Cost of doing business in Malaysia

http://www.mida.gov.my/env3/index.php?page=taxation

Costs of Doing Business

Taxation

Income of any person including a company, accruing in or derived from Malaysia or received in Malaysia from outside Malaysia is subject to income tax. However, income received in Malaysia by any person other than a resident company carrying on business of banking, insurance or sea or air transport for a year of assessment derived from sources outside Malaysia is exempted from tax.

To modernise and streamline the tax administration system, the self-assessment system was implemented for companies, sole proprietor, partnerships, cooperatives and salaried groups and the assessment of income tax is based on a current year basis.

Company Tax
Resident and non-resident companies		25%
Resident companies with paid-up capital of RM2.5 million (US$781,250) and less at the beginning of the basis period for a year of assesment
•	on the first RM500,000 (US$156,250) chargeable income	20%
•	on subsequent chargeable income	25%

Petroleum Income Tax
A person who signed Petroleum Agreement with Petronas or Malaysia-Thailand Authority and carry out petroleum operation		38%
'Chargeable person' means:
•	Petroleum Nasional Berhad
•	Malaysia-Thailand Joint Authority, or
•	Any person carrying on petroleum operations under a petroleum agreement with (a) or (b)
'Person' includes a company, a partnership or other body of person and corporate sole.
"Petroleum operations" means searching for, winning or obtaining of petroleum in Malaysia (by drilling, mining, extracting etc), all operations incidental thereto and sale or disposal of petroleum so won or obtained, transportation within Malaysia of petroleum so won or obtained to any point of sale or export but excludes transportation outside Malaysia; refining or liquefing; dealing with products so refined or liquefied; service involving the supply and used of rigs, derricks, ocean tankers and barges. From the year of assessment 2010, the assessment system under PITA has changed to the current year basis and the self assessment system.

Personal Income Tax
Resident individuals with chargeable income of RM16,667 (US$5,208) and above per annum (after deduction of personal reliefs)	1% - 26%
Non-resident individuals (not entitled to any personal reliefs)	26%

Withholding Tax
Non-resident persons individuals are subject to final withholding tax based on classes of income such as:
•	Special classes of income (use of moveable property, technical services, installation services on the supply of plant and machinery, etc.)		10%
•	Interest		15%
•	Royalty		10%
•	Contract payment on:
	-	account of contractor	10%
	-	account of employee	3%
* Other income such as commission, guarantee fees, agency fees, brokerage fees, introducers fees etc.			10%

Sales Tax

Sales tax is imposed on certain imported and locally manufactured goods under the Sales Tax Act 1972. The tax rate ranges from 5 - 10% for majority of the goods except for food preparations other than alcoholic and non-alcoholic compound preparations (other than those of heading No. 33.02) used for making beverages which falls under the tariff code 2106.90.490 with a tax rate of 20%. Sales tax is also imposed on petroleum and petroleum products according to specific rates

5% - 10%

Service Tax

Service tax is imposed on taxable services provided by taxable persons. Services include services provided by professionals (such as lawyers, engineers, architects, surveyors and consultants), advertising firms, private hospitals, insurance companies, communication companies, hotels and restaurants. In the case of taxable service relating to credit card or charge card services i. RM50(US$15.63) - shall be charged for each principal, on the date of the issuance, or on the date of renewal; and every twelve months thereof after the issuance of the card. ii. RM25(US$7.82) - shall be charged for each supplementary card holder, on the date of the issuance, or on the date of renewal; and every twelve months thereof after the issuance of the card.

6%

Excise Duty
Excise duty is levied on imported and locally manufactured goods under the Excise Act 1976. The goods are listed under the Excise Duties Order 2004. Goods include:
Goods		Duty Rate
•	Motorcars	75% -105%
•	4-wheel drive	60% -105%
•	Motorcycle	20% -30%
•	Intoxicating liquor	RM0.10 + 15% per litre -RM42.50 per 100% vol per litre + 15% RM0.22
•	Cigarettes	RM0.19 per stick + 20%

Source: Royal Malaysian Customs - www.customs.gov.my

Rates of Capital Allowance
Capital allowances are given on qualifying capital expenditure. Initial allowances are given only once while annual allowances are given every year by the straightline method. Some of the items accorded allowances are shown below. For plant and machinery, companies are advised to verify with the Inland Revenue Board on the specific items which qualify.
Capital Expenditure		Initial Allowance	Annual Allowance
•	Industrial buildings	10%	3%
•	Plant and machinery	20%	14%
•	Heavy machinery and motor vehicles	20%	20%
•	Computer and IT equipment	20%	40%
•	Environmental control equipment	40%	20%
•	Others	20%	10%

Source: Inland Revenue Board - www.hasil.gov.my