A Quick Guide: 2023 Malaysia Corporate Income Tax

Malaysia Corporate Income Tax: Meaning and Types

Ideally, Corporate Income Tax (CIT) is an imposed tax on companies, brands, or organizations operating within a particular region (or country). It follows corporate business laws and is not exclusive to only businesses set up within the location.
That being understood, Malaysia corporate income tax is a directly imposed tax on corporations or businesses within the country. All revenues or incomes (including royalties, dividends, and premiums) generated during operations in Malaysia must be paid to the government. This country’s unique taxation system was established and reviewed by the Inland Revenue Board of Malaysia (IRBM). Resident and non-resident companies in Malaysia are taxed according to the Income Tax Act 1967 (Customs Act). However, the rate may differ from one company to another.
If you are about to have a newly established company in Malaysia, you must become aware of the CIT to thrive successfully. Below is a list of the two types of companies with their corporate tax rates.

Resident & Companies

Resident Companies	Tax Rate
Resident company (other than company described below)	chargeable income taxed at the rate of 24%
– with up to 2.5 million Malaysian ringgit (MYR) or less as paid-up capital and gross income from business of not more than 50 million MYR. – without direct or indirect control over another company with over 2.5 million MYR paid-up capital. – without direct or indirect control by another company with over 2.5 million MYR paid-up capital.	17% on first 600,000 MYR (as the first chargeable income) 24% on the excess of 600,000 MYR (chargeable income)

Non-Resident Companies

Non-Resident Company

24%

In general, the standard corporate income tax rate in Malaysia is 24%.

What are the Criteria for Tax Residency and Taxation in Malaysia?

The basis period of year of assessment, management, and executives meeting are factors responsible for taxation in Malaysia.
The requirement for taxation is often based on a company’s residency status. The country has a territorial system where non-resident and resident companies are taxed based on generated revenues or incomes derived during regional operations.
However, an organization becomes a full tax resident in Malaysia on three main criteria:

If the basis period year of assessment is performed in Malaysia
If the affairs’ management and control are performed in Malaysia
If the meeting of executives and board of directions takes place in Malaysia

The only companies excluded from this taxation system are international corporations involved in air transportation, shipping, banking, and insurance.

Need Help with Paying Tax in Malaysia?

What are Malaysia Corporate Income Tax Incentives?

Tax incentives in Malaysia are the Pioneer status (PS) and investment tax allowance, which organizations in agriculture, manufacturing, hotel and tourism qualify for.
The former is a five-year corporate tax exemption on statutory income. The latter is a 60% allowance on qualifying capital expenditure over the next five years.
Other Malaysia corporate income tax incentives include the reinvestment allowance (companies get 60% QCE over the next fifteen years), approved service projects, and principal hub.

Malaysia Corporate Income Tax Deduction: The Deductible and Non-Deductible Expenses

In Malaysia, expenses wholly and exclusively incurred when a company generates profits are subject to income deduction. These expenses are divided into two types – the deductible and the non-deductible.

The most common example for deductible expenses for corporate tax are:

Employee’s salaries
Cost of office repair and maintenance
Marketing and advertisement
Lease or rental property expenses
Business travel expenses
Employee entertainment and leisure expenses
Corporate insurance
New talents acquisition expenses

The most common example for non-deductible expenses for corporate tax are:

The company’s trademark registration
Company donations and charity
Local or capital expenditure
Pensions
Fines, penalties
Licensing and registration expenses

The Significant Responsibilities of Every Company Filing Corporate Income Tax in Malaysia

Every business corporation in Malaysia (resident or non-resident) has three main responsibilities when filing corporate tax. They include:

1. Follow a Standard Filing Method

The first responsibility is to follow a standard filing method by estimating the tax payable through either e-filing or manual submission at the LHDNM Processing Center. The requirements are that a newly established company in Malaysia must file the estimated tax after three months of operation, or an existing company must file 30 days or a month before the new year.

2. Observe Tax Payment Method and Deadline

The second responsibility is to observe the tax payment method and pay the estimated tax before the deadline. The payment method permissible is through the CP207, and the deadline varies from one company to another. However, it must be on or before the 10^th of each month. New companies must pay starting from the 6^th month of the basis year of assessment. Existing companies must pay starting from the 2^nd month of the basis year of assessment.

3. Form C Furnish

The last part is for the new or established company to furnish Form C at the LHDNM Center or on the e-facility platform.

How We Can Help

At Premia TNC, we help with Malaysian taxation services. We have professional experience sorting corporate income tax problems based on our knowledge of the country’s economy and tax rate. Our services to clients include tax estimation (CPP204) filing, tax return filing, tax file registration, tax computation preparation (such as account analysis), and income tax schedule planning. Premia TNC’s Malaysian taxation services also extend to personal income and sales and services tax.
Overall, we are the best shot regarding corporate taxation services for newly established companies trying to set up in Malaysia.