As an owner of a private company in Malaysia, you will fall under the jurisdiction of the Malaysian Private Entities Reporting Standards or MPERS.
In case you had adopted the Financial Reporting Standards (FRS) framework for your enterprise’s financial reporting, the new directive states that you will need to use the MFRS or MPERS framework for the yearly period starting from the 1st of January, 2018.
Business taxation will apply for all business entities like the sole proprietorship, partnership, limited liability partnership, public and private limited company, branch office of an overseas company and business trust in Malaysia.
If a company is managed and controlled in Malaysia, it is considered as a resident and will be taxed on income generated from the country. If you own a bank or an insurance company or a shipping or air transport business, you will not be exempted from foreign-source income in Malaysia.
Whatever you earn in Malaysia is considered as taxable income by the authorities. Your earnings may include any type of interest or dividends, premiums or royalties, rents received as well as the profits from your business company in Malaysia.
Your income will be appraised on a current year principle under the tax appraisal system currently in operation. The tax appraisal system is solely governed by the Inland Revenue Board of Malaysia (IRBM) and it is characterized as a Self-Assessment System or (SAS).
As the name implies, you have to work out how much tax you need to pay on your own and be truthful about declaring your income to the IRBM.
Since taxpayers are now accountable for their tax related issues, you will need to have adequate knowledge on this subject so you can appraise your own business tax Malaysia liability appropriately and pay on time.
The business tax Malaysia or company tax for both resident and non-resident companies in Malaysia is 24%. If the paid-up capital is RM 2.5 million or less for a resident company when the basis period of annual assessment commences, the company tax is 18% on the first RM 500,000 of income and it rises to 24% on the successive increment of chargeable income.
As a resident, if your chargeable income is between RM 5,000 and RM 1,000,000 after personal benefits have been deducted, the personal income tax rate varies from 1% to 26%. If your income exceeds RM 1,000,000 after the deduction of personal benefits, then the tax rate increases to 28%.
The personal income tax rate for non-residents is fixed at 28% respectively.
For the calculation of Withholding Tax (Part of Business tax Malaysia), the categories of income are mentioned in the Double Taxation Agreement (DTA) or in the Income Tax Act of 1967.
For the amount paid for services related with the utilization of property or rights or setting up of operation of plant or machinery, the withholding tax rate is fixed at 10%. The same rate applies for any amount paid for technical counsel or services related with technical management or management of any commercial, manufacturing or scientific projects.
For any rent or payment made for utilizing moveable property, the withholding tax is 10% as well. For any interest obtained from Malaysia, the withholding tax is 15% while it is 10% for any royalty received from the county. A public entertainer has to pay 15% of withholding tax for any income or payment he or she received for performing in Malaysia.
The withholding tax for contract payment is set at 10% for any non-resident contractor and his or her employees need to pay 3% as well. For all types of profits defined by paragraph 4(f) of Income Tax Act 1967, the withholding tax is 10%.
Although no capital duty is charged in Malaysia, a local company is obligated to pay an incorporation fee of RM 1,000 while the same type of fee ranges between RM 5,000 to RM 70,000 for a foreign company.
The business tax Malaysia required to pay on employment income is held back by the employer under the pay-as-you-earn (PAYE) system and then sent to the relevant tax authorities. The real property tax varies from state to state in Malaysia.
It is mandatory for both the employer and employee in Malaysia to make payments to the Social Security Organization (SOCSO). For every employee filed at the SOCSO, the employer usually pays 1.75%.
Contributions to the Employee Provident Fund (EPF) are made by the employer as well as the employee at the rate of 11% to 13% of the employee’s salary. It has become legally binding for both employer and employee to pay 0.2% of the employee’s salary to the Employment Insurance System (EIS) from 2018 onward.
The maximum contribution for the EIS is fixed at RM 4,000 per month. The stamp duty is calculated at the rate of 1% to 3% of the value of transferred property in Malaysia and one has to pay 0.3% on share transaction papers as stamp duty. Well, now you need to know about how to register a company in Malaysia online as a foreigner.
