Malaysia Taxation Service

Malaysia Taxation Service


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

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.

Other Taxes

• 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.