Cost of doing business
Start A Business
Income of any person including a company, accruing in or derived from Malaysia or received in Malaysia from outside Malaysia is subject to income tax. In general, income tax is chargeable on the following classes of income;
- Gains or profits from a business;
- Gains or profits from an employment;
- Dividends, interest or discounts;
- Rents, royalties or premium;
- Pensions, annuities or other periodical payments not falling under any of the foregoing paragraphs;
- Gains or profits not falling under any of the foregoing paragraphs.
The income is assessed on a current year basis and the present tax assessment system administered by Inland Revenue Board of Malaysia (IRBM) is Self-Assessment System (SAS). In SAS, taxpayers are required to declare its income and calculate the tax payable on its own. However, the IRBM allows the appointment of a qualified tax agent to assist in preparing and submitting the annual tax returns on behalf of the taxpayer subject to the provision of the law. Below are the indicative tax rates as of the Year of Assessment (YA) 2016;
Corporate Income Tax
A company is tax resident in Malaysia if its management and control are exercised in Malaysia. Resident companies are taxed at the rate of 24%, while companies with paid-up capital of RM2.5 million or less are taxed at the following scale rates;
|Resident and non-resident companies||24%|
|Resident companies with paid-up capital of RM2.5 million and less at the beginning of the basis period for a year of assessment:|
|*||on the first RM500,000 chargeable income||19%**|
|*||on subsequent chargeable income||24%|
** reduced to 18% w.e.f. YA 2017
Personal Income Tax
An individual is regarded as tax resident if he/she meets any of the following conditions;
- In Malaysia for at least 182 days in a calendar year;
- In Malaysia for a period of less than 182 days during the year but the period is linked to a period of physical presence of 182 days or more “consecutive” days in the following or preceding year;
- In Malaysia for 90 days or more during the year and, in any three of the four immediately preceding years, he/she was in Malaysia for at least 90 days or was resident in Malaysia; or
- Resident for the year immediately following that year and for each of the three immediately preceding years.
Residents are taxed at the following scale rates;
|Personal Income Tax|
|Resident individuals with chargeable income (after deduction of personal reliefs) of more than RM5,000 and not more than RM1,000,000||1% – 26%|
|Resident individuals with chargeable income (after deduction of personal reliefs) of more than RM1,000,000||28%|
|Non-resident individuals (not entitled to any personal reliefs)||28%|
Withholding tax (WHT) is a method of collecting taxes from non-resident who have derived income which is subject to Malaysian tax. Any tax resident person who is liable to make certain specified types of payments to a non-resident is required to deduct WHT from the gross payment at a prescribed rate as follows;
|Payments subject to WHT||Rates*|
|Interest derived from Malaysia||15%|
|Royalty derived from Malaysia||10%|
|Dividends derived from Malaysia||15%|
|Contract payments (services rendered in Malaysia)|
|– Contractor’s liability||10%|
|– Employees’ liability||3%|
|Special classes of income;
– Technical services in Malaysia**
– Rental of movable properties
|Section 4(f) gains or profits
– Other income source not of a business / employment source
*A reduced rate may be provided under the Double Tax Agreement with certain treaty partners/countries.
** Upon operation of the Finance Bill 2016, the withholding tax for technical services is no longer limited to services performed in Malaysia.
Goods and Services Tax (GST)
The Sales and Services Tax system has been replaced with the GST effective on 1 April 2015. The GST is levied on the supply of goods and services at each stage of the supply chain from the supplier up to the retail stage of the distribution. The GST is a broad based consumption tax covering all goods and services made in Malaysia including imports except for specific goods and services which are categorised under zero-rated supply and exempt supply under the gazette order. The current The GST rate in Malaysia is 6%.
The GST can only be levied and charged if the business is registered under The GST. Businesses with taxable supply threshold of RM500,000 is required to be registered for The GST. However, business with taxable turnover of RM500,000 and below may apply for voluntary registration.
Apply for Expatriate
ECERDC has been empowered by the Ministry of Home Affairs Malaysia as an approving agency or a “One Stop Centre” for approval of expatriate posts within the promoted service sectors in the ECER. ECERDC is working closely with the Ministry of Home Affairs and the Immigration Department of Malaysia as well as relevant agencies to facilitate the process of local and foreign investors bringing in expatriate personnel i.e. ‘key post’ or ‘term post’.
EXPATRIATE POSITIONS IN THE ECER
|Key Post Positions||Executive Positions||Non-Executive Positions|
CRITERIA FOR CONSIDERATION
- Company activities
- Scope of job in relation to the company’s activities
- Expatriate experience
- The minimum monthly salary of RM5,000; and
- Knowledge transfer between expatriate and local workforce
- The number of expatriate posts will be considered based on the merits of the case.
Employment Pass Reclassification Effective 1st September 2017:
|Category||Salary Scale||Duration of Contract|
|Category 1||RM10,000 and above||Up to 5 years|
|Category 2||RM5,000 – RM9,999||Up to 2 years|
- Upon approval, hiring companies are required to register with the Expatriate Services Division (ESD) at https://esd.imi.gov.my
- Once a company is registered and approved by the ESD system, it can submit applications for the Employment Pass and other related passes.
- Further details can be found at https://esd.imi.gov.my/portal/pdf/esdguidebook-v3.pdf