2% Tax On The First RM100,000 For Individual Partners Receiving LLP Profits
Key Takeaway
From YA 2026, individual LLP partners receiving qualifying LLP profit exceeding RM100,000 should review their tax position and apply the prescribed calculation to determine the amount subject to the 2% tax.
The Income Tax (Determination of Chargeable Income of an Individual in Respect of Limited Liability Partnership’s Profit) Rules 2026, [P.U.(A) 278/2026] was gazetted on 31 July 2026 and applies from Year of Assessment (YA) 2026 and subsequent YAs. The Rules provide the method for determining an individual partner’s chargeable income arising from Limited Liability Partnership’s (“LLP”) Profit.
The chargeable income in respect of the profits of an LLP is determined using the following formula:
The chargeable income in respect of the profits of an LLP is determined using the following formula:
A/B x C
Where
A = statutory income in respect of LLP’s profit;
B = aggregate income
C = chargeable income
Where
A = statutory income in respect of LLP’s profit;
B = aggregate income
C = chargeable income
The chargeable income relating to the LLP profit is subject to the above tax treatment. Any remaining
chargeable income of the individual will continue to be taxed at the normal individual income tax rates.
For Malaysian tax residents, the normal resident individual tax rates under Para 1, Part 1 of Schedule 1, ITA 1967 (i.e progressive scale rates) apply, while non-residents are taxed at the applicable non-resident tax rate under paragraph 1A of Part I of Schedule 1 to the Income Tax Act 1967.
For Malaysian tax residents, the normal resident individual tax rates under Para 1, Part 1 of Schedule 1, ITA 1967 (i.e progressive scale rates) apply, while non-residents are taxed at the applicable non-resident tax rate under paragraph 1A of Part I of Schedule 1 to the Income Tax Act 1967.
