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Taxes in Malaysia

Taxes in Malaysia are mainly divided into categories.

  • Direct Tax
  • Indirect Tax

Direct Taxes are divided as follows:

  • Corporate Income Tax: Resident and non-resident organisations conducting business and earning taxable income in Malaysia are taxed on income accrued in or derived from Malaysia. Resident organisations carrying out business of air/sea transport, banking and insurance are taxable on their worldwide income.
  • Personal Income Tax: Income tax in Malaysia is imposed on income accruing in or derived from Malaysia. As such, every individual is subject to tax on income earned in Malaysia or received in Malaysia from outside Malaysia.
  • Real Property Gains Tax: Real Property Gains Tax is charged on gains arising from the disposal of real property, which includes land, buildings or shares of a Real Property Company.
  • Withholding Tax: Withholding tax is imposed on payments to non-residents in respect of the following:
    • Interest
    • Royalties
    • Payments to non-resident contractors, consultant or professionals having a permanent establishment (PE) in Malaysia
    • Remuneration of public entertainer
    • Payment for use of property or installation or operation of plant and machinery
    • Technical fees
    • Rent on moveable property
    • Other income under Section 4 (f)
  • Stamp Duty: Chargeable on certain instruments and documents.

Indirect Taxes are divided as follows:

  • Service Tax: Consumption tax levied and charged on prescribed taxable service provided by any taxable person.
  • Sales Tax: Consumption tax imposed on taxable goods manufactured locally and/or imported.
  • Import Duty: Import duties are levied on an ad valorem basis but may also be imposed on a specific basis. The values of goods are calculated in accordance with the World Trade Organisation principles. Import tax rates range from 0 – 30 per cent, although higher rates apply to luxury goods, tobacco, alcohol and processed and high-value food products.
  • Export Duty: Ad valorem basis on commodities that are exported and subjected to export duties.
  • Excise Duty: Excise duties are imposed on tobacco, alcoholic drinks and motor vehicles. No duty is liable on dutiable goods that are exported. The rates applicable range from 10 – 100 per cent, depending on the category of goods.