Taxation in Malaysia
Updated on Wednesday 30th October 2024
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Malaysia is tax-friendly country, but income taxes are imposed on profits derived from the country, with exceptions for the resident companies that have businesses in the following areas: insurance or banking and air/sea transport. The income tax is low and many of the taxes applied in other countries do not exist here. More so, the annual wealth taxes, estate duties, federal taxes, or accumulated earnings are not levied in the country. More about the taxation in Malaysia can be discussed with our tax lawyer in Malaysia.
| Quick Facts | |
|---|---|
| Who pays taxes in Malaysia | Resident and non-resident companies established in Malaysia |
Corporate tax rate in Malaysia | 24% |
Corporate tax rate for resident companies with paid-up capital over MYR 2,5 million | 17% on the first MYR 600,000 and then 24% for the amount over MYR 600,000 |
| Petroleum income tax rate in Malaysia | - 38%; - 25% for petroleum operations in marginal fields |
| Sales tax | Ranging from 5% to 10% and imposed on taxable goods made by local manufacturers |
| VAT or SST (Sales and Services Tax) in Malaysia | 6% |
| Import duties | Tax rate of 2%, imposed on imported goods to Malaysia |
| Property gains tax in Malaysia | Imposed on gains from disposal of real estate properties, ranging from 10% to 30%, depending on the holding period from the date of purchase |
| Employees' Provident Fund or EPF | - 12% for income higher than MYR 5,000 paid by employer; - 11% for the same income, paid by employee |
| Taxation of branches in Malaysia | Corporate income tax of 24% |
| Taxation of capital gains in Malaysia | 0% |
| Tax exemptions in Malaysia | 70% exemption from CIT for companies activating in sectors like agriculture, manufacturing, tourism, if they participate in promoted activities in Malaysia |
| Special incentive schemes | Reinvestment allowance permitted for resident companies involved in modernisation |
| Incentives for company relocation in Malaysia | 0% tax for investments of at least MYR 300 million made by relocated companies |
| Taxation in research & development sector | CIT exemption for 5 years |
Corporate Tax Rate in Malaysia
The corporate income tax in Malaysia is a form of tax that is collected from companies. The total amount requested is based on the net income that the company obtained while exercising its own business activity (normally) during one business year. The revenues from the corporate tax are one of the most important sources of income for the government of Malaysia. Here are a few of the most important taxes in Malaysia:
- The Malaysia corporate tax rate is set at a 25% rate.
- The personal income tax rate ranges between 24% and 30% rate, depending on the registered income.
- The sales tax rate is set at 10%, but a reduced rate of 5% is applicable, while the social security rate for companies and employees is set at a 6.2% rate.
- Apart from the corporate tax, another tax for companies is the value-added tax, or SST, set at a 6% rate and introduced in 2018.
The following video presented by our lawyers contains additional information about taxation in Malaysia. On the other hand, if you need information about immigration to Malaysia, you can get in touch with us. We have a well-prepared team of immigration lawyers in Malaysia at your disposal.
Taxes for residents and non-residents
Everyone who stays in the country for more than 182 days (regardless of his/her nationality) will be considered a resident under the Malaysian tax law. Those who stay less than 182 days are taxed based on a different scale and are considered non-residents. Another group of people, specifically those employed in Malaysia (less than sixty days in a year), people over 55 years of age, who receive Malaysian pensions, and the ones who obtain interest from banks, are tax exempt. Our Malaysian lawyers mentioned there is a program called Malaysia, My Second Home in which expatriates do not have to pay taxes on their pensions. As an example, Malaysia also has agreements for the avoidance of double taxation, available for several countries. For more details regarding these treaties, do not hesitate to talk with our tax lawyer in Malaysia. Plus, you can discuss with our immigration lawyers in Malaysia for company and staff relocation, including citizenship in Malaysia. Here is an infographic that explains the taxation in Malaysia:
The VAT/SST registration in Malaysia
The VAT in Malaysia is the Sales and Services Tax (SST) and replaced the Goods and Services Tax (GST) in 2018. The standard VAT/SST rate in Malaysia is set at a 6% rate and applies to several types of products and services available for sale purposes. In terms of registration for VAT/SST in Malaysia, companies with turnovers exceeding MYR 500,000 each year must register for this tax. As for the payment of VAT/SST in Malaysia, the tax is found on the final price of goods and services, and paid by the final consumer. There are also VAT exemptions, like companies dealing with non-taxable goods, jewelers, etc. More about the newly introduced VAT in Malaysia can be offered by our team of lawyers in Malaysia who can help companies register for this kind of tax.
Do you want to immigrate to Malaysia? You can direct your attention to our lawyers in Malaysia, with experience in this matter. You will need a visa to enter this country if you have accepted a job. You will also be able to apply with our help for a work permit to legally enter the labor market as a foreign worker. As for the residence permit, it can be issued at the same time as the work permit.
