Malaysia flag Malaysia: Business Environment

Tax rates in Malaysia

Tax Rates

Consumption Taxes

Nature of the Tax
  • Sales Tax
  • Services Tax
Tax Rate
Sales Tax: 10% or 5%
Services Tax: 6%
Reduced Tax Rate
A reduced rate of 5% applies to basic foodstuffs; petroleum oils; construction materials; IT, telecommunications and printing hardware and materials; and timepieces.
Oil and petroleum are subject to quantity-based rates.
Other Consumption Taxes
Excise duties are levied on tobacco, beer and liquor, playing cards and mahjong tiles.
Taxes on motor vehicles can go up to 105% of the value of motorcars, depending on engine capacity.
 
Find out more about Taxes and Accounting in Malaysia on GlobalTrade.net, the Directory for International Trade Service Providers.
 

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Corporate Taxes

Company Tax
24%
Tax Rate For Foreign Companies
The Malaysian tax system is territorial. Residents and non-residents alike are taxed on their Malaysian-sourced income while foreign-sourced income is usually not taxed even in the case of resident and/or local firms. Non-resident companies are taxed at a 24% flat rate, regardless of their capital.
Capital Gains Taxation
Malaysia does not tax capital gains from the sale of investments or capital assets other than those related to land and buildings.
A real property gains tax (RPGT) applies to the sale of land in Malaysia and any interest, option or another right in or over such land. The rate is 30% for disposals of real property made within three years of the date of acquisition. The rates are 20% and 15% for disposals in the fourth and fifth years after the acquisition, respectively, and 10% for disposals in the sixth year after acquisition and thereafter. For companies incorporated outside Malaysia, the rate is 30% for disposals made within five years and 10% thereafter.
Main Allowable Deductions and Tax Credits
Deductions are allowed for any revenue expenditure incurred wholly and exclusively in the production of income, including interest, royalty payments and certain taxes.
Interest expense is allowed as a deduction if the expense was incurred on any money borrowed and employed in the production of gross income or laid out on assets used or held for the production of gross income. Where a borrowing is partly used to finance non-business operations, the proportion of interest expense will be allowed against the non-business income.
A deduction is allowed for cash donations to approved institutions, capped at 10% of the aggregate income of the company for a year of assessment. Contributions and donations in cash and in kind by individuals and corporates to the COVID-19 Fund and the Ministry of Health are officially tax-deductible.
Incorporation and recruitment expenses are deductible, same as bad debts (which however need to be identified and reasonably estimated to be irrecoverable).
Net operating losses can be carried forward indefinitely (except in the case of a significant change in the ownership structure of a dormant company). The carryback of losses is not permitted.

Tax incentives are granted in exchange of investments in certain sectors (including manufacturing, hotels, tourism, energy conservation and environment protection) in the form of tax exemption (up to 10 years) or a tax credit (varying between 60% and 100% of the capital investment up to 10 years).
Other Corporate Taxes
Employers and employees alike must contribute to the Malaysian Social Security Organisation (SOCSO), with the employer's contributions generally at 1.75% of salaries. Employer contributions to Employees' Provident Fund (EPF) range from 12% to 13% of the salary. Employers and employees contribute 0.2% of the employee's salary (capped at MYR 4,000 per month) to Employment Insurance Scheme (EIS).

Employers engaged in the manufacturing and services sectors that employ more than a specified number of employees must contribute to the Human Resource Development Fund (HRDF), at the rate of 0.5% (5 to 9 employees) or 1% (10 employees or more) of the monthly wage.

Gains from disposals of real property are subject to a real property gains tax (RPGT). The rate is 30% for disposals of real property made within three years of the date of acquisition. The rates are 20% and 15% for disposals in the fourth and fifth years after the acquisition, respectively, and 10% for disposals in the sixth year after acquisition and thereafter. For companies incorporated outside Malaysia, the rate is 30% for disposals made within five years and 10% thereafter.

