MalaysiaWhat Are the Key Points on Must Know about Company Taxation Malaysia

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  • Company taxation in Malaysia offers opportunities for businesses to thrive in a vibrant and diverse market. Understanding the country’s corporate tax structure is key to navigating the financial landscape effectively. Malaysia operates under a territorial taxation system, meaning companies managed and controlled from within the country are taxed on income derived from Malaysia, including profits, dividends, interest, rents, royalties, and other earnings.  
  • Companies adopt a single-tier system, ensuring dividends paid are not taxed. However, foreign-sourced income is generally exempt, except for businesses involved in shipping, insurance, air transport, or banking. When you register company in Malaysia, gaining insight into these tax nuances is crucial for making informed business decisions. 

What is corporate tax rate in Malaysia? 

  • Corporate income tax, also known as company tax, is a direct tax on profits earned by companies in Malaysia. This tax applies to both resident and non-resident companies deriving income from within the country. The standard corporate income tax rate in Malaysia is set at 24% for resident companies. 
  • However, for small and medium enterprises (SMEs) with paid-up capital of RM2.5 million or less, a reduced rate of 17% (lowered from 18%) applies to the first RM600,000 of income. Any income above this threshold is taxed at the standard rate of 24%. Understanding these rates and thresholds is essential for efficient tax planning and compliance in Malaysia’s corporate tax environment. 

Different types of company taxation in Malaysia 

Withholding tax 

  • In Malaysia, withholding tax applies to payments made to non-resident individuals or companies for services rendered within the country. The rates vary based on the type of payment. For instance, contract payments are subject to a 10% withholding tax, interest payments incur a 15% rate, and royalties are taxed at 10%. Companies should be mindful of these rates when making payments to non-residents to ensure compliance with company taxation in Malaysia. 

Payroll tax 

  • Under company taxation in Malaysia, employers must retain a portion of employees’ remuneration, including bonuses, incentives, and salaries, and submit it as Monthly Tax Deduction (MTD) to the Lembaga Hasil Dalam Negeri Malaysia (LHDN). This payroll tax must be paid by the 15th of each month, based on the remuneration from the previous month. Companies must adhere to this schedule to ensure compliance with tax regulations and avoid any potential penalties. 

Stamp duty 

  • In Malaysia, stamp duty is a tax paid when handling legal, commercial, and financial documents, such as partnership agreements and mortgage contracts. Stamp duty rates can either be fixed or vary depending on the type of document being dealt with. As part of company taxation in Malaysia, it is important for businesses to understand the specific rates and rules that apply to different instruments to ensure proper compliance and smooth operations. 

Sales and services tax 

  • Sales and Service Tax (SST) applies to manufactured or imported goods. The sales tax rate is typically 10%, while the service tax rate is set at 6%. However, certain items such as face masks, medical equipment, and disposable items are exempt from service tax. Understanding SST is essential for businesses to manage their tax liabilities effectively and ensure compliance with Malaysian tax regulations. 

Navigating the different types of company taxation in Malaysia can be complex, but Tetra Consultants is here to simplify it for you. With our accounting and tax obligation services, we ensure your business remains compliant and operates efficiently. 

Steps to file company taxation in Malaysia 

Step 1: Submitting estimated tax payable 

  • Tetra Consultants will initiate the process of submitting your estimated tax payable either via e-filing (e-CP204) or directly to the LHDNM Processing Centre. For newcomers, estimated corporate income tax in Malaysia must be filed within three months of starting operations. Existing companies, meanwhile, should file their estimated tax payable 30 days before the start of a new fiscal year. 

Step 2: Remitting estimated tax 

  • Further, Tetra Consultants will proceed to assist your corporate entity in remitting the estimated tax via CP207 by the deadline, which falls on or before the 10th of each month. Newly established companies begin paying this tax from the sixth month of the basis period, while existing companies start making these payments from the second month of the basis period. We ensure timely and accurate tax payments to keep your business compliant with Malaysia’s regulations. 

Step 3: Submission of Form C 

  • To complete the filing of company taxation in Malaysia, our experts will submit Form C. This can be done either through e-filing (e-C) or by submitting it at the LHDNM Processing Centre. 

Who needs to pay company taxation in Malaysia 

  • All companies operating in Malaysia, whether resident or non-resident, must pay corporate tax on income earned or received within the country. Tetra Consultants not only provides accounting and tax obligation services but also offers offshore company incorporation services in Malaysia for clients seeking to establish a business presence in the region. 

Conclusion 

  • Navigating company taxation in Malaysia requires understanding the various taxes and compliance requirements. Tetra Consultants offers expert guidance to help you manage your accounting and tax obligations efficiently while ensuring full compliance with Malaysian tax laws for a smooth business operation. Moreover, we also provide expert guidance in offshore financial licenses acquisition, corporate bank account opening services, legal drafting of necessary documents, and many more. 
  • Contact us to know more about company taxation in Malaysia and our team will revert back in 24 hours. 

Tetra Consultants

Tetra Consultants is the consulting firm that works as your advisor and trusted partner in your business expansion. We tell our clients what they need to know, instead of what they want to hear. Most importantly, we are known for being a one-stop solution for our valued clients. Contact us now at enquiry@tetraconsultants.com for a non-obligatory free consultation. Our team of experts will be in touch with you within the next 24 hours.

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