Capital gains taxation in Malaysia
A very appreciated tax relief refers to the sale of investments or capital assets that are not subject to the capital gains tax in Malaysia. On the other hand, the real property gains tax or the RPGT is applicable to the sale of lands in Malaysia. This kind of tax is set at a 30% rate for the sale of properties after 3 years from the date of purchase. Tax rates between 15% and 20% apply to the same property sale after having ownership for at least 5 years. More about the capital gains tax in Malaysia can be offered by our tax lawyer in Malaysia.
If you would like to apply for residency in Malaysia, our advice is to discuss all legal aspects with one of our lawyers. Among the documents required by the authorities are proof of residence, a valid passport, a clear criminal record, and health insurance. We recommend working with our specialists to benefit from a process without complexities or legal problems. We also remind you that this permit has an indefinite validity, which is a great advantage for those interested.
Deductions and tax credits in Malaysia
In Malaysia, deductions are allowed for interest expenses if earned on any money lent and employed in the production of gross income. Contributions and donations are also subject to deductions in Malaysia, alongside recruitment and incorporation expenses. There are also tax incentives granted in Malaysia if investments are made in fields like tourism, environment protection, accommodation, and tourism. You can find out more about tax deductions in Malaysia if you get in touch with our tax lawyer in Malaysia.
If you are interested in a commercial lawyer in Malaysia, we suggest you discuss the legal aspects with us and see how you can be helped with the problems you face. Commercial litigation is always complex and requires representation and optimal solutions, which is why it is best to ask for legal guidance and support. We offer legal services at affordable prices and we recommend you contact us when needed.
The petroleum income tax in Malaysia
Malaysia imposes a petroleum income tax of 38% rate for companies activating in this field. As for incomes derived from petroleum activities in marginal fields in Malaysia, the tax is set at a 25% rate. International entrepreneurs with operations in the oil & gas field are invited to talk to our tax lawyer in Malaysia and find out more about taxation in this field.
Is there a stamp duty in Malaysia?
Yes, the stamp duty ranges between 1% and 4% and it is settled based on the price of the sold property in Malaysia. The share transaction documents is subject to a stamp duty of 0.3%.
We remind you that you can find out information about immigration to Malaysia from our website.
Making investments in Malaysia
Malaysia is a very much appreciated business and financial center in Asia and home to a large number of companies established with foreign capital. The legislation related to foreign investments is relaxed and allows international entrepreneurs to enjoy the business advantages and to start a company in a safe and reliable climate. There are many reasons why foreigners choose Malaysia for business and investment.
The country is quite attractive from many points of view and provides a stable economy that represents one of the most important advantages. Manufacturing, tourism, petroleum, real estate, finance, green energy, and e-commerce represent a few of the prolific sectors in Malaysia where international investors can thrive through their businesses. The infrastructure and logistics also play a great role in creating a solid and stable business in Malaysia. The following facts and figures show the business and economic direction of Malaysia:
The country is quite attractive from many points of view and provides a stable economy that represents one of the most important advantages. Manufacturing, tourism, petroleum, real estate, finance, green energy, and e-commerce represent a few of the prolific sectors in Malaysia where international investors can thrive through their businesses. The infrastructure and logistics also play a great role in creating a solid and stable business in Malaysia. The following facts and figures show the business and economic direction of Malaysia:
- In terms of total FDI stock, Malaysia registered around USD 169 billion in 2019.
- Most of the investments in Malaysia come from countries like Japan, Singapore, Hong Kong, and the Netherlands.
- The 2020 Doing Business report ranked Malaysia 12 out of 190 economies in the world.
- Nearly USD 9 billion was the total value of the greenfield investments in Malaysia.
Choosing our tax lawyer in Malaysia
Knowing the tax regime in advance will represent a great advantage for foreign investors in Malaysia. This is why it is important to collaborate and communicate with a tax lawyer in Malaysia right from the start, at the time the business is registered in Malaysia. Our clients can rely on professionalism, transparency, and proficiency when working with our tax lawyer in Malaysia. We remind you that our specialists work closely with the tax authorities in Malaysia and can help both domestic and foreign entrepreneurs register for taxation in this country.
The institution which is responsible for taxation is the Inland Revenue Board of Malaysia. It provides detailed information on all tax issues but, in case you are not able to find something regarding tax deductions or income tax scale, our attorneys in Malaysia will be able to help with the situation.
Tax planning in Malaysia
Tax planning in Malaysia refers to the methods applied by the company’s management, alongside tax experts, who can establish a taxation strategy that can reduce the costs of the business.
As a general rule, a foreign company operating in Malaysia can benefit of the provisions of the double taxation treaties signed by the state and other contracting states, as long as the company is a direct beneficiary of such an agreement.
Contact us for in-depth details, advice, and support for immigration to Malaysia. Our lawyers can also help you with applying for Malaysia My Second Home Program (MM2H), an investment program dedicated to those who want to acquire residency in this country.