Corporate Tax Rate In Malaysia and Tax Relief Facilities 2024

Starting a business in Malaysia presents numerous opportunities, along with access to a varied market. However, to effectively navigate the financial landscape, it is crucial to have a comprehensive understanding of the corporate tax system. This article explores Malaysia's business tax rate, the necessary steps for filing business tax, and the individuals or entities responsible for payment. By providing this information, we aim to assist you in making informed and strategic business choices.
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The corporate or business tax rate in Malaysia is determined based on the category of the company and is applicable to both resident and non-resident companies generating income within the country. Corporate income tax, also referred to as company tax, is a direct tax imposed on the profits earned by businesses operating in Malaysia.

Essential procedures for submitting corporate tax in Malaysia

Step 1: Filing the estimated tax liability
New companies can choose to file their estimated tax liability through e-filing (e-CP204) or directly to the LHDNM Processing Centre.

For new businesses, the estimated corporate income tax in Malaysia must be filed within three months of commencing operations.

Conversely, existing companies should file the estimated tax liability 30 days before the start of a new fiscal year.

Step 2: Settling the estimated tax
Corporate entities must settle the estimated tax using CP207, with the deadline falling on or before the 10th day of each month.

Newly established companies commence paying this tax from the sixth month of the basis period. In contrast, existing companies begin this tax payment from the second month of the basis period.

Step 3: Submission of Form C
After paying the estimated tax, companies must submit Form C. This submission can be done through e-filing (e-C) or at the LHDNM Processing Centre.

The table provides a clear breakdown of the diverse corporate tax rates applicable to various types of companies in Malaysia.

Companies with paid up capital not more than RM 2.5 million and gross business income of not more than RM 50 Million. 

Year Assessment 2023	Percentage
On first RM 150,000	15%
RM 150,000 to RM 600,000	17%
RM 600,001 to above	24%

Companies other than above category is 24% standard Malaysian tax rate. 

Every business entity conducting operations in Malaysia, whether local or foreign, must comply with the obligation of paying corporate tax on any income generated within or received from Malaysia.

You should keep in mind
Indeed, small and medium enterprises (SMEs) can benefit from a lower tax rate of 17% on the initial RM 600,000 of chargeable income. The regular business tax rate stands at 24% for the year 2023.

Major business tax exemptions (tax reduction facilities) in Malaysia

• Pioneer Status is provided as a tax exemption on 70% of the statutory income for a duration of five years, with the remaining 30% subjeContactct to the current CIT rate. ITA is offered on 60% of qualifying capital expenditure for a period of five years, offsetting 70% of the statutory income, while the remaining 30% is taxed at the prevailing CIT rate.

 

• A resident company that has been in operation for a minimum of 36 months and incurs capital expenditure to expand, modernize, automate, or diversify its existing manufacturing business or approved agricultural project is eligible for a reinvestment allowance. This allowance will be provided for a duration of 15 years starting from the first year of claim. The allowance is calculated at 60% of QCE incurred and can be offset against 70% of statutory income. However, the 70% restriction does not apply to projects that have achieved the productivity level set by the Minister of Finance. It is important to note that the allowance will be revoked if the asset, for which the allowance was granted, is disposed of within five years. Additionally, a special reinvestment allowance of 60% of QCE will be granted for the years of assessment 2020 to 2024 for companies that have utilized their initial 15-year reinvestment allowance period and special reinvestment allowance provided for the years of assessment 2016 to 2018.

 

• International trading companies are eligible for a special tax exemption on income that is equal to 20% of the increased export value. This exemption can be used to offset up to 70% of the company's statutory income for a period of five years. However, in order to qualify for this incentive, the company must meet three specific conditions. Firstly, it must be incorporated in Malaysia and have at least 60% Malaysian ownership. Secondly, the company must achieve a minimum annual sales of MYR 10 million, with no more than 20% of its annual sales derived from the trading of commodities. Lastly, the company must utilize local services such as banking, finance, and insurance, as well as local infrastructure including ports and airports, in its day-to-day operations.

 

• The incentives provided for petroleum operations include the following:

1. Accelerated capital allowance: Petroleum operations in marginal fields can benefit from an accelerated capital allowance on qualifying capital expenditure (QCE) incurred from the year of assessment 2010 to 2024.
2. Investment allowance: A 60% investment allowance is available for qualifying capital expenditure. This allowance can be utilized against 70% of statutory income for a period of ten years.
3. Exemption for chargeable income: Petroleum operations in marginal fields can enjoy an exemption for a portion of their chargeable income. This results in a reduction of the effective tax rate from 38% to 25%.
4. Investments in late-life asset upstream projects: Until 31 December 2029, investments in late-life asset upstream projects benefit from a petroleum income tax rate of 25%.
5. Accelerated capital allowance: Investments in late-life asset upstream projects also qualify for an accelerated capital allowance within two years.
6. Carryback of losses: Losses from decommissioning activities can be carried back to the two consecutive preceding years of assessment.
7. Export duty exemption: Petroleum products are exempt from export duty.

 

• The Northern Corridor Economic Region encompasses several priority sectors, including manufacturing, agribusiness, services, petrochemical, green economy, and sustainable mining. In order to promote investment and economic growth in these sectors, various incentives are available. These incentives include income tax exemption of up to 100% for a maximum of 15 years, investment tax allowance of up to 100% of Qualified Capital Expenditure (QCE) for a maximum of ten years, import duty exemption on raw materials, components, machinery, and equipment, and a 50% stamp duty exemption on instruments of transfer or lease of land.

To ensure a harmonious company and business management experience, feel free to reach out to us at Lim & Ani Associates. We offer comprehensive advisory services and have an extensive network of accountants, auditors, and tax submission agents to assist you.

We are providing full company setup, business license process, business setup, business bank account opening, accounting, audit, taxation, ESD (expatriate service division) license process, and business visa application advisory. ​
Our company registration consultancy package includes:

• Company registration consultancy
• First company secretary appointment
• Company forms/super form & sections
• CTC's & chop arrangements
• Name search
• SSM charges
• Foreign directors document certification
• Printing & Filing
• Share distribution agreement
• Finding nominee director & agreement
• Prepare signboard & Premises licenses application documents
• Prepare business licenses application documents
• Registered office facility & virtual office facility
• Bank account opening charges (first bank account)
• Service charge & related services
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WHY MALAYSIA IS SECURE BUSINESS HEAVEN NOW
Malaysia has emerged as a secure business haven for numerous reasons. Firstly, its robust and resilient economy has withstood the test of time, even during the global recession of 2009. This economic stability provides a solid foundation for businesses to thrive. Another advantage of Malaysia is its multicultural and multinational population, which creates a diverse market with constant demand. Moreover, Malaysia boasts a thriving online market with an active customer base, making it an ideal environment for businesses operating in the digital realm.

​Additionally, the Malaysian government's unwavering support and assistance contribute to the security of investing in the country. The government offers incentives and aid to businesses, while the banking sector provides reliable financial support for investment endeavors, ensuring a secure environment for investors. Malaysia is also renowned for its emphasis on security, respect, and the warm nature evident in daily life. This welcoming and safe atmosphere attracts investors and their families, making Malaysia an appealing location for both business and personal reasons.

​Furthermore, Malaysia offers a wide range of business opportunities across various investment budgets, ensuring that foreign investors can find genuine and profitable investments that align with their financial capabilities. The goal is to foster mutual growth and success between investors and Malaysia as a nation. In conclusion, Malaysia's strong economy, government support, cultural diversity, secure environment, and inclusive investment opportunities make it an attractive destination for foreign investors seeking profitable business ventures and a brighter future for themselves and their families.

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