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Business taxation in Malaysia

Corporate Income Tax

  • Resident company (other than SME as below) YA 2009-20015 25 % - YA 2016 24 %
  • Resident company –Small and Medium Enterprise YA 2009-20015 20 % - YA 2016 19 %
  • Non-resident company/ Branch YA 2009-20015 25 % - YA 2016 24 %
A Small and Medium Enterprise is a company which fulfills the following three requirements:
  • A paid-up capital of MR 2.5 million or less (approx. USD 575,000)
  • does not control, directly or indirectly, another company that has paid-up capital of more than MR 2.5 million, and
  • is not controlled, directly or indirectly, by another company that has paid-up capital of more than MR 2.5 million
Corporate residence
Generally, a company is tax resident in Malaysia in a basis year if, at any time during the basis year, the management and control of its affairs are exercised in Malaysia.

Permanent establishment (‘PE’)
Generally, a non-resident entity is regarded as having a PE in Malaysia if it has a fixed place of business in Malaysia, where the business of the entity is carried on in whole or in part.

Taxable Income and Gains
The sources of income that are subject to corporation tax in Malaysia include the following:
  • Gains and profits from any trade, business, profession or vocation ;
  • Dividends, interest and discounts ;
  • Rents, royalties and premiums ;
  • Pensions, annuities and other periodic payments ;
Taxation of Dividends
From 1 January 2008, the imputation system was replaced by a single tier system taxation. Under the single tier system, tax on a company’s profits is a final tax and all dividends paid by the company are exempt in the hands of shareholders.

Withholding Taxes
Non-treaty rates are the following:
  • Royalties : 10%
  • Management fees : 10%
  • Technical services fees : 10%
  • Interest : 15%
  • No withholding tax on dividends
Where the recipient is resident in a country which has a double tax treaty with Malaysia, the tax rates for specific income, may be reduced, depending on its source.

November 2015
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