Tax
Territorial taxation, with foreign-source income partly brought into charge
Malaysia taxes on a territorial basis under the Income Tax Act 1967, but from 2022 foreign-source income received by companies became taxable, with exemptions available on conditions. Corporate tax is 24%, with 15% and 17% tiers for smaller resident companies. Sales and Service Tax replaced GST in 2018, and a capital gains tax on unlisted shares began in 2024.
Governing law
- Income Tax Act 1967 (Act 53) — Income tax; foreign-source income amendments from 2022.
- Service Tax Act 2018 — Service tax; rate increased to 8% in 2024.
In practice
Corporate income tax is 24%, with reduced rates on the first chargeable income band for qualifying SMEs. Foreign-source income received in Malaysia by companies is taxable from 2022, subject to exemption conditions. Sales Tax and Service Tax apply instead of GST; service tax was raised to 8% for most services in 2024. Capital gains tax on disposal of unlisted Malaysian shares applies from 2024. The territorial description is now materially incomplete — foreign-source income and the new CGT both cut against it. Real Property Gains Tax is separate from the new share-disposal CGT; both can be relevant to a group reorganisation.