Hi! Edwin here and I will talk about taxes in Malaysia that will be relevant to you if you intend to start a business in Malaysia or to expand your business to Malaysia.
Company Tax
In a nut shell, all income that are derived from Malaysia is taxable, whether you are a resident or not. If the control and management of its
affairs are exercised in Malaysia, then, your company is considered a resident in Malaysia.
Income derived from
sources outside Malaysia
and remitted by a resident company is exempted from tax, except in the case of
the banking and insurance business, and sea and air transport undertakings.
Effective from the year of assessment 2009, the
corporate tax rate is at 25%.
The deduction for payment of zakat made by a company,
cooperative society or trust body shall not exceed 2.5% of its aggregate income
in the relevant year of assessment.
Deductions are allowed for contributions made to:
i. the Government, State Government, and local
authorities;or
ii. institutions or organisations approved by the
Director General of Inland Revenue Board Malaysia;or
iii. sports activities approved by the Minister of
Finance or Commissioner of Sports;or
iv. project of national interest approved by the
Minister of Finance.
The contributions in respect of ii, iii, and iv shall
not exceed 10% of the aggregate income of the company in the relevant year of
assessment with effect from the year of assessment 2009.
Sales Tax
Sales tax is a single stage tax imposed at the import
or manufacturing levels. In Malaysia,
manufacturers of taxable goods are required to be licensed under the Sales Tax
Act 1972. Companies with a sales turnover of less than RM100,000 and companies
with Licensed Manufacturing Warehouse(LMW) status are exempted from this
licensing requirement. However, companies with a sales turnover of less than
RM100,000 have to apply for a certificate of exemption from licensing.
Licensed manufacturers are taxed on their output
while manufacturers that are not licensed or exempted from licensing need to
pay tax on their inputs. To relieve small-scale manufacturers from paying sales
tax upfront on their inputs, they can opt to be licensed under the Sales Tax
Act 1972 in order to purchase tax-free inputs. With this, small-scale
manufacturers can opt to pay sales tax only on their finished products.
Sales tax is generally at 10%. However, raw materials
and machinery for use in the manufacture of taxable goods are eligible for
exemption from the tax, while inputs for selected non-taxable products are also
exempted.
Certain non-essential foodstuffs, alcoholic
beverages, tobacco/cigarettes and building materials are taxed at 5%, general
goods at 10%, compounds for making beverages at 20% and certain petroleum
products and motor oil are taxed at individual specific rates. Certain primary
commodities, basic foodstuffs, basic building materials, certain agricultural
implements and heavy machinery for use in the construction industry are
exempted. Certain tourism and sports goods, books, newspapers and reading
materials are also exempted.
Service Tax
A service tax applies to certain prescribed goods and
services in Malaysia
including food, drinks and tobacco; provision of rooms for lodging and premises
for meetings, conventions, and cultural and fashion shows; health services, and
provision of accommodation and food by private hospitals.
The tax also applies to professional and consultancy
services provided by accountants, advocates and solicitors, engineers,
architect, surveyors (including valuers, assessors and real estate agents),
advertising agencies, consultancy firms, management service provider, insurance
companies, motor vehicle service and repair centres, telecommunication services
companies, security and guard services agencies, recreational clubs, estate
agents, parking space services operators and courier service firms.
However, professional services provided by a company
to companies within the same group will be exempted from the current service
tax of 6%. Courier services provided from a point within Malaysia to a destination outside Malaysia
will also be exempted from the service tax of 6%.
Generally, the imposition of service tax is subject
to a specific threshold based on an annual turnover ranging from RM150,000 to
RM500,000 such as those
i.car rental agencies licensed under the Commercial
Vehicles Licensing Board Act 1987 having an annual sales turnover of RM150,000
and above,
ii.employment agencies having an annual sales
turnover of RM150,000 and above;
iii.companies providing management services,
including project management and coordination services, having an annual sales
turnover of RM150,000 and above;
iv.hotels having more than 25 rooms and restaurants
within such hotels
Service tax will be collected on the date the card is
issued, on the completion of year or on the date of renewal
Information above is sourced from the Malaysian Investment Development Authority (MIDA)
I hope this information is useful for you. If you have anything to add or to comment, you may Contact Us.
