Malaysia Accounting and Tax Considerations

Malaysia accounting and tax service

Many clients choose to outsource their Malaysia accounting and tax obligations to Tetra Consultants. Tetra Consultants will timely complete your firm’s financial statements, corporate tax returns and manage auditors on your behalf and without the need to travel.

By outsourcing accounting and tax obligations to Tetra Consultants, our international clients can reduce overhead costs while being ensured of timely reporting and filings. Our accounting team will explain to our clients all required deadlines and expectations before the start of the engagement.

Thereafter, our team will prepare the required fillings in advance to ensure we meet all stipulated deadlines. Tetra Consultants will send a weekly or bi-weekly update to our clients, ensuring all parties are aware of upcoming deadlines. Contact us now for a free consultation. Our team of experts will revert within the next 24 hours.

Who is the regulatory body for taxes in Malaysia?

The Inland Revenue Board of Malaysia (IRB), a division of the Ministry of Finance, is responsible for the administration of direct taxes enacted under the Income Tax Act 1967.

According to the Inland Revenue Board of Malaysia, Corporations in Malaysia are subject to corporate income tax, real property gains tax, and goods and services tax (GST).

Corporate tax 

• Businesses in Malaysia are subject to a corporate income tax rate of 24%. If structured properly, the profits of your Malaysian business can be legally tax-exempt.

• Resident and non-resident organisations doing business and generating taxable income in Malaysia will be taxed on income accrued in or derived from Malaysia.
• Companies are required to file annual return no later than 30 days from the anniversary of the date of incorporation.
• Failure to file an annual return is an offense and if convicted, the company and its directors will face penalties under sections 165 and 169 of the Companies Act.
• Companies are required to file an annual tax return with the Inland Revenue Board of Malaysia.

Capital gain tax 

• Malaysia does not tax capital gains from the sale of investments or capital assets other than those related to land and buildings.
• A real property gains tax (RPGT) applies to the sale of land in Malaysia and any interest, option or other rights in or over such land.
• The rate is 30% for such disposals of real property made within three years of the date of acquisition. The rates are 20% and 15% for disposals in the fourth and fifth years after the acquisition, respectively, and 5% for disposals in the sixth year after acquisition and thereafter.

Withholding taxes

Dividends

• Malaysia does not impose withholding tax on dividends paid to nonresidents.

Interest

• Interest paid to a non-resident is subject to a 15% withholding tax, which may be waived or reduced under an applicable tax treaty.

Royalties

• Royalties and technical service fees paid to non-residents are subject to a 10% withholding tax, which may be waived or reduced under an applicable tax treaty.

Wage tax/social security contributions

• Tax on employment income is withheld by the employer under a pay-as-you-earn (PAYE) scheme and remitted to the tax authorities.
• Both the employer and the employee are required to make contributions to the Social Security Organisation. The employer generally contributes 1.75% of an employee’s remuneration while the employee contributes 0.5% of his/her monthly wages. 

Goods and service tax (GST)

• The GST is levied at a rate of 6% on the supply of taxable goods and services (at each stage of the supply chain) in Malaysia, as well as on the import of goods and some imported services.
• Supplies of goods and services can be either taxable or nontaxable supplies. A taxable supply is standard-rated or zero-rated. Nontaxable supplies are exempt or outside the scope of the GST.
• Standard-rated supplies of goods and services are subject to GST at a 6% rate. A taxable person who is registered for GST must collect GST on the supply, and is eligible to claim input tax credits on the business inputs in making taxable supplies. Zero-rated supplies are subject to GST at a rate of zero percent. Businesses that make zero-rated supplies do not collect GST, but are entitled to claim credit for inputs used in the course of the business. 
• Supplies that are outside the scope of GST (i.e. that do not fall within the charging provision of the GST Act) include nonbusiness transactions, sales of goods from a place outside Malaysia to another place outside Malaysia, and certain services provided by the government, such as healthcare services, education and the issuance of licenses.
• It is mandatory to register for GST with the Royal Malaysian Customs Department (RMCD) if the annual turnover of your business is above RM500,000. The standard rate of GST in Malaysia is 6%.
• It is mandatory for GST-registered companies to file quarterly reports with the Royal Malaysian Customs Department (RMCD). Hence, GST returns must be submitted no later than the last day of the month following the end of the taxable period. The taxable period is one month, three months or such other period as determined by the Director-General.

Malaysia tax treaties & Double tax avoidance agreements (DTAAs)

• Malaysia has a broad tax treaty network, with the treaties generally following the OECD model treaty. Treaties generally provide for relief from double taxation on all types of income, limit the taxation by one country of companies resident in the other and protect companies resident in one country from discriminatory taxation in the other.
• A claim for tax treaty relief can be made in a taxpayer’s income tax return form, or a written request can be made for treaty relief within two years from the end of the relevant year of assessment for which the claim for relief is made.
• Malaysia has an extensive number of double tax treaties available for the avoidance of double taxation. Under DTAAs Standard requirements, such as those relating to tax residence, beneficial ownership, etc. apply. To do so, Tetra Consultants will assist your company to attain the Certificate of Residence (COR).

Contact us now for a free consultation. Our team of experts will revert within the next 24 hours.