All companies operating in Malaysia must file tax returns regardless of their resident status. The Income Tax Act (1967) requires that tax returns be filed within 7 months of the end of a company’s financial year. A foreign owned Sdn Bhd will be needed to engage the services of a licensed tax agent who files the returns on its behalf according to the Year of Assessment. This information is submitted to the Inland Revenue Board.
Taxation for foreign owned Sdn Bhd
Starting the Year of Assessment 2016, resident Sdn Bhd, i.e. companies operating in Malaysia (resident status) are under the following corporate tax rates:
- For a net profit up to RM 500,000- 19%
- For every additional RM 1 in net profit – 24%
For non-resident Sdn Bhd companies, i.e. companies having more than 50% shareholding by foreigners, the effective rate is a flat rate of 24%.
What is the tax rate for SME Sdn Bhd Companies?
A company is considered small and medium enterprise classified has a paid-up share capital of less than RM 2.5 million at the beginning of the Year of Assessment. The chargeable tax is as follows for these companies:
- For the first RM500, 000, chargeable Income tax rate is 19% in YA 2016 (18% in YA 2017)
- Above RM500, 000 chargeable Income tax rate is 24% in YA 2016 (in Budget 2017)
There is a proposal for a reduced tax rate for increasing chargeable income in the YA 2017/2018.
If the Sdn Bhd financial year ran from 1 Jan 2016 to 31 December 2016, the tax rate is 19% for net profit (chargeable income) below RM 500,000. If the Sdn Bhd had the financial year as 1 Jan 2016 to 31 Jan 2017, the tax rate was 18% net profit (chargeable income) below RM 500,000.
An assessment of tax payable can also be altered by the declaration of investment holding. For example, in terms of selling land or company, property could be considered selling of capital assets instead of disposals of stock in trade. The chargeable income could be considerably higher in this case.
A company is allowed to revise the estimates of payable tax in the 6th and 9th months of the financial year. This is done with Form CP 204A. This is helpful in avoiding underestimation of tax which can attract penalties.