Taxation of Sole Proprietorships in Malaysia

Updated on Tuesday 23rd May 2017

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Malaysia offers plenty of possibilities for business ventures. Individuals can operate as sole traders, in a form of business called sole proprietorship. It represents the most traditional form of business available, is very easy to set up and has low maintenance costs. Taxation of sole proprietorships in Malaysia is made according to a specific financial and legal framework. A detailed presentation on the requirements of sole proprietorship taxation can be provided to you by our company formation representatives in Malaysia.


Taxation of sole proprietorships in Malaysia

A sole proprietorship in Malaysia makes no difference between the natural person who owns it and the business. Sole proprietorships are pass-through entities; all profits and losses go directly to the business owner. Thereby, no separate tax return file is needed. Sole proprietorships in Malaysia are charged the income tax on a gradual scale applied to individual income (from 2% to 26%). Other taxes paid by a sole proprietorship comprise of self-employment taxes, social security taxes and property taxes. A number of expenses are eligible for tax deductions:

-    accounting fees,
-    rental for premises,
-    legal fees,
-    sales advertisements.

Our company formation specialists in Malaysia are willing to provide you with complete information on taxation of sole proprietorships.


Sole proprietorships in Malaysia

Once you decided to start a sole proprietorship to run your business in Malaysia, there are certain features you need to consider:

• You are personally reliable for all business profits and losses;
• Your personal assets can be taken in order to settle all liabilities incurred by a business fail;
• Higher revenues allow you to turn the sole proprietorship into a limited liability company (Sdn Bhd);
• The business can be ended and closed by the unexpected death of the owner;
• Rely on your personal savings for funding a sole proprietorship in Malaysia; financial support or cash investment can be obtained by introducing partners into the business and transforming the sole proprietorship into a partnership;
• Small grants from Government Departments can be applied for; you need a good credit record with banks in order to be eligible.

An in-depth presentation of the advantages of a sole proprietorship in Malaysia can be offered to you by our local company incorporation specialists.



December 12, 2017

Hi, you mentioned that a sole proprietor's expenses are eligible for tax deductions. How much can be deducted from each category?
- accounting fees,
- rental for premises,
- legal fees,
- sales advertisements.
Thanks in advance. =)

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