Overview of Malaysia’s Taxation System [Issue 2 of 2]
Explore the key components of Malaysia’s taxation system, from individual tax structures to international tax obligations, which collectively support the country’s economic growth and fiscal fairness.
Individual Income Tax
The progressive income tax structure for individuals ensures tax equity, aligning rates with income levels. Residents benefit from multiple tax reliefs, whereas non-residents are taxed at a flat rate of 30%.
Sales and Service Tax (SST)
Reinstated in 2018, the SST is a simpler alternative to the Goods and Services Tax (GST), comprising Sales Tax and Service Tax, applied to various goods and services at rates primarily set at 6% for services and 10% for goods.
Withholding Tax
This pre-collection mechanism for income tax from non-residents covers earnings like service fees and royalties, with rates varying by the type of income and applicable Double Taxation Agreements.
Foreign Income Tax
Recent legislative changes redefine ‘foreign tax’ and ‘foreign income’, affecting how international earnings are taxed in Malaysia, particularly concerning unilateral and bilateral credits.
Conclusion
Malaysia’s evolving tax system plays a vital role in the nation’s economic progression, adapting to global trends and local needs to enhance compliance and fairness.
