What is the Tax Code for Companies in Malaysia?
Other Taxes Applicable To Companies In Malaysia
- Capital duty is levied between RM 1,000-70,000
- PAYE tax is withheld by an employer for forwarding to the IRB
- Real property taxes differ in different regional authorities as some levy quit rates.
- Social security by every company hiring Malaysian workers. The employer contributes 1.75% of the employee’s basic salary. There is also the Employees Provident Fund for which the employer contributes 11-13% of the employee’s basic salary.
- Stamp duty is levied at 1-3% of the value of the property being transferred. There is also a 0.3% levy on the value of shares being transferred.
This is strictly enforced in Malaysia with companies expected to follow some basic principles.
- Tax returns must be filed each financial year. The returns should be made by the company secretary within 7 months of the end of the financial year. Advance corporate tax is to be paid in 12 monthly installments in the case that the company estimates a profit.
- Consolidated returns cannot be done even for group companies. Each company must file separate returns. However, in some cases, companies are allowed to have up to 70% of their losses offset by profit from a related entity.
- A company can request for a ruling on a specific transaction regarding tax issues on that tax transaction.
Goods And Services Tax
Companies with a turnover of RM 500, 000 in Malaysia are required to have a Goods and Services Tax number. The Goods and Services tax applies for some goods and services at a flat rate of 6%. The GST must be submitted within 1 month of the fiscal year if the turnover was RM 5 million and more. If the turnover was less than this, the GST must be paid within 3 months of the taxable period.
Hiring A Tax Agent
Many companies in Malaysia opt to hire a licensed tax agent to deal with tax related matter. Generally, the tax agent takes on the duties of:
- Ensuring tax returns of the company are submitted at the required time after the company secretary has verified and signed.
- Acting on behalf of the company in any tax related communications with the IRB.
- Acting on behalf of the company in legal matters related to tax like tax appeals.
The benefits of hiring a tax agent include but are not limited to:
A tax agent ensures that the correct returns are filed without overestimation or underestimation of the taxable income which 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.
- Tax Benefits
The tax agent advises the company on taking advantage of the various tax incentives offered so that the company has a lower tax burden.
The tax agent helps negotiate the tax bureaucracy in at national and regional levels.
- Legal Troubles
The tax agent helps the company steer clear of legal troubles by ensuring all documents are filed properly and that all information is accurate.