Five Company Taxes In Malaysia You Need To Be Aware Of
As a business owner, it is critical for you to be familiar with the various types of company taxes applicable to your business in Malaysia. Getting familiar with these types of taxes will also help you in obtaining the right kind of tax incentives in Malaysia. By engaging in a professional accounting service in Malaysia, you will be able to keep up with the changing tax regulations.
This post explains the five major company taxes in Malaysia.
1. Corporate Tax
Corporate income tax is the direct tax that businesses in Malaysia have to pay under the Income Tax Act 1967. This tax is applicable to all companies registered in Malaysia. Generally, the rate of the corporate tax is anywhere between 17% to 24% for companies that generate taxable income from sources within Malaysia.
The exact rate of the corporate tax can greatly vary from business to business and on the basis of the yearly budget. However, it is the responsibility of every company in Malaysia to submit and file the corporate tax on a yearly basis.
The taxable income in Malaysia includes business profits, interests, rents, and other sources of income. Accounting services can help businesses in evaluating these incomes and making sure the company is complying with all of the essential rules and regulations related to corporate tax.
2. Withholding Tax
Withholding tax is applicable to companies that are using the services of non-resident individuals or companies when a significant amount of payment has to be deducted and submitted as income tax.
There are certain tax incentives in Malaysia that allow you to avoid withholding tax or at least reduce it, like the double taxation agreements. Contact a professional audit firm in Malaysia to understand such incentives. Companies must pay the withholding tax within one month from the date of payment to a non-resident individual or company.
3. Payroll Tax
According to the rules and regulations in Malaysia, it is the responsibility of the employer to retain a certain percentage of the employees’ remuneration like bonuses, incentives, commission, and salaries, which should be submitted as the Monthly Tax Deduction (MTD) to the LHDN.
It is important to show this type of tax on the payslip of the employees. The payroll tax has to be paid by the 15th of each month based on the remuneration provided to the employees in the previous month.
4. Stamp Duty
It is essential to pay the stamp duty when your company is dealing with legal, commercial, and financial documents. Some of the common taxable instruments include partnership and mortgage agreements.
Generally, companies have to pay two types of stamp duty: the fixed tax rate you have to pay and the one that is dependent on the nature of the instrument. You can also rely on accounting services to get tax incentives in Malaysia.
5. Sales and Service Tax (SST)
The sales tax is a tax that is applicable to manufactured products or products that are imported to Malaysia by a taxable company. When the revenue of such a company is more than RM500,000 within the period of 12 months, the company must pay the sales tax.
However, there are several tax incentives that apply to service tax. Items such as face masks, medical and laboratory equipment, PPE, and disposal items are exempted from the service tax.
It is important that you do not confuse service charges with service tax. Service tax is the tax that is applicable on taxable services in Malaysia like accommodation, gaming, and services being provided by a taxable individual that has a total value of greater than RM500,000 in 12 months.
For the food and beverages industry, the threshold of the total value is greater than RM1,500,000 in 12 months. Since there are different rules that govern the types of SST taxes in different industries, it is better for the companies to rely on a professional accounting service and an audit firm to ensure they are able to keep up with these regulations.
In a Nutshell
These are the five most important taxes in Malaysia. In fact, companies with different business nature are required to pay different taxes. Accounting services in Malaysia help the companies in getting all of the available tax incentives and get through the process of taxation in an efficient manner.