Insight into Malaysia's taxation regime
Healy Consultants Group PLC
04 December, 2017
Malaysia is a respected and well-recognized manufacutring destination in Asia. Part of the success of the country is due to its moderate taxation regime, which offers convenient solutions to global investors.
As a main corporate tax regime, Malaysia uses a dual-tax system when calculating the due corporate tax. For example, a resident company with cargeable income on the first income MYR500,000, suffers only 18% corporate taxation for 2017. For the remaining excess of MYR500,000 the taxation rate rises to 24%.
Positively, some companies will be able to apply for tax reduction between 1 and 4%, if there is an annual increase of 5% or more in the company's cargeable income. However, the reduction rate is only applied on the portion representing the actual increase.
If registered in Malaysia's financial centre, Labuan, a company may opt to apply for the alternative minimum tax regime. Such company can choose to elect to pay a fixed amount of MYR20,000 annual alternative tax, or a fixed alternative rate of 3% on the audited profits incurred during the year.
Other important taxes such as withholding taxation on dividend is actually fully tax exempt in the country. The country enjoys access to multiple double taxation treaties to motr than 70 countries around the globe, making the country one of the top destinations in this aspect in south east asia.
Furthermore, the country enjoys a suitable holding company regime, targeted at companies that derive no less than 80% of its gross income from investments. Such companies qualify for significant tax deductions only for their "permitted expenses".
Lastly, Malaysia enjoys very low goods and services tax (GST) of only 6% and a moderatly high registration threshold of MYR500,000. In comparison, many other countries in EU apply similar VAT regime at much higher amounts.
For above tax-related topics and many more business and infrastructure reasons, Malaysia represents a great investment destination in its respective region.
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