๐ฒ๐พ Tax Overview โ Malaysia
Corporate tax, VAT/GST, and key tax information for businesses operating in Malaysia.
Tax Treatment by Structure
Private Limited Company (Sdn Bhd)
A Sdn Bhd with paid-up capital not exceeding MYR 2.5 million and annual gross income not exceeding MYR 50 million qualifies as an SME and benefits from a preferential tax rate of 17% on the first MYR 600,000 of chargeable income, with the remainder taxed at the standard rate of 24%. Non-SME companies pay the standard rate of 24% on all chargeable income. Malaysia does not impose capital gains tax on disposal of shares (except for shares in real property companies). Dividends paid by Malaysian companies are tax-exempt in the hands of shareholders under the single-tier tax system. Withholding tax on dividends paid to non-residents is zero. Royalty payments to non-residents are subject to 10% withholding tax, and interest payments to non-residents attract 15% withholding tax (both may be reduced under double tax treaties). Sales Tax (5โ10%) applies to manufactured and imported goods, and Service Tax (8%) applies to prescribed services.
Labuan Company (Labuan Co.)
Labuan entities conducting trading activities (including banking, insurance, shipping, and commodity trading) are taxed at 3% of net profits under the Labuan Business Activity Tax Act. Labuan entities conducting non-trading activities (holding investments, receiving dividends, interest, or royalties) are not subject to tax on such income, provided substance requirements are met. To qualify for Labuan tax rates, the company must meet minimum substance requirements: at least one full-time employee based in Labuan and minimum annual operating expenditure of MYR 20,000 (non-trading) or MYR 50,000 (trading). Failure to meet substance requirements means the company is taxed under the Malaysian Income Tax Act at the standard 24% rate. No withholding tax applies on distributions from a Labuan company to non-resident shareholders. Labuan companies may access Malaysia's double tax treaties if they meet the substance requirements and are treated as Malaysian tax resident.
This content is educational and does not constitute legal or tax advice. Always consult a qualified professional for your specific situation. Data last verified March 2026.