Petroleum income tax is imposed at the rate of 38% on income from petroleum operations in Malaysia. An effective petroleum income tax rate of 25% applies on income from petroleum operations in marginal fields.
A levy is imposed on crude palm oil and crude palm kernel oil where the price exceeds MYR 2,500 per ton in Peninsula Malaysia, and MYR 3,000 per ton in the states of Sabah and Sarawak.

A levy of 0.125% on contract works having a contract sum above MYR 500,000 is imposed on every registered contractor by the Construction Industry Development Board.
Local companies are subject to an incorporation fee of MYR 1,000, while foreign companies pay a higher fee (from MYR 5,000 to MYR 70,000).

Stamp duty is levied at rates ranging from 1% to 4% of the value of property transfers, and at 0.3% on share transaction documents.

Other Domestic Resources
Inland Revenue Board
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Country Comparison For Corporate Taxation

  Malaysia East Asia & Pacific United States Germany
Number of Payments of Taxes per Year 9.0 23.4 10.6 9.0
Time Taken For Administrative Formalities (Hours) 174.0 195.1 175.0 218.0
Total Share of Taxes (% of Profit) 38.7 33.8 36.6 48.8

Source: Doing Business, Latest available data.

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Individual Taxes

Tax Rate

Individual income tax (2021) Progressive rates from 0% to 30%
Up to MYR 5,000 0%
MYR 5,000 - 20,000 1%
MYR 20,001 - 35,000 3%
MYR 35,001 - 50,000 8%
MYR 50,001 - 70,000 13%
MYR 70,001 - 100,000 21%
MYR 100,001 - 250,00 24%
MYR 250,001 - 400,000 24.5%
MYR 400,001 - 600,000 25%
MYR 600,001 - 1,000,000 26%
MYR 1,000,001 - 2,000,000 28%
Above 2,000,000 30%
Qualified knowledge worker 15%
Applies to workers in the Iskandar Malaysia, from employment with a designated company engaged in a qualified activity (e.g. green technology, educational services, healthcare services, creative industries, financial advisory and consulting services, logistics services, tourism)
Non-resident individuals 30% flat rate on total taxable income
Resident individual under the Returning Expert Programme 15% for five years
Non-citizen receiving a monthly salary of not less than RM25,000 and holding key positions/C-Suite positions 15% for five years
(limited to 5 non-resident individuals employed in each company that has been granted relocation tax incentive under PENJANA initiative)
Allowable Deductions and Tax Credits
Employees are allowed a deduction for any expenditure incurred wholly and exclusively in the performance of their duties, but no allowance is given for tax depreciation. Donations to approved institutions or organisations are deductible (limits apply). Contributions and donations in cash and in kind by individuals and corporates to the COVID-19 Fund and the Ministry of Health are officially tax-deductible.
Mortgage interest incurred to finance the purchase of a house is deductible only if income is derived from the house.

Several personal allowances apply: standard allowance of MYR 900, MYR 400 for a spouse (in case of joint assessment), MYR 2,000 for each child below 18 years of age, extra allowances for disabled persons.

Other deductions include: medical expenses (MYR 8,000), pension/provident funds (MYR 4,000) and insurance premiums (MYR 3,000), education fees (MYR 8,000), certain childcare (MYR 7,000), etc.

Special Expatriate Tax Regime
Individuals who do not meet the residence requirements are taxed at a flat rate of 30% on total taxable income.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
See the list of the double taxation avoidance agreements on the website of the Inland Revenue Board of Malaysia.
Withholding Taxes
Dividends: 0%; Interest: 0% (paid to a non-resident by a bank operating in Malaysia) /15%; Royalties: 10%
Bilateral Agreement
The United Kingdom and Malaisya are bound by a double taxation treaty.

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Find out more about Taxes and Accounting in Malaysia on GlobalTrade.net, the Directory for International Trade Service Providers.

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Latest Update: June 2022

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