Malaysia corporate tax rate, incentives, filing dates, and compliance explained

Why expand to Malaysia?

With its strategic location, dynamic economy, investor-friendly policies, and excellent infrastructure, Malaysia is a country most businesses think of when they want to expand their operations in Asia.

Proximity to economies like Singapore, Indonesia, and Thailand makes Malaysia a gateway to the larger market in Southeast Asia. Its economic showing in 2025 is impressive – 5.2% year-on-year GDP growth and a sharp jump in investments in the third quarter. A 24% corporate income tax rate with preferential rates for SMEs continues to catch the attention of foreign companies.

Overview of corporate tax in Malaysia

As of 2025, the 24% corporate income tax (CIT) rate is applicable to resident companies and non-resident companies (foreign firms) with paid-up capital of more than RM 2.5 million. Business income derived from Malaysia is subject to tax. Certain foreign-sourced income received in Malaysia may also be taxable, subject to exemptions and specific conditions.

If an SME is a tax resident of Malaysia, has paid up capital of RM 2.5 million or less and gross income not more than RM 50 million, it can avail of reduced rates. It pays 15% on the first RM 150,000 of chargeable income, 17% on the next RM 450,000, and 24% on anything above.

Corporate income tax rates and tax compliance are overseen by the Lembaga Hasil Dalam Negeri Malaysia (LHDNM), or HASiL. The body is also referred to as the Inland Revenue Board of Malaysia.

Tax rates and structures

In addition to preferential SME rates, income from petroleum operations in Malaysia is subject to a higher 38% tax rate under a separate petroleum income tax framework, rather than the standard corporate tax system.

Additionally, sole proprietorships and partnerships are exempt from corporate tax. Instead, they're taxed as individuals and pay between 0% and 30% income tax, depending on their tax bracket.

The corporate tax rate remains unchanged for 2026 under current regulations, though future policy changes may affect applicable rates.

What constitutes chargeable income in Malaysia?

Chargeable income, or taxable income, is total annual income minus tax reliefs. Tax deductions are permissible on expenses as long as they are “wholly and inclusively incurred in the production of income”, as per the Income Tax Act 1967.

Deductible expenses include:

• Salaries
  
• Rent
  
• Utilities
  
• Repairs/maintenance
  
• Plant and machinery lease
  
• Business insurance
  
• Business travel
  
• Staff training and entertainment
  

Non-deductible expenses include:

• Capital expenditure, such as startup expenses, licensing/registration costs, income tax, fines, trademark registration fees, donations to non-approved institutions, etc.
  

Companies can reduce taxable income through the capital allowance provision. This tax relief allows them to deduct the cost of fixed assets (plant and machinery, office equipment, furniture, vehicles, IT equipment, software). This allowance works in two stages: an initial allowance in the year the expense is incurred and an annual allowance for each year the asset is in use. For example, general plant and machinery attracts a 20% initial allowance and 14% annual allowance.

Tax incentives in Malaysia

Singapore businesses looking to expand to Malaysia can look forward to numerous tax incentives in the form of exemptions, allowances, and preferential tax treatments for promoted sectors.

Some of the major tax incentives are:

• Pioneer status, which grants eligible companies a five-year exemption on 70% of their statutory income.
  
• Investment tax allowance (ITA) on 60% of qualifying capital expenditure for five years, offset against 70% of statutory income for each assessment year.
  
• Reinvestment allowance at 60% of qualifying capital expenditure for 15 years for resident companies in business for 36 months or more.
  
• Export and import duty exemptions.
  

Malaysia’s tax incentives are aimed at specific sectors, including manufacturing, agriculture, education, tourism, healthcare, R&D, and financial services, to encourage investment.

However, it’s important to note that incentives such as Pioneer Status apply to a percentage of a company’s statutory income, not total revenue or turnover. Eligibility is subject to specific qualifying conditions and typically requires prior approval from the relevant authorities, such as the Malaysian Investment Development Authority (MIDA). Companies must meet sector, investment, and operational criteria to continue enjoying these incentives.

There are incentives specific to special economic regions, too. For example, the Johor-Singapore Special Economic Zone (JS-SEZ), which benefits Singapore companies involved in sectors such as manufacturing, tourism, and logistics.

