TKEG Expat™ (Test) Malaysia Corporate Tax Guide

Malaysia imposes corporate income tax (CIT) at a standard rate of 24% on resident and non-resident companies on income accruing in or derived from Malaysia. Resident companies are also taxed on foreign-sourced income received in Malaysia. Small resident companies with paid-up capital of MYR 2.5 million or less, gross income not exceeding MYR 50 million, and meeting ownership conditions benefit from reduced rates: 0-150,000 MYR at 15%; 150,001-600,000 MYR at 17%; above 600,000 MYR at 24%. Non-resident companies are taxed at a flat 24% CIT rate. Malaysia has implemented the OECD Pillar Two GloBE Rules effective for financial years commencing on or after 1 January 2025: the Multinational Top-up Tax (MTT) and Qualified Domestic Minimum Top-up Tax (QDMTT) apply at 15% to the Malaysian operations of multinational groups with consolidated revenue of EUR 750 million or more. Petroleum income is taxed at 38% (25% effective rate on marginal fields). There are no other local or provincial income taxes on corporations.

Individuals in Malaysia, whether tax resident or non-resident, are taxed on income accruing in or derived from Malaysia. Resident individuals are also subject to tax on foreign-sourced income received in Malaysia. Resident individual income tax rates (year of assessment 2024 onwards): 0-20,000 MYR: 1%; 20,001-35,000 MYR: 150 MYR + 3% on excess over 20,000; 35,001-50,000 MYR: 600 + 6%; 50,001-70,000: 1,500 + 11%; 70,001-100,000: 3,700 + 19%; 100,001-400,000: 9,400 + 25%; 400,001-600,000: 84,400 + 26%; 600,001-2,000,000: 136,400 + 28%; above 2,000,000: 528,400 + 30%. Non-resident individuals are taxed at a flat rate of 30% on total taxable income. Special rates apply for qualifying knowledge workers in designated regions (15%) and Returning Expert Programme participants (15% for five years). There are no local income taxes in Malaysia.

In Malaysia, capital gains on assets are generally exempt from tax. However, real property gains tax (RPGT) applies to gains derived from the disposal of real property in Malaysia. The RPGT rate can be as high as 30%, depending on the property and the holding period. The CGT in Malaysia is applicable only in certain cases, primarily focusing on real estate, making it a specific tax that differs from typical capital gains taxes in other countries.

Malaysia levies a sales tax on certain locally manufactured and imported goods. The sales tax is a single-stage tax, meaning it is imposed only at one point in the supply chain, usually when goods are sold to retailers. The ad valorem rates applied in Malaysia vary between 5% and 10%, with the higher rate applied primarily to refined petroleum products. This tax system is intended to ensure that taxable goods contribute to revenue without overburdening end consumers.

Service tax in Malaysia is charged at 8% on taxable services offered by registered businesses, except for certain services, which are taxed at a lower 6%. Some of the services taxed at the reduced 6% rate include food and beverage services, telecommunication services, parking services, and logistics services. This tax forms an important part of Malaysia’s consumption tax framework, ensuring that service-based businesses contribute to the national tax revenues.

Corporations making payments to non-residents must withhold tax at the following non-treaty rates: Dividends: 0%; Interest: 0% or 15% depending on type; Royalties: 10%; Special classes of income/rentals: 10%. Resident corporations: dividends 0%, interest 0%, royalties 0%. Resident individuals: dividends 0%, interest 0% or 5%, royalties 0%. Treaty rates vary by jurisdiction, generally reducing interest to 0-15%, royalties to 0-10%. Interest on loans to or guaranteed by the Malaysian government is exempt. Interest paid by Malaysian commercial or merchant banks is also exempt. Approved royalty payments under treaty provisions may be exempt from WHT. Contract payments to non-resident contractors for services under contract projects are subject to a 13% WHT deduction.