Malaysia Corporate Tax Guide for Foreign Companies
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| **Information updated as of May 2025 |
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Malaysia continues to be a strategic hub for foreign companies expanding into Southeast Asia. With its growing economy, competitive costs, and investor-friendly policies, it's an attractive destination for setting up operations.
However, understanding and complying with Malaysia’s tax system is non-negotiable. This article outlines the key tax obligations foreign businesses should be aware of when operating in Malaysia — updated for 2025.
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Corporate Income Tax
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Companies generating taxable income in Malaysia are subject to corporate income tax. Malaysia’s corporate tax system uses a tiered structure as follows:
- Standard corporate tax rate: 24%
For companies with paid-up capital of RM2.5 million or less and annual revenue not exceeding RM50 million, preferential rates apply:
- First RM150,000 of chargeable income: 15%
- Next RM450,000: 17%
- Above RM600,000: 24%
!! Eligibility is subject to conditions outlined in the government’s SME definition and tax regulations. |
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Sales & Service Tax, SST
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Malaysia’s indirect tax regime consists of Sales Tax and Service Tax.
- Sales Tax: Applies to certain locally manufactured and imported goods.
- Service Tax: Applies to designated service sectors.
Common SST-Registered Services:
- Restaurants / Cafés
- Accommodation services (Hotels, Inns, etc.)
- Nightclubs, dance halls, wellness centers, massage parlors, bars, karaoke centers
- Private clubs
- Golf clubs and driving ranges
- Betting and gaming activities
- Telecommunication / Internet services
- Other service providers (e.g. car rental, advertising, domestic flights, cleaning services, vehicle repair, etc.)
- Economic and underwriting agents (non-financial services)
- Logistics service providers
- Professional services (e.g. accounting, legal, design, professional engineering, etc.)
- Beauty salons, gyms, fitness centers
！！ SST applies to specific industries and annual revenue thresholds. It is advisable to consult a qualified tax advisor to determine whether registration and collection are required. |
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Transfer Pricing
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Conducting transactions with related companies — locally or internationally? Transfer pricing compliance is critical.
If your company engages in controlled transactions (e.g., purchase, sales, financing) under the following circumstances:
- You are a small/medium or multinational enterprise
- You deal with related domestic or foreign entities
- You provide or receive financial assistance exceeding RM50 million
Then you must comply with the transfer pricing documentation requirements as outlined by the Inland Revenue Board of Malaysia (LHDN). |
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Withholding Tax
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Running Facebook or Google ads? You may have a tax obligation in Malaysia.
Certain payments to non-resident entities are subject to withholding tax in Malaysia, depending on:
- Whether the payee’s country has a Double Tax Agreement (DTA) with Malaysia
- The type of payment (e.g., advertising, royalty, interest, technical services)
举例：
Facebook (resident in Ireland) and Google (resident in Singapore) both have DTAs with Malaysia. Therefore, the withholding tax rate applicable is 8% for digital ad payments.
Other common types of withholding tax：
| 类型 |
举例 |
税率 |
| Digital Advertising |
Facebook / Google / TikTok Ads |
8% |
| Interest |
Foreign loans |
15% |
| Software Royalties |
Licensed overseas software |
10% |
| Management/Tech Fees |
Foreign consultancy or services |
10% |
It’s essential to confirm the DTA status of your service provider to determine the correct tax rate. |
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Personal Income Tax
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Not just companies — individuals are also subject to income tax in Malaysia.
Tax filing is based on the source of personal income:
- Form BE: For individuals with employment income only, and no business income
- Form B: For those with business or freelance income, such as sole proprietors or commission agents
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Final Thoughts : Tax Compliance Is a Business Priority
Don’t wait until an audit to understand your tax obligations. From corporate tax filing to withholding digital ad payments, non-compliance can cost your business in penalties, reputation, and operational delays. |
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