|---|---|
| SME resident companies* | 15% on the first RM150,000 17% on the next RM600,000, 24% on the remaining taxable income. |
| Non-SME resident companies | 24% |
*Eligibility Criteria for SME resident companies in Malaysia:
This definition ensures that small and medium-sized enterprises (SMEs) in Malaysia benefit from available tax incentives and preferential rates. |
|
Amaze Advisory helps foreign businesses optimize tax planning and ensure compliance with Malaysia’s corporate tax laws.
(B) Tax Filing & Compliance Requirements
- Corporate tax returns (Form C) must be filed annually within 7 months from the end of the financial year.
- Estimated tax payments (CP204) must be submitted within 3 months of the company’s financial year start, with payments made in monthly installments.
- Companies must maintain proper accounting records for at least 7 years for audit purposes.
Amaze Advisory assists with corporate tax filing, estimated tax planning, and regulatory compliance to avoid penalties.
3. Withholding Tax (WHT) in Malaysia
| Type of Payment | Withholding Tax Rate (without DTA) |
|---|---|
| Interest Payments | 15% |
| Royalties | 10% |
| Special classes of income/Rentals (Technical Services, Consultancy & Management Fees, & Rental of Moveable Property) | 10% |
| Special classes of income (Contract Payments to Non-Resident Contractors) | 10%+3% |
Important Considerations:
- Companies must deduct and remit WHT to LHDN within one month from payment date.
- Double Tax Agreements (DTA) may reduce withholding tax rates for businesses from treaty countries.
For more information on withholding tax, you can check out our article on Withholding Tax Exemptions in Malaysia
Amaze Advisory helps foreign businesses determine their withholding tax obligations and apply for exemptions where applicable.
4. Sales and Service Tax (SST)
Malaysia does not impose a Goods and Services Tax (GST); instead, it applies the Sales and Service Tax (SST) system.
(A) Sales Tax
- Applies to manufacturers and importers of taxable goods.
- Standard rate: 5% or 10%, depending on the product category.
(B) Service Tax
- Applies to specific taxable services, including hotels, restaurants, consultancy, digital services, and professional services.
- Standard rate: 8%.
- Digital Service Tax (DST): Foreign digital service providers (e.g., SaaS, cloud services, online platforms) must register and charge 8% service tax if their annual revenue exceeds RM500,000.
(C ) Sales Tax on Low Value Goods (LVG) in Malaysia
| Aspect | Details |
|---|---|
| Tax Rate | 10% |
| Threshold for Registration | Annual sales exceeding RM500.000 |
| Goods Covered | Imported goods valued at RM500 or below, excluding prohibited/restricted items |
| Who Needs to Register? | Foreign sellers, online marketplaces, and intermediaries meeting the sales threshold |
| Collection & Payment | Registered sellers must charge and remit 10% sales tax to the Royal Malaysian Customs Department (RMCD) |
Amaze Advisory assists businesses in SST registration, compliance, and tax reporting.
5. Other Taxes Foreign Businesses Should Be Aware Of
(A) Personal Income Tax for Foreign Employees & Directors
- Tax rates range from 0% to 30%, depending on income levels.
- Non-residents (less than 182 days in Malaysia) are taxed at a flat rate of 30% on Malaysian-sourced income.
(B) Real Property Gains Tax (RPGT)
- 30% RPGT on property disposals within 5 years of acquisition by foreign investors.
(C) Stamp Duty
- 0.3% on share transfers and 1%-4% on property transfers.
Amaze Advisory provides tax planning for real estate transactions, employment tax compliance, and stamp duty obligations.
6. Summary of Key Taxes for Foreign Businesses
| Tax Type | Description | Key Considerations |
|---|---|---|
| Corporate Tax | 24% standard rate for foreign-owned companies and non SME resident companies. 15%/17%/24% for SME resident companies. | Tax filing required within 7 months of financial year-end. |
| Withholding Tax | Applies to non-resident service providers (10%-15%). | Must be remitted to LHDN within 1 month. |
| Sales & Service Tax (SST) | 8% service tax; 5%-10% sales tax. | Applies to businesses in taxable categories. |
| Personal INcome Tax | 0%-30% for residents; 30% flat for non-residents. | Employees and directors must register with LHDN. |
| Real Property Gains Tax (RPGT) | 30% for foreign investors disposing of property. | Tax applies within 5 years of acquisition. |
| Stamp Duty | 0.3% on shares, 1%-4% on property. | Taxed on legal transactions. |
| Tax Incentives | Various benefits for manufacturing, digital, and export-driven industries. | Requires approval and application. |
7. How Amaze Advisory Can Help Foreign Businesses in Malaysia
Get Started with Amaze Advisory Today!
Phone: +6013-284 7678 / +6013-323 7678
Website: www.amazeadvisory.com
