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Malaysia
Malaysia, located in Southeast Asia, is separated by the South China Sea into two non-contiguous regions: the Peninsula Malaysia region bordering Thailand (i.e. West Malaysia) and the Malaysia Borneo region bordering Indonesia and Brunei (i.e. East Malaysia). Malaysia is divided into 13 states and three federal territories, with Kuala Lumpur as the capital and Putrajaya as the seat of the federal government. The official language of Malaysia is Bahasa Malaysia, and the currency is the Malaysian ringgit (MYR).
VAT
N/A
CIT
24%
SSC
24%
CIT = Corporate Income Tax
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SSC = Social Security Contribution (Employee + Employer)
Economy
Over the last 60 years, Malaysia has developed from a primary commodities exporter to a strong industrial base for foreign electrical and electronics multinational corporations. As an oil and gas exporter, Malaysia has profited from higher world energy prices, but the government recognises the need to reduce the dependence on petroleum as the main source of revenue. In the last decade, as it moved up the industry value chain, Malaysia has emerged as an attractive regional hub for services, including financial services, information and communications technology (ICT), and logistics sectors. Malaysia is increasingly being recognised as an innovative international Islamic financial centre. It is also emerging as a springboard or centre for regional expansion into the Association of Southeast Asian Nations (ASEAN) in view of its strategic, central location and multi-lingual ‘Truly Asia’ mix of Malay, Chinese, and Indian populace.
Taxation
Taxation of individuals
An individual, whether tax resident or non-resident in Malaysia, is taxed on any income accruing in or derived from Malaysia. Resident individuals are also subject to tax on foreign-sourced income received in Malaysia.
Personal income tax rates
The following rates are applicable to resident individual taxpayers for year of assessment 2023 onwards:
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A non-resident individual is taxed at a flat rate of 30% on total taxable income.
A qualified person (defined) who is a knowledge worker residing in Iskandar Malaysia is taxed at the rate of 15% on income from an employment with a designated company engaged in a qualified activity in that specified region.
An approved resident individual under the Returning Expert Programme having or exercising employment with a person in Malaysia would also enjoy a tax rate of 15% for five years on income from an employment.
A qualified person (defined) who is holding a key position (C-Suite) is taxed at the rate of 15% on income from employment with a company that has been granted a relocation tax incentive under the PENJANA initiative.
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Social Contribution
Employees’ Provident Fund (EPF)
The Malaysian EPF is a compulsory pension scheme for all Malaysians. The EPF receives and manages retirement savings, encompassing compulsory contributions by all Malaysian citizens and permanent residents who are working in Malaysia. It is not compulsory for non-Malaysian citizens and non-permanent residents to contribute to the EPF, but they may elect to do so.
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Social Security Organisation
Malaysia also has a Social Security Organisation (SOCSO) who administers the Employment Injury Scheme (EIS) and the Invalidity Scheme (IS). SOCSO coverage and protection is limited to Malaysian citizens and permanent residents. A monthly contribution must be made and may fall under one of two categories:
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Both the employer and employee make monthly contributions to EIS and IS. The sum is based on the employee’s monthly wages and is restricted to a maximum of MYR 86.65 for the employer and MYR 24.75 for the employee.
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The employer makes a contribution to EIS only for employees who are not eligible to be covered under the IS, with the amount restricted to a monthly maximum of MYR 61.90. Malaysian employers are required to contribute to SOCSO on a monthly basis for all their employees (including foreign employees). However, the employment or assignment arrangement could impact the applicability of the requirement on the employee. As a result, each case needs to be examined individually to determine the applicability.
Employment Insurance System (EIS)
The EIS provides certain benefits and a re-employment placement programme for insured persons in the event of loss of employment to promote active labour market policies. The EIS covers only Malaysian citizens and permanent residents.
Both the employer and employee make monthly contributions of 0.2% of employee's wage, restricted to a maximum of MYR 9.90.
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Taxation of legal persons
For both resident and non-resident companies, corporate income tax (CIT) is imposed on income accruing in or derived from Malaysia. Resident companies are also taxed on foreign-sourced income received in Malaysia. The current CIT rates are provided in the following table:
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Value Added Tax
Sales tax
Sales tax is a single-stage tax imposed on taxable goods manufactured locally by a registered manufacturer, and on taxable goods imported by any person. Sales tax is generally an ad valorem tax. Specific rates of sales tax are currently only imposed on certain classes of petroleum (generally, refined petroleum). The ad valorem rates are 5% or 10% depending on the class of goods.
Service tax
Service tax is a consumption tax levied and charged on any taxable services provided in Malaysia by a registered person in carrying on one's business. The rate of service tax is 8% for all taxable services except for the following which is at 6%:
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Provision of food & beverage services
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Telecommunication services
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Parking services
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Logistics services
OUR PRESENCE IN MALAYSIA
Our office In Kuala Lumpur can count on the support of a firm of Accountants and Auditors founded in 2009 made up of 1 Partners as well as a staff of 8 people who work daily in the areas of auditing, payroll processing, accounting, tax assistance and compliance.
