All income of companies and individuals accrued in, derived
from or remitted to Malaysia are liable to tax. However, income derived from
outside Malaysia and remitted to Malaysia by resident companies (except those
involved in the banking, insurance, air and sea transportation business),
non-resident companies and non-resident individuals is exempted from tax. Apart
from income tax, there are other direct taxes such as stamp duty and real
property gains tax, and indirect taxes such as sales tax, service tax, excise
duty, import duty and export duty.
The following sources of income are liable to tax:
and profits from a trade, profession and business
or profits from an employment (salaries, remunerations, etc.)
interests or discounts
royalties or premiums
annuities or other periodic payments
gains or profits of an income nature.
A company, whether
resident or not, is assessed on income accrued in or derived from Malaysia.
Income derived from sources outside Malaysia and remitted by a resident company
is exempt from tax, except in the case of the banking and insurance business,
and sea and air transport undertakings. A company is considered a resident of
Malaysia if the control and management of its affairs are exercised in
Malaysia. Between the years of assessment 1998 and 2002, a corporate tax rate
of 28 percent applied.
For the year of assessment 2003, companies with paid-up
capital not exceeding RM2.5 million at the beginning of the year are taxed at
20 percent on the first RM100,000 of chargeable income and 28 percent on
subsequent chargeable income. Companies with paid-up capital exceeding RM2.5
million at the beginning of the 2003 tax year are taxed at a flat rate of 28
From the year of assessment 2004, companies with paid-up capital
not exceeding RM2.5 million are taxed at 20 percent on the first RM500,000 of
chargeable income and 28 percent on subsequent chargeable income. The
corporate tax rate for companies with paid-up capital exceeding RM2.5 million
remains as for year of assessment 2003. A company carrying on petroleum
upstream operations is subject to a petroleum income tax of 38 percent.
To promote greater private sector investment and to enhance
the nation’s competitiveness, the corporate tax rate for the year of assessment
2009 is reduced to 25 percent for companies (including small and medium-scale
companies) resident in Malaysia with paid-up ordinary share capital not
exceeding RM2.5 million, to the extent of that portion of their chargeable
income in excess of RM500,000.
Tax on individuals
All individuals are liable to tax on income accrued in,
derived from or remitted to Malaysia. However, a non-resident individual will
only be taxed on income earned in Malaysia. Generally, an individual residing
in Malaysia for more than 182 days in a year has resident status. Effective
from the year of assessment 2004, income remitted to Malaysia by a resident
individual is exempt from tax. Resident individuals are taxed on their
chargeable income at a graduated rate from 0 percent to 27 percent after
deducting personal tax relief effective from the year of assessment 2009.
Non-resident individuals are liable to tax at the rate of 27 percent without
any personal relief. However, the non-resident can claim rebates in respect of
levies paid to the government for the issuance of an employment work permit.
Non-residents are also subject to withholding tax between 3 percent and 15 percent depending on the nature of the income.