Important Taxes In Malaysia

What are some of the taxes that your company has to pay when you are running a company? We will briefly share some of them below (Do note that however, the list below is not exhaustive and there are more taxes that your company needs to pay). 

Corporate tax

Your company has to pay corporate tax for any income derived from Malaysia including business profits, dividends, interests, rents, royalties, premiums, and other income.

FYI, if the company is newly registered, it should bear in mind that the company should:

1. File the estimation of tax payable within 3 months of operation; 
2. Make monthly installments starting from the 6th month of the assessment year by the 15th of each month; 
3. After the assessment year, file its tax to the LHDN through the e-filing portal within 7 months. 
4. Pay the balance of tax if the actual tax liability is greater than the taxes paid/ apply for a refund if the actual tax liability is lower than the taxes paid (both based on estimation).

Withholding tax

Withholding tax is an amount withheld by the party making payment (payer) on income earned by a non-resident (payee) and paid to the Inland Revenue Board of Malaysia (IRB). In this regard:

1. ‘Payer’ refers to an individual/body other than an individual carrying on a business in Malaysia. He is required to withhold tax on payments for services rendered/technical advice/rental or other payments made under any agreement for the use of any moveable property and paid to a -resident payee; and
2. ‘Payee’ refers to a non-resident individual/body other than an individual in Malaysia who receives the above payments.

The law provides that where a payer is liable to make payment (other than the income of non-resident public entertainers) to a non-resident person payee, he shall deduct withholding tax at the prescribed rate from such payment and pay that tax to the Director General IRB within one month after such payment has been paid or credited to the payee.

Payroll tax

Your company has to pay payroll tax if it has employees in it. Essentially, payroll tax, including EPF, SOCSO, and EIS derives from a small portion of employee’s salary, payable to LHDN if the employee falls within the taxable income bracket. How much an employee contributes is dependent on the category of taxable income they fall into and the amount of salary they receive each month.

Stamp duty

Stamp duty comes into play when your company is involved in any legal dealings with other parties. Depending on what legal document needs to be stamped, the company will either have to pay a fixed amount/ varied amount to the government.

Sales and service tax

We will break this category into two parts, assuming your company is involved with any of the two services above:

1. Sales tax

Sales tax is tax (usually 5%/10%/ specific rate) charged for goods manufactured in or imported into Malaysia. It is due when the goods are sold, disposed of, or first used with a total sale value of more than RM500,000 in 12 months. 

2. Service tax

Service tax (6%) is charged for services in Malaysia with a total value of more than RM500,000 in 12 months. The threshold (the charge for the services) might vary from industry to industry. For example:

1. The threshold is a total value of more than RM1,500,000 in 12 months; 
2. Credit card services have a specific threshold or no threshold.

Real property gain tax

Your company has to pay real property gain tax (or RPGT for short) if your company is selling/ disposing of any company assets and your company gains profit from it. The amount of tax is calculated as follows:

(Disposal price – acquisition price) x tax rate

The tax rate is as follows:

1. If the asset is disposed of within 3 years after the year of acquisition: 30%;
2. If the asset is disposed of within 4 years after the year of acquisition: 20%;
3. If the asset is disposed of within 5 years after the year of acquisition: 15%;
4. If the asset is disposed of after 6 years after the year of acquisition: 10%.

The process to pay the tax is as follows:

1. File the tax within 60 days from the day the asset is disposed of of;
2. Assessment notices will be issued for cases that are taxable;
3. Pay the tax within 30 days from the date of the issuance of the assessment;
4. If such disposal is not taxable, a certificate will be issued.