Officially launched in early 2025, the JS-SEZ offers some of the most competitive tax treatments in the region. Singaporean firms operating in the 9 flagship zones—including Forest City’s Special Financial Zone—can access

• Preferential corporate rates: Qualifying sectors such as AI, medical devices, and the digital economy can enjoy special rates between 0% and 10% for up to 15 years.
  
• Knowledge worker incentive: A flat 15% personal income tax rate is available for eligible knowledge workers and returning experts working within the SEZ.
  
• Operational ease: Through the Invest Malaysia Facilitation Centre Johor (IMFC-J), the application processes for MIDA incentives and MyIPO registrations are significantly streamlined to encourage rapid cross-border expansion.
  

When to file tax returns

Corporate tax returns must be filed, and any tax payable settled, by the last day of the seventh month after the close of the financial year, which companies are free to choose. For businesses with a 31 December year-end, the filing deadline falls on 30 September.

Foreign companies, especially, mustn’t forget their Malaysia tax filing deadlines to stay compliant and avoid late fees, interest charges, and penalties. It is also recommended that they keep proper records in preparation for tax audits.

Reducing tax burden with double taxation agreements

Foreign companies can take advantage of Malaysia’s extensive network of double taxation agreements (DTAs) to prevent the same income from being taxed twice. These provide relief on various income types, such as profits, dividends, interest, royalties, and capital gains.

Singapore has a DTA with Malaysia dating back to 1968 and amended in 2006.⁵ With its help, Singapore firms in Malaysia aren't taxed twice on profits, dividends, technical fees, income from property, income from shipping and transport, etc. The DTA also lays out lowered withholding tax rates – 10% or none on interest, 8% on royalties, and 5% on technical fees.

To be eligible for relief, you have to be a tax resident company of Singapore or Malaysia. A Singapore company making a claim under this DTA must first obtain a certificate of residence from its country and submit it to Malaysian authorities at HASiL with the tax claim.

Recent tax amendments to know about

There were a few tax amendments in Malaysia in the past year or so, including:

• A 10% capital gains tax on gains made by companies, limited liability partnerships, trust bodies, and cooperatives from disposing of unlisted shares.
  
• A 10% sales tax on imported low-value goods (except alcohol and tobacco products) worth RM 500 or less.
  
• Service tax up from 6% to 8% on select services (logistics, underwriting, brokerage, etc) but not including consumer-based services (food, telecom, etc).
  
• Under the Global Minimum Tax (OECD Pillar Two) regime, multinational groups operating in at least two jurisdictions and with global revenues exceeding EUR 750 million are subject to a minimum effective tax rate of 15% through a multinational or domestic top-up tax. While this framework is part of a global tax reform initiative led by the OECD, Malaysia has signalled alignment with these rules, which may affect large multinational groups operating in the country.
  

Other taxes to take note of

Apart from corporate income tax, withholding tax, and capital gains tax, businesses are required to pay the following taxes in Malaysia:

• Sales and service tax – A 5% or 10% tax on manufactured or imported goods, along with a 6% or 8% tax on services related to food, beverages, accommodation, telecom, education, healthcare, etc.
  
• Digital services tax – Charged at the rate of 8% on services provided in Malaysia by foreign companies.
  
• Real property gains tax – Charged at the rate of 10% to 30% on gains from the disposal of ‘real property’ (land, shares in real property, etc).
  
• Stamp duty – Payable on sale or transfer of property or shares and on service or loan agreements.
  
• Payroll tax – Deducted from employees’ salaries every month.
  
• Excise duties – Levied on select goods manufactured in or imported into Malaysia (types of liquor, cigarettes, cars, bikes, etc).
  

Tax compliance and registration

Foreign companies must adhere to Malaysia's strict tax compliance or face hefty penalties and even jail time. Here's what to do to stay compliant:

• Register your company with HASiL to receive a corporate tax identification number, so you can start filing taxes in Malaysia.
  
• Know your corporate tax rate. Check to see if you are eligible for SME rates.
  
• File your tax return using Form C, accurately specifying chargeable income and tax payable.
  
• File returns within seven months of the closing of accounts. Failing to do so might invite a fine or penalty. The option of e-filing is available.
  
• Pay advance tax in monthly instalments as required under law. Check payment options available to you (net banking, wire transfers, etc).
  
• Ensure your invoices are in electronic format. The Inland Revenue Board of Malaysia's e-invoicing system won't accept anything else and your claims for deductions depend on this.
  
