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Tax Considerations in Malaysia

The Inland Revenue Board (IRB), an agency under the Ministry of Finance, is the main tax administrator to the Malaysian government. The IRB is responsible for collecting tax and Malaysia is ranked 61st out of 190 economies in the World Bank’s 2017 Doing Business report on the ease of paying taxes, above the East Asia and Pacific regional average. Recently Malaysia has made paying taxes easier by introducing a mandatory electronic filing system.

An overview of the major types of taxes levied in Malaysia is provided in the table below. Other taxes may also be applicable, such as stamp duty. Malaysia and Hong Kong have secured a Double Tax Agreement (2012), from which Hong Kong companies may be entitled to benefit.

TaxScopeRate
Corporate Income Tax (CIT)Resident tax companies are taxed on chargeable income earned in the preceding financial year. Non-resident tax companies are taxed on their business income.24%
Withholding taxCertain incomes (e.g. royalties, dividends, interest, etc.) received by a non-resident company that are not attributable to a business carried on by that non-resident in Malaysia.10% to 15% (with dividends exempted)
Goods and Service Tax (GST)Imposed on goods and services supplied and imported in Malaysia unless the supply qualifies for zero rating or the supply is granted relief or exemption.6%
Personal Income Tax (PIT)

Income tax rates depend on an individual's tax residency status:

  • Resident or a foreigner who has stayed or worked in Malaysia for 182 days or more in the previous year; and is taxed on worldwide income.
  • Non-resident, if not meeting the above criteria, although there are some exemptions (e.g. as in the case of a short term resident or people working in approved Operational Headquarters).

Residents:
1% to 28%

Non-residents:
10%, 15% (interest, royalties etc.)
28% (employment and business income)

Real Property Gains Tax (RPGT)Imposed on capital gains arising from the sale of real property or shares in a real property company (RPC). The rates vary depending on the date of disposal from the acquisition.

Companies and other bodies:
5% to 30%

Individuals:
0% to 30%

 

A Practical Guide to Doing Business in Malaysia

  1. Regulatory Environment
  2. Establishing a Presence
  3. Intellectual Property Protection
  4. Staff Recruitment
  5. Tax Considerations
  6. Import/Export Procedures
  7. Further Information


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