Malaysia is an increasingly attractive destination for foreign businesses due to a growing economy and a favorable tax system. This tax system is often a significant factor for businesses considering whether to incorporate or expand their operations in Malaysia. Below we take a look at some of the key features of the Malaysian tax system and some of the benefits it offers to businesses.

The Malaysian Corporate Tax Rate

The corporate tax rate in Malaysia is currently 24%. This rate applies to both resident and non-resident companies.

The corporate tax rate may vary depending on the type of business activities carried out by the company. For example, small and medium enterprises (SMEs) may be eligible for a reduced tax rate of 17% depending on their annual revenue.

The Corporate Tax System

The corporate tax system in Malaysia is based on the self-assessment principle, which means that companies are responsible for determining their own tax liability. Companies must submit their corporate tax returns annually and pay the tax owed within 6 months of the end of their financial year.

Double Taxation Agreements

Malaysia has signed double taxation agreements with over 60 countries to avoid double taxation of income earned by companies operating between Malaysia and those participating countries. These agreements help reduce the tax burden on companies and encourage investment.

A company operating both in Malaysia and in another country with which Malaysia has a double taxation agreement may be eligible for a tax credit in that company’s country of residency. This tax credit is based on tax paid and helps to reduce the overall tax liability of the company.

Incentives for Investors

The Malaysian government has implemented incentives to encourage investment and promote economic growth in the country. Some of these incentives include tax holidays, tax exemptions, and investment allowances. These incentives make Malaysia an attractive destination for foreign investment and encourage local businesses to expand their operations.

• Tax holidays are available for companies that invest in approved industries, such as manufacturing, agriculture, and tourism. Tax holidays are reserved for industries that make significant capital investments. The length of the tax holiday varies depending on the type of industry and the size of the investment, but it can range from 5 to 10 years.
• Tax exemptions are available for companies that invest in approved industries. These exemptions may include exemptions from corporate income tax, import duties, and sales tax.
• Investment allowances are available to companies that make significant investments in Malaysia. These allowances provide a tax reduction based on the amount of the investment made by the company.

Final Thoughts

The Malaysian tax system is a key factor for businesses that are in the process of deciding whether to incorporate in Malaysia or expand their operations in the country. In an effort to attract foreign investment and encourage growth the government offers incentives that include double taxation agreements, tax holidays, tax exemptions, and investment allowances. These incentives, along with a favorable tax system and growing economy, make Malaysia an attractive destination for foreign investment and expansion.