7. Malaysia Taxation
Corporate Income Tax
A company, whether resident or not, is assessable on income accrued in or derived from
Malaysia. The current corporate income tax rate (for assessment year 2008) is 26%. The rate
will be further reduced to 25% for assessment year 2009. A company carrying on petroleum
upstream operations is subject to a Petroleum Income Tax of 38%. Currently, corporate tax
is based on the imputation system. With effect from assessment year 2008, the current
imputation tax system will be replaced, over a transition period of 6 year, with a single-tier
tax system. Under the single-tier system, profits are taxed only at the company’s level and
dividends received are exempted from tax.
Personal Income Tax
Whether an individual is a “resident” in Malaysia under the Malaysian Income Tax Act 1967
is determined by the duration of his stay in the country. Generally, an individual residing in
Malaysia for 182 days or more in a year has resident status. A resident individual is taxed
on his chargeable income at a graduated rate from 0% to 28% after deducting relevant
tax relief. There are also available tax rebates. A non-resident individual is liable to tax (on
income earned in Malaysia) at the rate of 28% without any personal relief.
Withholding tax is imposed on certain payments made by residents to non-residents such
as interest, royalty, technical fees and rentals for moveable properties. The resident has the
obligation to withhold tax when making the payments and to pay the amount within a
certain time, failing which the resident is liable to pay a penalty equal to 10% of the unpaid
tax and the total sum shall be a debt due to the Government. Due to double tax agreements,
residents in some countries may enjoy exemption or reduced withholding tax rates.
• Sales Tax is imposed at the import or manufacturing levels at a general rate of 10%.
• Service Tax applies to certain prescribed goods and services, including certain
professional and consultancy services in Malaysia, at a general rate of 5%.
• Import duty is imposed at ad valorem generally.
• Excise duties are levied on selected products manufactured in Malaysia.
• Stamp duty is imposed on various written legal documents that are executed in
Malaysia. For documents executed outside Malaysia, stamp duty is applicable if the
document purports to effect a transfer of subject matter in Malaysia.