Malaysia Corporate Tax

The standard corporate tax rate in Malaysia is 25%, while resident
small and medium-sized companies (i.e. companies capitalised at MYR
2.5 million or less and not part of a group having a company exceeding
the above capitalisation threshold) are taxed at 20% on the first MYR
500,000, with the balance taxed at the 25% corporate tax rate:

- Company with paid up capital not more than RM2.5 million
. On first RM500,000
20%
. Subsequent Balance
25%

- Company with paid up capital more than RM2.5 million 25%

Residence – A corporation is resident in Malaysia if its management
and control are exercised in Malaysia.

Basis – Corporations are taxed on income derived from Malaysia.
Foreign-source income is not taxable unless the corporation is
carrying on a business in the banking, insurance, air transport or
shipping sectors.

Taxable income – Taxable income comprises all earnings derived from
Malaysia, including gains or profits from a trade or business,
dividends, interest, rents, royalties, premiums or other earnings.

Taxation of dividends – As from assessment year 2008, Malaysian
companies are transitioning to the single tier system (STS) and
phasing out the imputation system. Corporations in Malaysia have until
31 December 2013 to adopt the STS. Dividends received under the
imputation system are taxable with a credit available for underlying
corporate tax paid. Dividends paid by companies using the STS are not
taxable.

Capital gains – Capital gains are not taxed in Malaysia, except for
gains derived from the disposal of real property or on the alienation
of shares in a real property company (RPC). The real property gains
tax, which applied to such gains, had been suspended since 1 April
2007, but is reinstated at a rate of 5% as from 1 January 2010.

Losses – While losses can only be carried back for assessment years
2009 and 2010, they may be carried forward indefinitely (except where
there is a substantial change in corporate ownership of a dormant
company).

Surtax – No

Alternative minimum tax – A Labuan offshore company may elect to pay
MYR 20,000 or to be taxed at 3% of the audited accounting profit.

Foreign tax credit – Foreign tax paid may be credited against
Malaysian tax on the same profits (limited to 50% of foreign tax in
the absence of a tax treaty), but the credit is limited to the amount
of Malaysian tax payable on the foreign income.

Participation exemption – No, but foreignsource income is not taxable
and local dividends do not attract further tax or are tax exempt.

Holding company regime – An investment holding company (IHC) is a
company whose activities consist mainly of the holding of investments
and that derives not less than 80% of its gross income, other than
gross income from a source consisting of a business of holding of an
investment, from such investments. Generally, only expenses falling
within the definition of "permitted expenses" in the tax legislation
would qualify for tax deduction in respect of an IHC.

Tax Incentives – A wide range of incentives are available for certain
industries, such as manufacturing, IT services, biotechnology, Islamic
finance, energy conservation and environment protection. Available
incentives include: tax holidays of up to 10 years (pioneer status);
investment tax allowances (i.e. 100% allowance on capital investments
made up to 10 years); accelerated capital allowances; double
deductions; and reinvestment allowances (i.e. 60% allowance on capital
investments made in connection with approved projects).

Withholding tax:

Dividends – Malaysia does not levy withholding tax on dividends.

Interest – A withholding tax of 15% applies to interest paid to
nonresidents, which may be reduced under an applicable tax treaty.

Royalties – A withholding tax of 10% applies to royalties paid to
nonresidents, which may be reduced under an applicable tax treaty.

Other – A withholding tax of 10% applies to rentals of movable
property, technical fees for services rendered in Malaysia and certain
one-time income paid to nonresidents, which may be reduced under
applicable tax treaties.

Branch remittance tax – No

Other taxes on corporations:

Capital duty – Capital duty is levied at rates ranging from MYR 1,000
to MYR 70,000.

Payroll tax – Tax on employment income is withheld by the employer
under a pay as you earn (PAYE) scheme and remitted to the tax
authorities.

Real property tax – Individual states in Malaysia levy "quit" rent and
assessments at varying rates.

Social security – Employers and employees are required to make social
security contributions to the Social Security Organisation (SOSCO).
Generally, an employer contributes 1%-1.25% of an employee's
remuneration. Employers and employees also must contribute to the
Employees Provident Fund (EPF) at the rate of 12% and 8% of the
employee's remuneration, respectively.

Stamp duty – Stamp duty is levied at varying rates between 1% to 3% of
the transacted value of property transfers and 0.3% on share
transaction documents.

Transfer tax – No, except for stamp duty.

Other – Equity requirements have been substantially relaxed as from 2009.

Anti-avoidance rules:

Transfer pricing – Transfer pricing rules are imminent and guidelines
have been issued by the tax authorities. Taxpayers can request an
advance pricing agreement.

Thin capitalisation – There are no specific thin cap rules, but
legislation has been amended to allow for such rules.

Controlled foreign companies – No
Disclosure requirements – Yes

Administration and compliance:

Malaysia Tax year – Fiscal year (i.e. generally the accounting year).

Consolidated tax returns – Consolidation is not permitted as each
company is required to file a separate tax return. However, subject to
certain conditions, 70% of a company's adjusted loss may be used to
set off profits of a related entity.

Tax Filing requirements – Malaysia imposes a self-assessment tax
regime. Advance corporate tax is payable in 12 monthly instalments. A
tax return must be filed within 7 months of the company's year end.

Penalties – Penalties at various rates apply for failure to comply.

Rulings – Taxpayers may request an advance ruling on the tax treatment
of a specific transaction. Public rulings also are issued.

Source : http://tax-rates.cc