• Keep records of all your financial statements and supporting documents as you might be asked to produce them.
  

As of July 1, 2025, Malaysia entered Phase 3 of its mandatory e-invoicing rollout. Managed by HASiL through the MyInvois portal, this regime now encompasses a significant portion of the SME market (businesses with annual turnover between RM 5 million and RM 25 million).

• Real-time validation: Unlike traditional invoicing, every transaction must be validated by the Inland Revenue Board (IRBM) in real-time. Validation results in a unique UUID and a QR code that must be embedded in the final invoice.
  
• Proof for deductions: Under the Finance Act 2024, businesses can only claim tax deductions for expenses that are backed by a validated e-invoice. If your supplier isn't yet compliant, your company risks losing that deduction.
  
• Phased deadline: While Phase 3 began in July 2025, a relaxation period is currently in place until December 31, 2025, allowing businesses to transition without immediate prosecution for non-compliance.
  

Tax treatment of dividends

Malaysian resident companies do not pay tax on dividends received from other Malaysian companies or on dividends paid to shareholders.

Dividends received by Malaysian companies from foreign sources can receive an exemption if these conditions are fulfilled:

• If the dividend income has already been taxed in its country of origin.
  
• If the highest tax rate in the country of origin does not exceed 15%.
  

Malaysia corporate tax vs income tax: Key differences

• Tax rates: The corporate income tax rate in Malaysia is 24%. Small businesses enjoy reduced rates of 15% on the first RM 150,000 of chargeable income and 17% on the next RM 450,000. Personal income tax rates range between 0% and 30%, depending on tax brackets.
  
• Taxable income: For companies, this includes gross income minus deductible expenses and tax reliefs. Chargeable income for individuals includes annual income (wages, business earnings, etc) minus personal tax deductions and reliefs.
  
• Deductions: Companies are allowed deductible expenses if incurred in producing income (salaries, rent, utilities, etc). Individuals receive relief on medical expenses, education costs, retirement and social security contributions, etc.
  
• Tax incentives: Companies receive tax exemptions and allowances in specific sectors and industries. Incentives for individuals include tax rebates on religious spending (pilgrimages, etc) or if their income is below a certain level.
  

How Aspire supports your expansion into Malaysia

Expanding into Malaysia means managing taxes, cash flow, and cross-border payments with confidence. Aspire gives you the financial infrastructure to operate compliantly, control costs, and scale without unnecessary complexity.

• Business account: Operate globally from one account. Hold and move funds in 30+ currencies, pay Malaysian and international partners, and benefit from transparent fees and competitive FX rates.
  
• Corporate cards: Issue unlimited virtual cards with custom spending limits and automated receipt capture, helping you control expenses and maintain clean records for tax and audit purposes.
  
• Global payments: Send and receive international payments efficiently with same-day transfers in 15+ currencies, reducing settlement delays and foreign exchange costs.
  
• Aspire Accounting: Close your books on the double with automated workflows, accurate book-keeping, and integrations with all major accounting software.
  

FAQs

What is the corporate income tax rate in Malaysia?

The standard rate is 24% and applicable to both resident companies and non-resident companies on income earned in or derived from Malaysia. Small businesses are eligible for reduced rates.

When to pay corporate tax in Malaysia?

The deadline for paying corporate tax and filing returns is the last day of the seventh month before the closing of accounts.

How much is the minimum corporate income tax in Malaysia?

A reduced corporate income tax rate of 15% is available for SMEs on the first RM 150,000 of their chargeable income.

How do you reduce company tax in Malaysia?

Businesses can reduce their tax burden in Malaysia by availing of the exemptions and allowances available to them, including those under double taxation treaties.

What is the 8% tax in Malaysia?

Under the sales and services tax, an 8% tax is levied on services related to food, beverages, accommodation, telecom, education, healthcare, etc.

What is the 40% tax in Malaysia?

This likely refers to the maximum penalty for non-payment of the sales and service tax. If payment is delayed by 61-90 days after the due date, a penalty of 40% of the unpaid amount comes into force.

Which country has the highest corporate tax rate?

Comoros, in East Africa, has the highest corporate income tax rate at 50%. However, this rate is reserved for large state-linked entities. A standard 35% rate covers all other businesses in the country.