Corporate Tax in Malaysia

Updated on Wednesday 04th November 2020

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The corporate tax in Malaysia is one of the basic income taxes that are applicable to companies and to other entities that obtain an income from the sale of services or goods. It represents a compulsory tax that is charged based on the income obtained in a financial year by a taxable entity. This is why the Malaysia corporate tax rate varies. 
 
Businessmen who want to open a company in Malaysia can find extensive details on how to register for the payment of the corporate tax from our team of specialists. Our consultants can provide an extensive presentation on the overall tax system applicable in this country, as well as the latest tax regulations imposes to local businesses or to foreign businesses developing various operations here. 
 

What is the Malaysia corporate tax rate? 
 

Currently, there are three basic types of tax rates that are charged to companies, and they vary based on the yearly income (there are two basic financial thresholds available here), as well as on the activity in which a company operates (the tax law distinguishes between general business activities and petroleum activities), the following being available for those who want to open a company in Malaysia
 
  • the standard Malaysia corporate tax rate is of 24% for the financial year of 2019-2020, this rate being applied to both resident companies and to non-resident companies;
  • however, in the case of a resident company, the Malaysia corporate tax rate can be applied at 17% or 24% from the yearly income (the lower rate, of 17%, is not applicable to non-resident entities);
  • the rate of 17% is applied to an income of maximum MYR 600,000, while an excess of this amount is charged with 24%;
  • in order for this to apply, the resident company in Malaysia must have a maximum paid-up capital of MYR 2.5 million and a gross income obtained from business activities of maximum MYR 50 million;
  • at the same time, the Malaysia corporate tax rate system presented above will be applied to a resident company if the company does not control (directly or indirectly) another company with a paid-up capital of more than MYR 2.5 million or if the resident company is not controlled by another company with a paid-up capital of more than MYR 2.5 million. 
     
As presented above, the tax law in Malaysia provides these two basic corporate tax rates, of 17% or 24%, but in the case of companies that develop economic activities related to the petroleum industry, a different corporate tax will be applied, which is known as the petroleum income tax. The standard tax rate is of 38%. Our team of consultants in company formation in Malaysia can present more details to those interested in investing in the petroleum sector. 
 

The obligations of companies required to pay the corporate tax in Malaysia 
 

Any company incorporated in this country has the obligation to register for and pay the Malaysia corporate tax rate which is applicable to the respective business. Once the company has registered for the payment of the corporate tax, it needs to file regular tax returns and this depends on the category in which the legal entity is included (newly-formed company, newly-formed small and medium sized companies with a capital of maximum MYR 2.5 million, or established companies).  
 
Regardless of the manner in which the tax returns have to be filed, all companies must submit such documents with the Inland Revenue Board of Malaysia. The steps any legal entity has to complete are prescribed under the local tax law, which is given by the regulations of the Income Tax Act 1967. 
 
In Malaysia, companies must submit tax returns in which they present the estimated tax payable and the payment of the estimated value of the Malaysia corporate tax rate has to be done by the 15th of each month in most of the cases (for instance, small and medium sized companies can benefit from a tax exemption).  It must be noted that in the case in which the value of the estimated tax is higher than the actual tax the company is liable to, then the local tax authorities will refund the difference. 
 
Any small and medium sized company in Malaysia with a paid-up capital of maximum MYR 2.5 million is entitled to a tax exemption of two years since it became operational, which means that the company’s representatives will not have to deal with submitting tax returns in the first two years of financial activity.
 
Our team of consultants in company registration in Malaysia can present more details on other tax benefits applicable to these types of companies. For more details on the Malaysia corporate tax rate, we invite you to contact our team of specialists, who can provide you with professional tax services.