Corporate Tax Law: Part I

Company Tax

A company, whether resident or not, is assessable on income accrued in or derived from Malaysia. Income derived from sources outside Malaysia and remitted by a resident company is not subject to tax, except in the case of banking and insurance business and sea and air transport undertakings. A company is considered a resident in Malaysia if the control and management of its affairs are exercised in Malaysia. Places of control and management are considered on the basis of where meetings of the Board of Directors are held.

A tax rate of 28% is applicable to both resident and non-resident companies. In the case of a company carrying on petroleum production, the applicable tax rate is 38%.

Resident Status

A company is tax resident in Malaysia if its management and control is exercised in Malaysia. Management and control is normally considered to be exercised at the place where the directors' meetings are held.

Income Tax Rates

 YA 1997YA 1998
Resident Companies
All income 3028
Nonresident companies
Rental of movable properties1010
Technical or management service fees1010
Business and other income3028

Where the recipient is resident in a country which has a double tax treaty with Malaysia, the tax rates may be reduced.

Interest paid to a nonresident by a bank or a finance company in Malaysia or on approved loans exceeding RM250 million where application was received before 25 October 1996 or on loans granted to or guaranteed by the Malaysian Government is exempt from tax.

Collection of Tax

Tax is normally collected within 30 days after the issue of a notice of assessment by the tax authorities. However, companies are required under the compulsory tax payment scheme to pay tax by bi-monthly installments for each assessment year commencing from the month of January or February based on an estimate of tax payable.

Tax on royalties, rental of movable properties, technical or management service fees and interest received by nonresident companies are collected by means of withholding tax. The withholding tax is payable within one month of crediting or paying the nonresident company, whichever is earlier.

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Knowledge Base ID :   1335
Last Reviewed :   May 31, 2001

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