Taxation of Sole Proprietorships in Malaysia
|Institution that oversees sole proprietorships in Malaysia|| |
Companies Commission of Malaysia
Tax legislation in Malaysia
Tax Act 1967
Income tax for sole proprietorship
|Ranging from 2% to 26%|
|Social security tax imposed (YES/NO)|| |
|Property tax (YES/NO)|| |
|Tax deductions available|| |
- business expenses,
- office space rentals,
- banking fees,
- travel expenses
|Income tax return (YES/NO)|| |
|Filling date for taxes in Malaysia|| |
No later than 30th of June
|Submission for tax return||6 months from the end of December each year|
|Liability for profits and losses|| |
|Accounting for sole traders (YES/NO)|| |
|Support for tax registration in Malaysia (YES/NO)|| |
|Assistance for annual tax declarations (YES/NO)|| |
|Advice for tax deductions (YES/NO)|| |
|Free case evaluation offered (YES/NO)||Yes|
How is a sole proprietorship in Malaysia taxed?
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 the individual income (from 2% to 26%). Other taxes paid by a sole proprietorship in Malaysia are:
- Self-employment taxes.
- Social security taxes and property taxes.
A number of expenses are eligible for tax deductions, such as accounting fees, rental for the premises of the company, legal fees, or sales advertisements. Our company formation specialists in Malaysia can provide you with complete information on taxation of sole proprietorships.
Gains or profits in Malaysia
In Malaysia, the gains or profits that are obtained through trade or through a vocational activity are liable to taxation. Thus, sole traders have to register for tax purposes as taxpayers and to obtain an Income Tax Return Form. Sole traders are also required to keep any business documents attesting the transactions concluded by the businessman - the receipts and other similar documents. A sole trader has to submit a special form designed for this type of business entity, Form B, which has to be filed no later than 30th of June of each financial year, a date at which the company’s owner should also pay his or her taxes due with the local tax authorities.
How can a businessman register as a Malaysian sole trader?
The registration of a sole trader starts with the Companies Commission of Malaysia (SSM), which represents the main institution that handles the registration of any business set up in this country. Sole traders in Malaysia can only be registered by persons who are citizens of the country and who need to provide several documents required for incorporation. This business entity is also available for natural persons who are foreigners but have received permanent residence in Malaysia. For example, it is necessary to provide a Malaysian identity card (a photocopy), the proposed names for the company’s trading name, information regarding the activities that will be developed by the company, and a business address. Sole traders can be registered with the name of the owners (the one stated in the person’s identity card) or it can have a trading name that designates the activities of the business.
With extensive expertise on board, our accountants in Malaysia can offer the right services for your company registered in this country. Thus, those interested can opt for bookkeeping, payroll, tax registration, debt monitoring, audits, and preparation of annual financial statements. On request, high-net-worth individuals can benefit from investment consultancy and complete tax expertise. Feel free to contact our firm for a personalized offer.
Sole proprietorships in Malaysia
Once you have decided to open a company in Malaysia that operates as a sole trader there are certain features of this business form that you need to consider. Our specialists in company formation in Malaysia can offer an in-depth presentation regarding the advantages and disadvantages of the sole trader, which are mentioned below:
- you are personally liable for all business profits and losses, due to the fact that there is no legal distinction between the owner and the company;
- your personal assets can be taken in order to settle all the 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.
The registration procedure of a sole trader in Malaysia
In order to register as a sole trader in Malaysia, it is necessary to submit the Business Registration Form (Form A). This procedure can be completed at the nearest SSM office or through the online portal of the institution and with complete support provided by our specialists in company formation in Malaysia. Following the submission of the form, the businessman will receive a Business Registration Certificate, which can be issued on the same day on which the application was made. At the same time, businessmen are advised to open a corporate bank account for their company, even though a personal bank account can be used in this case. However, this is recommended in order to separate personal transactions from the ones concluded through the sole trader.
The next step is to register with the Social Security Organization for employment-related matters; this can be done by submitting specific forms required by the institution and the procedure can vary depending on whether the sole trader has additional employees, besides the owner of the company. An in-depth presentation on other advantages of a sole proprietorship in Malaysia can be offered to you by our local company incorporation specialists in Malaysia. Our team of consultants in company registration in Malaysia can also provide in-depth information regarding the taxation scheme available for local sole traders.
Interested in opening a business in Malaysia? The formalities involved, as well as the procedures, are quite simplified, but even so, we advise you to collaborate with our local company formation agents. They are at your disposal with the preparation of the necessary documents, as well as the opening of a bank account for future financial operations. we mention that it is enough for only one shareholder to open a company in this country. Also, there is no need for a local director in this endeavor.
Accounting for sole proprietorships in Malaysia
Payment of sole traders in Malaysia
Cutting the taxes as a sole trader in Malaysia
Making investments in Malaysia
- Nearly 39% of the total FDIs in Malaysia were absorbed by the manufacturing sector in Q3 of 2020, followed by financial and insurance activities with more than 24%.
- Singapore was the main investor in Malaysia in 2020, directing around 21.7% of the investments in Q3.
- Around USD 169 billion represented the total FDI stock for Malaysia in 2019.
- The 2020 Doing Business report ranked Malaysia 12 out of 190 economies in the world for the ease of doing business in the country.
Choosing our Malaysian agents
Feel free to contact us and find out more about sole proprietorship in Malaysia. If you want to open a sole proprietorship in another country, such as Greece, we can put you in touch with our local partners.