Malaysian Tax Law

Small companies in Malaysia are taxed 20 percent on their first 500,000 ringgit of annual profit.

Malaysia taxes most income earned by residents on a graduated scale. Income taxes in Malaysia are established by the Income Tax Act of 1967.

Income Tax Base

Resident individuals are taxed on graduated rates from 2 to 26 percent as of tax year 2010, though those making less than 2,500 Malaysian ringgit annually are exempt. Generally, nonresident individuals are liable for 30 percent of their Malaysia-sourced income. Residency is established by presence in the country for 183 days within a calendar year.

Taxable Income

The sources of income that are taxable include salaries and other remunerations from employment; gains and profits from business; dividends and interests from investments; rents, royalties or premiums; and pensions, annuities and other periodic payments.

Corporate Tax

Corporations in Malaysia are taxed at a standard rate of 25 percent. Small and medium-sized businesses--those capitalized at 2.5 million ringgit--are only taxed at 25 percent on the first 500,000 ringgit in annual profit and 25 percent on anything above that.

Capital Gains and Withholding

Generally, Malaysia does not tax capital gains or levy any withholding taxes and all such income are included in individual and corporate income. Nonresidents, however, are required to pay withholding taxes on interest and royalties and other profit made at point-of-sale of movable and immovable property.

References

• Deloitte, International Tax: Malaysia Highlights