Corporate Tax Services in Malaysia for Foreign & Local Companies

Corporate tax in Malaysia isn’t just a number on a form. For local SMEs, it’s about meeting LHDN deadlines without missing deductions you’re entitled to. For foreign companies, it’s about understanding withholding tax, transfer pricing rules, and whether your structure actually protects you.

Malaysia’s standard corporate tax rate is 24%. In practice, many businesses pay significantly less by structuring correctly, claiming available incentives, and managing compliance proactively. At InCorp Malaysia, our licensed tax advisors work with both local and foreign companies to do exactly that — keep you compliant, reduce your tax exposure, and make sure you’re never caught off guard by LHDN.

This service is designed for foreign companies entering Malaysia, SMEs scaling operations, and groups managing cross-border tax exposure.

How Does Company Taxation Work in Malaysia?

Malaysia generally taxes income accruing in or derived from Malaysia, subject to specific rules, exemptions, and the treatment of foreign-sourced income. A company is resident in Malaysia if at any time during the basis year the management and control of its business is exercised in Malaysia

Note, though, that all companies in Malaysia adopt the single-tier system, under which dividends paid by them are not taxed. Foreign-sourced income treatment depends on the applicable legislation, exemption conditions, and the taxpayer’s activities, including sector-specific rules for certain industries.

Malaysia Corporate Income Tax Rate

The standard rate of corporate taxation in Malaysia is 24% for a resident company.

For SMEs — resident companies with paid-up capital of RM2.5 million or less and gross business income not exceeding RM50 million — a preferential three-tier rate applies since Year of Assessment (YA) 2023: 15% on the first RM150,000 of chargeable income, 17% on the next RM150,001 to RM600,000, and 24% on income above RM600,000.

This makes early tax planning critical, especially for companies with foreign shareholding or group structures.

Note that effective from YA 2024, this preferential rate does not apply if more than 20% of the company’s paid-up ordinary share capital is owned directly or indirectly by foreign entities or non-Malaysian citizens — those companies are taxed at a flat 24%.

Other Key Tax Considerations for Businesses in Malaysia

Withholding Tax on Cross-Border Payments

Malaysia does not impose withholding tax on dividends under the single-tier system.

However, withholding tax applies to certain payments made to non-residents, including:

• Interest
• Royalties
• Technical and service fees

Withholding tax may apply to certain payments to non-residents, including interest, royalties, and some service-related payments, with rates depending on the nature of the payment and any applicable treaty relief.

Capital Gains Tax on Unlisted Shares (Effective 2024)

Malaysia does not generally impose a broad capital gains tax on most disposals of capital assets, subject to specific regimes such as CGT on certain unlisted shares and RPGT.

However, effective 1 March 2024, a Capital Gains Tax (CGT) applies to the disposal of unlisted shares in Malaysian companies:

• 10% on net gains, or
• 2% on gross proceeds (for certain disposals)

This has direct implications for:

• Group restructuring
• Shareholder exits
• M&A transactions
• Investment holding structures

Real Property Gains Tax (RPGT)

Malaysia imposes RPGT on gains arising from the disposal of real property, including:

• Land and buildings
• Shares in real property companies

For disposals within 3 years of acquisition, the rate can go up to 30%.

Group Relief and Loss Utilisation

Malaysia provides a Group Relief Scheme for resident companies, subject to eligibility conditions.

Under this framework:

• Up to 70% of current-year adjusted losses can be transferred to related companies
• Business losses can be offset against income from other sources within the same year

Other Taxes and Statutory Obligations

Businesses in Malaysia may also be subject to:

• Stamp duty:
  • 1% to 4% on property transfers
  • 0.3% on share transactions
• Quit rent (state-level property tax)
• PAYE obligations, where employee income tax is withheld and remitted to IRBM

OECD Global Minimum Tax (Pillar Two)

Multinational groups operating in Malaysia are subject to the OECD Global Anti-Base Erosion (GloBE) Rules.

Effective for financial years beginning on or after 1 January 2025:

• A Qualified Domestic Minimum Top-up Tax (QDMTT) of 15% applies

This ensures Malaysia retains taxing rights over profits that would otherwise be undertaxed.

This is particularly relevant for groups with global revenues exceeding EUR 750 million, which should assess their Pillar Two exposure as a priority.

Social Security Contributions in Malaysia

Malaysia also has mandatory social security contributions to the Social Security Organisation (SOCSO), the Employment Insurance System (EIS), and the Employees Provident Fund (EPF) by both employees and employers.

