Taxation

In Malaysia, income is taxable on modified territorial basis. Generally, any income accruing in or derived from Malaysia is taxable locally notwithstanding the fact that the income may not have been received in Malaysia. However, a foreign source income received is exempted from income tax with the exception of resident companies carrying on business of sea/ air transport, banking or insurance which are assessable on a world income scope.

Revenue income receipts are chargeable to income tax whereas capital receipts are not.

The self-assessment system (SAS) for individuals (include salaried individuals and sole proprietors) and for partnerships was implemented with effect from YA 2014. Under the SAS taxes are collected from employees through monthly deductions from salary under the Scheduler Tax Deduction (STD) system. Individuals having business income are required to pay their income tax liability through bi-monthly instalments.

Individuals are required to file their completed income tax return forms to the Inland Revenue Board (IRB) together with the payment of the balance of tax payable, if any. The tax filing deadline is 30 April of the following year for individuals with no business income; and 30 June of the following year for individuals carrying on business.

A resident individual is subject to income tax at scale rates of 0% to 30% with effect from year of assessment (YA) 2020 on his chargeable income. Resident individual is entitled to personal reliefs. An individual is regarded as tax resident based on his number of days stayed in Malaysia. Generally, he has to be in Malaysia for at least 182 days in a calendar year to be considered as resident for tax purposes.

A non-resident individual is liable to income tax at a flat rate of 30% with effect from YA2020. Non-resident individual is not eligible for personal reliefs. However, non-resident individual is exempt from tax on employment of 60 days or less.

The SAS for companies came into effect from YA2001.

Under the SAS, every company is required to determine and submit in a prescribed Form CP204 an estimate of its tax payable for a YA, 30 days before the beginning of the basis period. When the estimate of tax payable has been submitted to the IRB, the company is required to remit this amount to the IRB in 12 equal monthly instalments. Each monthly instalment is due and payable to the IRB by the 15th day of the following month. Under SAS, all companies must file the tax returns within 7 months from the end of the accounting period.

For YA 2016 onwards, companies are taxed at the rate of 24% on chargeable income. With effective from YA2020, small and medium enterprises (SMEs) enjoy preferential tax rates of 17% on first RM600,000 chargeable income and 24% on subsequent chargeable income. SME is defined as resident company incorporated in Malaysia with paid up capital of RM2.5 million and below at the beginning of the basis period and having gross income from source or sources consisting of a business of not more than RM50 million for the basis period for a YA.

A non-resident company is subject to corporate tax rate of 24%, with effect from YA 2016.

Non-resident individuals and companies are subject to the following withholding tax:

Non-resident companies	Rate %
Royalties	10
Rental of moveable properties	10
Fee for any advice, assistance or services given or performed in Malaysia	10
Interest	15
Service portion of contract payments   - account of contractor   - account of employee	10 3
Other income such as commission, guarantee fee,   agency fees and etc (w.e.f 1.1.2010)	10

Where the recipient is a resident of a country which has a double tax treaty with Malaysia, the above withholding tax rates may be reduced.

 

The tax authorities take aggressive stance to combat tax evasion by conducting tax investigation on suspected taxpayers to detect fraud and/or willful evasion. Taxpayers under tax investigation are usually panic, stressed and are not able to think clearly and act rationally. An undesirable strategy in managing the investigation cases may result in loss of thousands, if not, millions of ringgit. Furthermore, one may need to prepare various documents requested by tax authorities such as mean test and capital statement which is technically challenging.

We offer you our Professional Tax Investigation Advisory Services and give you the most invaluable support and guidance as to the Dos & Don'ts during an investigation. Together, we can work out the best solutions.

Tax Audit

Tax audit is regularly carried out by the Inland Revenue Board (IRB) officers to enhance tax compliance. It is especially intensified under the self-assessment system. Tax audit may result in additional tax adjustments being made and penalties being imposed. Therefore, an appropriate approach must be adopted in handling tax audit cases.

If you were chosen for a tax audit, you need no worry because we provide three different types of services to suit your needs:-  

• Tax Audit Preview Services
  We will conduct a pseudo field audit by previewing your selected business records and extracting relevant supporting documents before the actual field visit by the IRB audit officers.
• Tax Audit Review Services
  We will be by your side to help you attend to the IRB officers' needs and queries whilst they are visiting you.
• Tax Audit Post-View Services
  We will assist you to narrow the scope of the IRB officers’ queries and negotiate for better terms where applicable.

 

Our Government has been generous in giving a great number of tax incentives to the taxpayers. An abundance of tax incentives provides taxpayers with many choices, sometimes uncertainties about the incentives appropriate for the taxpayers.  We can help you to understand, identify and apply for the right tax incentives to maximize tax benefits in cost-effective approach.  We offer advice and assistance in the application of tax incentives including the following:

• Manufacturing sector
• Trading sector
• Agricultural sector
• Tourism sector
• Research and development ( R&D ) sector
• Education and Healthcare sector
• Communications, utilities and transportation sector
• Green technology sector
• High technology and multimedia sector
• Service sector
• Waste recycling sector
• Real estate investment sector
• Biotechnology sector
• Property development sector
• Other sectors

Main incentives available are:

• Pioneer Status (PS)
• Investment Tax Allowance (ITA)
• Income Tax Exemption
• Reinvestment Allowance (RA)
• Export Incentives
• Promotion of Export
• Accelerated Capital Allowance
• Double Deduction
• Group Relief
• Tax incentives relating to promoting Industry 4.0
• Tax Incentives for companies relocating their operations to Malaysia and undertaking new investments

 

The list of advices we can render to our clients and potential clients is inexhaustible. It ranges from individual tax planning, payments to non-residents which are subject to withholding tax, capital gains versus business receipts, real property gains tax exemption, corporate tax planning, cross border transactions, merger & acquisition and lots more!

Under the self-assessment system, taxpayers are required to compute their tax liabilities and submit their tax returns in accordance with tax legislations issued by the IRB. The tax returns submitted is deemed to be a notice of assessment served on the taxpayers on the date of submission.

Tax compliance has becoming very complex and challenging, in view of the tightened stringent enforcement by tax authorities and introduction of more tax laws, rules and regulations, guidelines and rulings.

We can assist you from the very beginning by registering a tax file number with the IRB; and the routine tax compliance matters including preparation of tax computation, submission of tax returns and estimated tax payable.