Other Corporate Taxes in Malaysia
Aside from the standard corporate tax in Malaysia, there are a few other taxes that need to be noted by companies in Malaysia. These include:
Both employers and employees must contribute to the Malaysian Social Security Organization (SOCSO). The tax rates are as follows
Employer’s contributions to SOCSO: Generally 1.75% of salaries
Employer’s contributions to Employees’ Provident Fund (EPF): 12% – 13% of the salary
Employee’s & Employer’s contributions to Employment Insurance Scheme: 0.2% of employee’s salary (capped at MYR 4,000 per month)
For those employers in the manufacturing and services sectors thatemploy more than a specified number of employees must contribute to the Human Resource Development Fund (HRDF), at the rate of 0.5% (5 to 9 employees) or 1% (10 employees or more) of the monthly wage.
Gains from disposals of real property are subject to a real property gains tax (RPGT) (link to RPGT article). The rates are listed below:
|For companies established in Malaysia|
Within 3 years
|4th year after acquisition||20%|
|5th year after acquisition||15%|
|For companies established outside Malaysia (within 5 years)||30%|
|6th year onwards||10%|
Petroleum income tax is imposed at the rate of 38% on income from petroleum operations in Malaysia. An effective petroleum income tax rate of 25% applies on income from petroleum operations in marginal fields.
A levy is imposed on crude palm oil and crude palm kernel oil where the price exceeds MYR 2,500 per ton in Peninsula Malaysia, and MYR 3,000 per ton in the states of Sabah and Sarawak.
A levy of 0.125% on contract works having a contract sum above MYR 500,000 is imposed on every registered contractor by the Construction Industry Development Board.
Local companies are subject to an incorporation fee of MYR 1,000, while foreign companies pay a higher fee (from MYR 5,000 to MYR 70,000). Stamp duty is levied at rates ranging from 1% to 4% of the value of property transfers, and at 0.3% on share transaction documents.
What is the Corporate Tax in Labuan
Corporate tax in the Malaysian federal territory, Labuan greatly differs from that of Peninsular Malaysia.
Business activities in Labuan are categorised into 4 different categories, namely:
Companies involved in any of these fields, banking, management, trade, licensing, insurance, consultancy, imports, exports, and advisory services are taxed at a rate of 3%.
Labuan companies that deal with other Malaysian entities are considered to be involved in non-Labuan business activity. According to the Income Tax Act, such companies are to pay a 24% corporate tax on their net profit.
Tax Compliance for Corporations
It is compulsory that each company file its own tax return unless they fit the requirements for a group relief. Companies are deemed to be related if at least 70% of the paid-up capital of the surrendering company is either directly or indirectly owned by the claimant company or vice versa.
The alternative scenario is that at least 70% of the paid-up capital of the surrendering company and claimant company is either directly or indirectly owned by another company which is a tax resident of and incorporated in Malaysia.