It is normal for an entrepreneur to employ professional services of accountants and tax advisors because of Malaysia's complex tax laws. A summary of important Malaysian accounting and tax laws follows:

Malaysia imposes a withholding tax of between 10% and 20% on payments to non-residents, including bank interest, royalties, consulting fees and rental income. For example:

i) Dividends paid by a Malaysian company to international corporate shareholders suffer no withholding tax in Malaysia. For example, a dividend paid to it’s USA parent company does not suffer Malaysia withholding tax;

ii) If company sales exceed RM100,000 (US$29,600) in a calendar year, a Malaysian company is obliged to register for sales tax of 10%. Thereafter, all sales invoices issued by the Malaysia company will add a sales tax to total invoice value. Just like GST or VAT, Malaysia sales taxes on expenses are reclaimed from the Government.

In abidance to the Malaysian Companies Act 1965, a company must appoint an external auditor. Completing an annual audit in Malaysia is time consuming and difficult because of the lack of adequately qualified auditing staff.

A Malaysia-resident company suffers corporation tax of 27% on net profits earned in Malaysia. International profits accounted for in a resident Malaysian company are not subject to Malaysian corporation tax if certain conditions are met. One such condition is that the international income must not be remitted to a Malaysian bank account.

When tax planning in Malaysia, it is important to note Malaysia's double tax treaty network forms. A double tax treaty is signed by two countries to prevent the duplicate taxation of international income. In addition, a double tax treaty reduces withholding tax on payments to non-resident individuals and companies. A Malaysian company is a useful global corporate structure because of the double taxation treaties Malaysia has signed with 62 countries, including Australia, Canada, China, France, Germany, India, Indonesia, Ireland, Italy, Japan, Singapore, the UAE, the UK, and the US. Consequently, a Malaysian company is an attractive holding company structure.

For more detailed information on tax planning in Malaysia please refer to Healy Consultants' Asia Business Setup guide.

For more information on tax planning in Malaysia, email email@healyconsultants.com or call us in Singapore at (+65) 6735 0120.