Regardless of if it is a resident or non-resident company, all Shd 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:
Net taxable rate for profits = 24%
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 of shareholders meet certain conditions.
Are Newly Established Companies Required to Pay Taxes?
Every new company does not need to pay income tax before commencing their trades.
Tax estimations have to submitted within 3 months of the first sales and submitted to the Inland Revenue Board
Form CP 204 should also be submitted if the company has a paid-up capital of less than RM 2.5million (SME)
Tax installments are also to be paid monthly if a profit is forecasted.
Form C to Inland Revenue Board within 7 months
All unpaid taxes to be paid within 7 months after correction of tax payable
Who Can Submit Tax Returns?
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:
Submitting tax returns on behalf of the company, with the company signing on the returns
Representing the company in any tax related communications with the IRB
Representing the company in legal matters related to tax like tax appeals
Some benefits of engaging a tax agent includes:
This is very crucial when filing tax returns as underestimation can lead to penalties while overestimation loses the company money. Wrongful classification of income and expenses can also have a big change in the tax liability of the company.
Malaysia has various tax benefits and incentives. Using a tax agent can make the company enjoy these benefits and have a lower tax burden.
For a foreign company, navigating the Malaysian bureaucracy can be a challenge. Engaging a tax agent clears this headache and leaves the directors to concentrate on business.
Simple oversight can be costly. Having a tax agent ensures that all documents are filed properly and that all information is accurate.
If your business requires a taxation expert, reach out to us! We’ll be able to provide tax advices, and plan your taxes in the most efficient way to reduce the amount of taxes to be paid.
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)
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?Tommy2021-09-17T15:17:29+08:00
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?Tommy2021-09-17T15:14:33+08:00
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?Tommy2021-09-17T15:13:47+08:00
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.