Corporate Income Tax
The standard corporate tax rate is 25%.
For companies capitalized at less than MYR 2.5 million the corporate tax rate is 20% on the first MYR 500,000, then subsequently 25%.
For petroleum, oil products, banking and insurance industries, different rates apply.
Income Tax Rate
- RM 0 – 2,500: 0
- RM 2,501 – 5,000: 1
- RM 5,001 – 10,000: 3
- RM 10,001 – 20,000: 3
- RM 20,001 – 35,000: 7
- RM 35,001 – 50,000: 12
- RM 50,001 – 70,000: 19
- RM 70,001 – 100,000: 24
- RM 100,001 – 150,000: 26
- RM 150,001 – 250,000: 26
- RM 250,000+: 26
The Goods and Services Tax is 6%.
As of 1 April 2015, the Sales and Services Tax was replaced by a Goods and Services Tax. There are products that are exempt from the GST, including agricultural products, livestock, exported goods and certain services.
- Dividends: No withholding tax applies to dividends paid to non-residents.
- Interest: A withholding tax of 15% applies to interest paid to non-residents, which may be reduced under a tax treaty.
- Royalties: A withholding tax of 10% applies to royalties and technical service fees, which may be reduced under a tax treaty.
- Rental or installation fee tax: A 10% withholding tax applies to income received by non-residents from rental of movable property or installation fees from services rendered in Malaysia. These may be reduced under a tax treaty.
Capital tax: Capital duty is levied at rates from MYR 1,000 to MYR 70,000.
- Real estate tax: Varying rates apply to real property taxes depending on state.
- Stamp duty: Levied between 1% and 3% of the value of property transfers, plus 0.3% on share transaction documents.
- Customs and excise duties: Most dutiable goods have import duties from 5% to 30%.
Time to prepare and Pay Taxes
Employers Social Security and statutory contributions
Total social security rate for companies: 13.78%.
The employer contributes 1.78% of an employee’s remuneration to social security. In addition, the employer must contribute 12% to the national social security organization through an employee’s provident fund (EPF) scheme. The EPF provides retirement benefits to Malaysian employees.
Employees Social Security and statutory contributions
Total social security rate for employees: 11.51%
The employee contributes 0.51% and an additional 11% payable to the EPF.
There are specific rules for payroll and taxation in Malaysia, depending upon whether your company employs foreign nationals or local Malaysian employees. The primary concerns for a foreign company that needs to comply with tax laws in China are: individual income tax for employees in Malaysia, social security costs, payroll tax, goods and services tax (GST), withholding tax, business tax and permanent establishment concerns.
A remote payroll in Malaysia is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Malaysia. One option for a non-resident company to payroll its employees (local and foreign) in Malaysia is to use a fully outsourced service like a GEO which will employ and payroll the staff on their behalf.
Local Payroll Administration
In some cases, a company will register their business in Malaysia under one of the forms available, but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.
Larger companies with a commitment to Malaysia may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Malaysian payroll, and can fulfill all tax, withholding, and payroll requirements.
This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Malaysian employment laws.
Setting up payroll in Malaysia
Malaysian Ringgit (MYR)
Documentation Required for New Employees
Malaysians may work at will. Expatriates and foreign workers and are required to possess valid visas, work passes as well as employment passes prior to commencing work.
The Employment Act 1955 is the main legislation on labour matters in Malaysia. A Malaysia’s business environment is usually strike-free.
Frequency of Salary Payment
Invoice / Payslips required
Available monthly on web-site, pdf or paper.