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Taxation in Malaysia
 
 
 

BUSINESS TAXATION IN MALAYSIA

General

A company which is incorporated in Malaysia and/or its active management is exercised from within the jurisdiction is considered to be resident for taxation purposes. Corporation tax rate is 28%, however, those companies which conduct activities of petroleum operations, are liable to pay corporation tax of 38%. A Labuan offshore company may elect to pay RM20,000 or to be taxed at 3% of the audited accounting profit.

Taxable income comprises all earnings derived from Malaysia, including gains or profits from a trade or business, dividends, interest, rents, royalties, premiums or other earnings. Where the recipient is resident in a country which has a double tax treaty with Malaysia, the tax rates may be reduced.

Capital gains tax is payable on real estate properties situated in Malaysia or on shares held in a real estate company. The rate of this tax varies between 5% and 30%. Withholding tax is levied on various transaction starting from 10% to 20%. Government grants certain tax incentives for companies which operate in particular market segments.

While losses can only be carried back for assessment years 2009 and 2010, they may be carried forward indefinitely (except where there is a substantial change in corporate ownership of a dormant company).

Foreign tax paid may be credited against Malaysian tax on the same profits (limited to 50% of foreign tax in the absence of a tax treaty), but the credit is limited to the amount of Malaysian tax payable on the foreign income.

Tax Incentives – A wide range of incentives are available for certain industries, such as manufacturing, IT services, biotechnology, Islamic finance, energy conservation and environment protection. Available incentives include: tax holidays of up to 10 years (pioneer status); investment tax allowances (i.e. 100% allowance on capital investments made up to 10 years); accelerated capital allowances; double deductions; and reinvestment allowances (i.e. 60% allowance on capital investments made in connection with approved projects).

Withholding Tax

Dividends

Malaysia does not levy withholding tax on dividends.

Interest

A withholding tax of 15% applies to interest paid to non-residents, which may be reduced under an applicable tax treaty.

Royalties

A withholding tax of 10% applies to royalties paid to non-residents, which may be reduced under an applicable tax treaty.

Other

A withholding tax of 10% applies to rentals of movable property, technical fees for services rendered in Malaysia and certain one-time income paid to non-residents, which may be reduced under applicable tax treaties.


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