Employer obligations for SOCSO, EIS, and EPF depend on the employee’s status and the applicable statutory rules. Businesses should confirm their obligations for Malaysian citizens, permanent residents, and foreign employees based on current agency guidance

Sales and Services Tax (SST) in Malaysia

Malaysia also levies a sales tax on goods manufactured or imported, with certain exemptions like live animals, antibiotics, unprocessed food, and vegetables. (standard rates are 5%, 10%).

Service tax is generally 8% for taxable services, except for selected categories that remain at 6%, including food and beverage, logistics, telecommunications, and parking, subject to current Customs guidance and scope rules. Businesses should review which rate tier applies to their specific service category to ensure correct SST compliance based on current Royal Malaysian Customs guidance.

SST registration thresholds vary by taxable service category. Businesses should confirm the applicable threshold for their sector based on current Customs guidance. This tax must be paid within one month after the end of the taxable period.

Misclassification of service categories is one of the most common SST compliance risks for businesses.

Avoidance of Double Taxation in Malaysia

Malaysia has an extensive network of double tax agreements and has also adopted the OECD Multilateral Instrument for covered tax treaties. Key legislation includes the Income Tax Act 1967, the Sales Tax Act 2018, the Service Tax Act 2018, and related subsidiary legislation and guidance

Foreign tax credit treatment depends on whether treaty relief or unilateral credit applies, and the relief is generally limited by the amount of Malaysian tax attributable to the relevant foreign income. But this credit can’t exceed the value of the Malaysian tax payable on the foreign income.

How does Transfer Pricing work for Malaysian Companies?

The country also has a Transfer Pricing mechanism under the provisions of Section 140A of the Income Tax Act 1967 and the Transfer Pricing Rules 2012. It is based on the arm’s length principle to be applied to transactions between associated persons, as notified by the IRBM.

Filing of Corporate Income Tax in Malaysia

Malaysia operates a self-assessment regime, and a tax return must be filed within seven months of the company’s fiscal year-end (FYE), which is generally the accounting year. Late or inaccurate filings may trigger penalties or audit scrutiny from LHDN.

Companies can also pay advance corporate tax in 12 monthly instalments, but consolidated returns are not permitted. So every company is required to file a separate tax return. But 70% of a company’s adjusted losses may be offset against profits of a related entity, with certain restrictions and conditions.

Non-compliance may trigger penalties, and taxpayers may seek advance rulings on the tax treatment of specific transactions where available

Businesses should also note Malaysia’s mandatory e-Invoicing rollout, managed by the Inland Revenue Board via the MyInvois portal. Under the Finance Act 2024, companies may only claim tax deductions for expenses supported by a validated e-invoice. Phase 3 of the rollout — covering businesses with annual turnover between RM5 million and RM25 million — took effect from 1 July 2025.

Ensuring your invoicing processes are e-Invoice compliant is now a direct tax compliance obligation, not just an administrative matter. This is not just a finance function change. It directly affects tax deductibility and audit readiness.

Which Tax Incentives Can My Business Claim in 2026?

Among the existing tax incentives, the country offers Pioneer Status, Investment Tax Allowance, and Reinvestment Allowance, with benefits varying by sector, investment profile, and approval conditions.

Incentive availability depends on the promoted activity, sector, location, and approval conditions set by the relevant authorities.

Among the new incentives proposed, the Government has proposed automation equipment allowances and accelerated capital allowances in IoT, big data, robotics, and other technology drivers.

Common Tax Risks

Common tax risks businesses face in Malaysia include:

• Incorrect SST classification and registration thresholds
• Transfer pricing documentation gaps
• Missing e-Invoicing compliance requirements
• Misunderstanding tax incentive eligibility
• Late or inaccurate corporate tax filings

How InCorp Can Help

Most tax issues do not arise during filing. They surface later during audits, expansion, or restructuring, when mistakes become significantly more costly.

InCorp Malaysia supports businesses with:

• Tax planning and structuring
• Corporate tax compliance and filing
• SST advisory and registration
• Transfer pricing support
• Tax audit and investigation handling
• Dispute resolution and advisory

With a team of MIA-registered tax advisors, InCorp Malaysia supports both local and foreign companies across tax planning, compliance, audit support, and dispute resolution.

Overall, key taxation services we provide in Malaysia include (but are not limited to) tax planning and structuring, tax audit and investigation, tax filing and advisory, and tax dispute resolution. If there are other aspects of company tax in Malaysia that you would like us to address, feel free to contact us or engage in our services.