Running your business as a separate legal entity through a private limited company provides you
with benefits such as personal financial security and access to funding, but it also requires
compliance with laws and regulations in Malaysia. One of the most concerning compliances that
many entrepreneurs face is taxes as required by the Inland Revenue Board (LHDN) and the Royal
Malaysian Customs Department (RMCD). Understanding each company tax requirement can put
you at ease on this matter so that you put more focus on growing your business.
1. Corporate tax
Corporate tax is governed under the Income Tax Act 1967, which applies to all companies
registered in Malaysia for chargeable income derived from Malaysia including business profits,
dividends, interests, rents, royalties, premiums and other income.
When to pay corporate tax?
Newly registered companies should file the estimation of tax payable within 3 months of operation
and make monthly instalments starting from the 6th month of the assessment year by the 15th of
each month. After the assessment year has ended, a company is required to file its tax to the LHDN
through the e-filling portal within 7 months. If the actual tax liability is greater than the taxes paid
based on estimation, the balance of tax payable has to be paid. On the other hand, you can apply for
a refund if the actual tax liability is lower than the taxes paid.
2. Withholding tax
Withholding tax is applicable only if your company is paying a non-resident individual or company
(known as the payee) for their services where a certain percentage of the payment is deducted and
paid as their income taxes to the LHDN. Each payment type has a different tax rate according to
Section 107A and Section 109 of the Income Tax Act 1967. Under the Double Taxation Agreements
(DTA), you may apply for a refund of overpaid withholding tax.
When should the tax be paid?
The withholding tax should be paid within 1 month from the date of payment to the non-resident
payee.
3. Payroll tax
As part of the employer’s responsibility, a company with employees will need to retain a percentage
of the employees’ remuneration including salary, commission, bonus, incentives, etc. and pay as
Monthly Tax Deduction (MTD) to LHDN on behalf of employees who are taxable. This deduction,
along with EPF, SOCSO, and EIS, will be stated in the employees’ payslip as PCB (potongan cukai
bulanan). The payroll tax can be deducted if the employee is paying Zakat, a payment made under
the Islamic law for charitable and religious purposes.
Tax rate of payroll tax
The calculation of PCB can be done based on the MTD schedule or through the Computerised
Calculation Method on the e-CP39 portal. The amount of PCB required from each employee varies
according to the category they fall in and also the amount of remuneration they receive each month.
When to pay payroll tax?
PCB should be paid to LHDN by the 15th of each month, for the remuneration issued for the
previous month.
Contact Us
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