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Malaysia: Domestic Corporate Taxation

Withholding Taxes on Outgoing Remittances

Dividends, royalties or loan interest paid by a Malaysian holding company to its Labuan parent company are exempt from any withholding taxes in accordance with the generally accepted fiscal practice governing remittances made between resident subsidiary and parent corporations. Remittances from the offshore Labuan parent corporation to its shareholders are totally exempt from withholding taxes because Labuan is an offshore jurisdiction which does not levy withholding taxes on any transaction.

(N.B. By comparison a Malaysian company with no Labuan connections is subject to the following withholding tax rules:

  • Dividends representing foreign source income are exempt from withholding taxes in Malaysia when distributed;
  • Royalties, loan interest or capital gains realized by a resident Malaysian corporation on the profitable sale of its shareholding in a foreign subsidiary are subject to a standard rate 10%-15% withholding tax on distribution to its non-Labuan shareholders (unless those shareholders are resident in a country which has a double tax treaty with Malaysia under which withholding taxes are reduced from the standard rate).

 

 

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