Taxation of Partnerships in Malaysia

Updated on Tuesday 23rd May 2017

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For the purpose of economic gain, foreign and local investors in Malaysia can start a joint venture. Partnerships are economic entities comprised of two or more persons who carry together a business in a specific sector. The Malaysian partnerships can operate with a maximum of twenty members and their liabilities are unlimited. There are certain rules and regulations that stipulate how a partnership can be registered, do business and withhold taxes. Our team of specialists in company incorporation in Malaysia can provide an extensive presentation on the matter.

Taxes paid by partnerships in Malaysia

Malaysia offers a tax friendly environment with significantly low income tax. The incomes are earned by the individuals and not by the partnership; therefore the partners are liable for this profit under personal income tax. The partners are taxed on their chargeable income at rates ranging from 2% to 26%, after the deduction of tax relief. A self-assessment (SAS) system operates in Malaysia for payments, estimates and tax assessments. For Malaysian partnerships, the SAS became effective since 2004. Businessmen who need more information about taxation of partnerships in Malaysia can address our team of company incorporation specialists in Malaysia.

Partnership Act 1961

In Malaysia, all economic partnerships are governed by the Partnership Act 1961. This document contains all the provisions for the establishment and functioning of partnerships:
• Equally share of profits and losses;
• Partners cannot withhold the interest of the capital invested in the partnership;
• The business management can be done by all partners;
• A salary is not entitled for partners;
• An 8% interest rate applies to loans and monetary advances made by partners to the business;
• The majority of partners is needed for reaching decisions; the consent of all partners is necessary for the change of the business nature;
• New partners can enter the business by an agreement; this is also required for leaving a partnership;
• Books and accounts must be kept at the principal base of the business.

An in-depth presentation of the provisions of the Partnership Act 1961 can be given to you by our Malaysian company incorporation representatives.



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