Regardless of if it is a resident or non-resident company, all Sendirian Berhad (Sdn Bhd) companies operating in Malaysia are required to appoint a licensed Tax Agent to prepare the tax file to the Inland Revenue Board of Malaysia. Under the Income Tax Act (1967). The tax return must be submitted within 7 months after the end of the financial year of a company.
Taxation for Foreign-Owned Sdn Bhd Company in Malaysia
Effective from 2018 Year Assessment, the following corporate taxation rate applies to all Malaysian Sdn Bhd companies:
For all ‘non-resident’ status Sdn Bhd companies, for eg; companies with more than 50% foreign shareholders, the effective tax rates would be at 24% flat.
Taxation for Small and Medium-sized Enterprises (SME) Sdn Bhd in Malaysia
How do we classify a company to be a SME? If the paid -up share capital is less then RM 2.5 million at the beginning of the Year of Assessment, your company will be considered as a SME and the chargeable tax will be subjected to the rates below.
- For the first RM 600,000 = 17%
- Above RM 600,000, chargeable income tax rate will be at 24%
What If My Company Incur a Loss Instead of a Profit?
According to the tax regulations, business losses are allowed to be offset against the income in the current financial year.
All non-utilised losses can be carried forward indefinitely and get offset whenever in need. This is an exception to dormant companies when loss offsetting is only allowed when the shareholders meet certain conditions of the continuity.
Unabsorbed capital allowances are also allowed to be carried forward indefinitely and be utilised whenever needed. Similar to revenue, dormant companies are only allowed to carry forward capital allowances only if shareholders can meet the conditions of continuity.
Do Newly Established Companies Need to Pay Taxes in Malaysia?
Every new company does not need to pay income tax before commencing their trades.
However, there are certain things a newly incorporated company has to do:
Who Can Submit Tax Returns in Malaysia?
Foreign-owned companies are always advised to seek consultations from licensed tax agents to prevent making mistakes such as improperly filled tax return Form C, late filling taxes and overlooking submission of documents such as CP 204 and CP 204 A.
Duties that can be done by tax agents include:
There are benefits when you engage a tax agent:
Tax agents are financial experts who specialises in tax laws and accounting as well as any finance-related consultation. There are generally 4 types of tax preparers namely:
- Certified Public Accountants (CPA)
- Enrolled agents
- Tax attorneys
- Non-credentialed preparers
Read more about tax services and tax agents in Malaysia here.
My company is not resident in Malaysia. Does the temporary presence of my employees or personnel in Malaysia due to COVID-19 travel restrictions lead to the creation of a permanent establishment in Malaysia?
LHDNM will consider such temporary presence of employees or personnel does not result in the creation of a permanent establishment in Malaysia, provided it meets the following criteria:
a. your company does not have a permanent establishment in Malaysia before the existence of COVID-19 travel restrictions;
b. there are no other changes to the economic circumstances of the company;
c. the temporary presence of your employees or personnel in Malaysia are solely due to travel restrictions relating to COVID-19;
d. the activities performed by the employees or personnel during their temporary presence would not have been performed in Malaysia if not for the COVID-19 travel restrictions.
My company is unable to convene a meeting of the BOD in Malaysia because of COVID-19 travel restrictions. Will this have an effect on the company’s residence status in Malaysia?
If your company is not able to convene its BOD meeting in Malaysia due to COVID-19 travel restrictions, Lembaga Hasil Dalam Negeri Malaysia (LHDNM) is prepared to presume the company as a Malaysian resident, provided it meets all the following conditions:
a. the company is a resident in the immediate previous year of assessment;
b. the directors of the company have to attend the BOD meeting held outside Malaysia (either physical meeting or via electronic means) due to COVID-19 travel restrictions.
I am currently outside of Malaysia because of COVID-19 travel restrictions. Does my absence from Malaysia affect my residence status in Malaysia?
It will not affect your residence status in Malaysia. If you are an individual who is temporarily absent from Malaysia because of COVID-19 travel restrictions, the period of temporary absence shall be taken to form part of your period or periods in Malaysia for the purpose of determining tax residence.