【About Us】
DAGON TAX, located in Shenzhen, has a team of experts in the field of tax law, focusing on professional services in the fields of corporate compliance, high-net-worth private, financing and M&A, capital market taxation, tax dispute resolution, international taxation, transfer pricing and anti-avoidance response.
【 Department of International Revenue
The purpose of this column is to share articles related to international taxation, and we can provide non-resident investment in China, tax treaty treatment and tax incentive application, investment structure planning, profit repatriation, exit plan planning and other tax-related services.
Organized by the Grand Duke team
Reprinted with the source
Malaysia's tax environment is relatively relaxed, and the tax system includes several taxes such as corporate income tax, personal income tax, petroleum income tax, sales tax, service tax, real estate gains tax, stamp duty, etc.
The federal government and state governments in Malaysia have a tax sharing system. The Federal Ministry of Finance centralizes the management of the national tax affairs and is responsible for formulating tax policies, with the Inland Revenue Board (IRBM) under the Federal Ministry of Finance collecting direct taxes and the Royal Malaysian Customs Department (RMCD) collecting indirect taxes.
01 Corporate Income Tax
A resident enterprise under Malaysian tax law refers to a legal person whose board of directors meets annually in Malaysia and whose directors are in charge of the company's business in Malaysia. Fulfill unlimited tax obligations.
Malaysia's corporate income tax rate is 24%. Starting from the 2020 tax year, when the paid-up capital of a small or medium-sized resident company is less than RM2.5 million and the total business income in a tax year does not exceed RM50 million, the income tax rate of 17% will be applied to the taxable income of up to RM600,000 and the income tax rate of 24% will be applied to the excess amount.
A non-resident enterprise is a company that is not incorporated in Malaysia or is not controlled and managed in Malaysia. Corporate income tax is paid only on Malaysian-sourced income.
The payment of corporate income tax for non-resident enterprises is subject to a withholding tax system (excluding dividends, which is not levied on dividends in Malaysia) and the withholding tax rate ranges from 10% to 25%.
02 Individual income tax
Malaysia's personal income tax adopts a comprehensive income tax system, and taxable income is all income derived from Malaysia, including income or gains from trade or business, employment income, dividends, interest, rents, royalties, insurance premiums and other income.
Malaysian resident taxpayers are determined by the criteria of residence and length of residence, specifically, those who meet one of the following four conditions are resident taxpayers:
(1) reside in Malaysia for at least 182 days in a tax year (calendar year, the same below);
(2) residing in Malaysia for less than 182 days in a tax year, but residing in Malaysia for at least 182 consecutive days in the sum of the adjacent tax years;
(3) reside for not less than 90 days in three of the four tax years;
(4) Be a resident taxpayer in the first three years of the tax year.
The progressive personal income tax rate table for Malaysian resident taxpayers is as follows:
| The period of taxable income | Tax Rate (%) | Taxes payable for each segment | Progressive taxes |
| 5000 or less | |||
| 5,001—20,000 | 1 | 150 | 150 |
| 20,001—35,000 | 3 | 450 | 600 |
| 35,001—50,000 | 6 | 900 | 1,500 |
| 50,001—70,000 | 11 | 2,200 | 3,700 |
| 70,001—100,000 | 19 | 5,700 | 9,400 |
| 100,001—400,000 | 25 | 75,000 | 84,400 |
| 400,001—600,000 | 26 | 52,000 | 136,400 |
| 600,001—2,000,000 | 26 | 392,000 | 528,400 |
| More than 2,000,000 | 30 | - | - |
If you stay in Malaysia for less than 182 days in a year, you are a non-resident taxpayer under the Malaysian tax law, regardless of citizenship or nationality. Work in Malaysia for less than 60 days and do not pay taxes.
The individual income tax rates for non-resident taxpayers are as follows:
| Type of income | tax rate |
| Income from business, trade, or occupation (requiring higher education or specialized skills). | 30% |
| Employment Income | |
| dividend | |
| rent | |
| Payments related to the use of the operating property of any plant or machinery purchased from a non-resident or for services related to installation | 10% |
| Payment for technical advice, assistance, or services related to the management of technology or the management or management of any scientific or business operation, entrepreneurship, project, or program | |
| Rent or other payment for the rental of any movable property |
03 Sales Tax
A taxpayer of sales tax is a registered manufacturer who manufactures taxable goods and has a total sales of taxable goods exceeding MYR 500,000 in a 12-month period.
Sales tax applies to the whole of Malaysia, but excludes designated areas (Labuan, Langkawi and Tioman) and special areas.
Sales tax is ad valorem, different rates are applied to different taxable goods, the tax rate is 5% or 10%, and the sales tax in the oil industry is given a special rate. Tax payable = (sales amount - deduction) × tax rate. The sales tax deduction is shown in the table below:
| classify | Deductions |
| Taxable goods subject to 5% sales tax | 2% of the value of the taxable goods at the time of purchase |
| Taxable goods subject to 10% sales tax | 4% of the value of the taxable goods at the time of purchase |
Sales tax evasion is punishable by fines of up to 40 times, or imprisonment, or both.
04 Service Tax
Malaysian Service Tax is an indirect tax imposed on specific taxable services or goods (e.g. food, beverages, tobacco, etc.). Service tax laws apply throughout Malaysia except for Designated Areas, Free Zones, Licensed Warehouses, Licensed Manufacturing Warehouses and Malaysia-Thailand Joint Development Zones (JDAs).
If the turnover of taxable services exceeds or is expected to exceed the prescribed registration threshold for 12 consecutive months, any taxpayer who provides taxable services and exceeds the corresponding threshold must register to pay service tax, except for the prescribed registration threshold of RM1,500,000 for catering and the registration threshold for other services is basically RM500,000.
Service tax rate is 6%
05 Other taxes
Real Property Gains Tax applies to the sale of land and any title, option or other rights related to the land in Malaysia. Under this Act, a taxpayer is entitled to tax on the taxable income in relation to the disposal of any taxable asset in that tax year, whether resident in Malaysia or not.
Depending on the difference between companies and individuals, residents and non-residents, the maximum tax rate is 30%.
Labuan Business Tax is a tax that regulates Labuan entities to be paid for engaging in business activities in Labuan. Labuan is an island in the South China Sea, located in the state of Sabah in eastern Malaysia, a federal territory of Malaysia, and it is also known as an offshore financial center that provides international financial and business services. Companies engaged in business activities in Labuan can enjoy preferential tax treatment, such as lower corporate income tax (flat rate of 3%), exemption from withholding tax on payments made to non-resident taxpayers, exemption from personal income tax on directors' fees received by foreign directors, etc. Labuan is not subject to capital gains tax, real estate gains tax or inheritance tax. In addition, Labuan companies are not subject to foreign exchange controls and foreign ownership restrictions.
PS: Due to space limitations, this article is only a brief combing to help Chinese residents invest overseas to understand local taxes, and for specific business, please contact us for reference: "Tax Guide for Chinese Residents Investing in Malaysia"
Written by: Caizi
Typesetting: Chen Wen
头条抖音公众号：大公Tax
The content of this article is for general information purposes only and does not constitute the provision of any professional advice or services. Nothing provided herein should be construed as formal tax, accounting, or legal advice.
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