Taxes in Malaysia: Rates, Deadlines, and Everything You Need to Know

Malaysia’s tax system can seem intimidating, especially if you are new to it. This guide breaks down the essentials, answering key questions on individual and business tax rates, tax deadlines, and the different types of taxes in Malaysia. Whether you're filing for the first time or looking to stay updated, here’s everything you need to know to manage your taxes confidently in Malaysia.

Malaysia’s tax system has several types of taxes, and the major ones are:

• Individual Income Tax
• Corporate Income Tax
• Sales and Service Tax (SST)
• Real Property Gains Tax (RPGT)

Let’s discuss all types of taxes in Malaysia in detail. 

Taxes in Malaysia Overview

Here’s a summary of these key taxes, their rates, and respective deadlines:

Individual Income Tax in Malaysia

Malaysia’s individual income tax rates vary based on income levels, with different tax brackets for different earnings. The rates apply progressively, meaning higher rates apply as income increases.

• Residents benefit from a tiered tax rate structure, and non-residents have to pay a flat rate of 30% and do not have access to certain reliefs and deductions available to residents.
• Taxable income is divided into brackets, each with a specific rate. They are:

Deadlines and Payment

Before Assessment Year 2024, you had two ways to file (Manual and Electronic). The deadlines for them were:

• E-Filing Deadline: Due by April 30
• Manual Filing Deadline: Due by May 15

However, effective AY 2024, the individual taxpayer is required to submit the income tax return form electronically only. Manual filing will not be allowed.

If you fail to match these deadlines, you might have to pay penalties of 10% on the balance of tax unpaid after the deadline. 

Income Tax Deductions

Malaysia offers various deductions and reliefs to help reduce taxable income. You can claim them in:

• Eligible deductions: In Malaysia, you can get tax deductions for services like education fees, medical expenses, life insurance, and EPF contributions.
• Tax Reliefs: These apply to specific categories, like lifestyle expenses and medical check-ups, and help reduce residents' overall tax liability.

Corporate Income Tax in Malaysia

Malaysia’s corporate tax rates are set according to the company’s residency status and type:

Certain industries are eligible for either PS or ITA benefits, such as:

• Manufacturing
• Agriculture
• Hotel
• Tourism
• Any other manufacturing/commercial sector that produces a promoted product or participates in a promoted activity.

These benefits can include reinvestment, exemptions, or reduced taxes. They are done to encourage investment and growth in key sectors.

Deadlines for Corporate Tax Filing and Payment

Timely filing and payment of corporate tax is important in Malaysia to avoid penalties.

• Corporate income tax returns are typically due seven months after the end of the company’s fiscal year.
• Late filing or payment can incur fines and additional penalties. These usually range from a percentage of the unpaid tax to fixed penalties, depending on the duration and nature of non-compliance.

Benefits for SMEs

Small and medium-sized enterprises (SMEs) benefit from reduced tax rates and other incentives.

• Resident SMEs with a paid-up capital < RM2.5 million and annual income < RM600,000 are eligible for a lower tax rate of 17% on the first RM 600,000. The remaining income is taxed at the standard 24% rate.

Sales and Service Tax (SST)

SST was reintroduced in 2018, replacing the former GST system. SST applies separately to the sale of goods and specific services.

• SST is imposed on manufacturers and importers at 5% or 10% for goods produced or imported into Malaysia. This tax is generally charged at the point of manufacturing or import, not at the retail level.
• Service Tax is charged at 6% on certain services like: hospitality, food & beverages, telecommunications, and professional services like legal or accounting services.
  •  It applies to manufacturers and importers at rates of 5% or 10%.
  • Standard rate of 6% on specified services like food, hospitality, entertainment, etc.

Real Property Gains Tax (RPGT)

Real Property Gains Tax is imposed on profits from the sale of real property or shares in real property companies. RPGT is aimed at discouraging speculative property trading.

• RPGT is primarily applied when properties are sold within five years of purchase, with lower rates or exemptions available for longer-term ownership.
• Rates vary based on the ownership period and residency status, ranging from 0% to 30%. The rates that apply are:

Other Taxes

Stamp Duty

Stamp Duty is applied to specific documents and transactions, particularly in property and share transfers

• Rates typically range from 1% to 3%, depending on the value and nature of the transaction.

Withholding Tax

Withholding Tax applies to certain payments made to non-residents, such as

• Royalties
• Technical fees
• Interest
• Contract payments

Withholding tax rate can range from 5-15%, depending on the payment type and Double Taxation Agreements (DTAs) with specific countries.

Custom Duty

Customs Duties include import and export duties on goods brought into or sent out of Malaysia. The custom duty rates vary based on the type of goods and origin, supporting local industries and regulating trade.

Excise Duty

Excise Duty applies to specific goods, often luxury or high-impact items:

• Common Goods Subject to Excise Duty: Alcoholic beverages, tobacco, motor vehicles.
• Rates of excise are based on a percentage of the goods’ value or a fixed amount per unit.

Quit Rent

Cukai Tanah (Quit Rent) is Paid by property owners to state governments for land ownership.

Assessment Tax

Cukai Pintu (Assessment Tax): Paid to local authorities for property maintenance and infrastructure.

Tourism Tax

Tourism Tax is imposed on foreign tourists staying at hotels or similar accommodations. The rate is fixed at RM10 per night per room.

Conclusion

Malaysia’s tax system can be challenging, especially because it has so many different types of taxes and so many rules to keep in mind. Missing important details or deadlines can lead to penalties and unnecessary costs. 

Staying updated on tax obligations is also just as important for an individual and business to avoid penalties in Malaysia, This way you can also make the most of available deductions and incentives.