Cost of doing business in Malaysia

Costs of Doing Business

Taxation

Generally, all income of companies and individuals accrued in or derived from sources outside Malaysia and received in Malaysia is liable to tax. However, income remitted to Malaysia by resident companies (other than companies carrying on the business of banking, insurance, air and sea transportation), non-resident companies and non-resident individuals are exempted from tax. From the year 2000, income tax in Malaysia is assessed on income earned in the current year. The assessment system will be changed to a self-assessment system in stages starting 2001. Effective from the year of assessment 2004, income remitted to Malaysia by a resident individual is exempted from tax.

Company Tax
Resident and non-resident companies	25%
Resident companies with paid-up capital of RM2.5 million (US$754,375) and less at the beginning of the basis period for a year of assesment
- on the first RM500,000 (US$150,875) chargeable income	20%
- on subsequent chargeable income	25%

Petroleum Income Tax

A person who signed Petroleum Agreement with Petronas or Malaysia-Thailand Authority and carry out petroleum operation. "Person" includes a company, a partnership or other body of person and corporate sole. "Petroleum operations" means searching for, winning or obtaining of petroleum in Malaysia (by drilling, mining, extracting etc), all operations incidental thereto and sale or disposal of petroleum so won or obtained, transportation within Malaysia of petroleum so won or obtained to any point of sale or export but excludes transportation outside Malaysia; refining or liquefing; dealing with products so refined or liquefied; service involving the supply and used of rigs, derricks, ocean tankers and barges. 38%

Personal Income Tax

Resident individuals with chargeable income of RM16,667(US$5,029) and above per annum (after deduction of personal reliefs) 1% - 27% Non-resident individuals (not entitled to any personal reliefs) 27%

Withholding Tax

Non-resident persons • Special classes of income (use of moveable property, technical services, installation services on the supply of plant and machinery, etc.) 10% • Interest 15% • Royalty 10% • Contract payment on: - account of contractor - account of employee Other income such as commission, guarantee fees, agency fees, brockerage fees, introducers fees, etc. 10% 3% 10%

Source:

Inland Revenue Board - www.hasil.org.my

Sales Tax

Sales tax is imposed on certain imported and locally manufactured goods under the Sales Tax Act 1972. The tax rate ranges from 5 - 10% for majority of the goods except for food preparations other than alcoholic and non-alcoholic compound preparations (other than those of heading No. 33.02) used for making beverages which falls under the tariff code 2106.90.490 with a tax rate of 20%. Sales tax is also imposed on petroleum and petroleum products according to specific rates. 5% - 10%

Service Tax

Service tax is imposed on taxable services provided by taxable persons. Services include services provided by professionals (such as lawyers, engineers, architects, surveyors, consultants), advertising firms, private hospitals, insurance companies, communication companies, hotels and restaurants. 5%

Excise Duty
	Excise duty is levied on imported and locally manufactured goods under the Excise Act 1976. The goods are listed under the Excise Duties Order 2004. Goods include:
	Goods Duty Rate Motorcars - 75% - 105% 4Wheel drives - 60% - 105% Motor cycle - 20% - 30% Intoxicating liquor - RM0.10 + 15% per litre - RM42.50 per 100% vol per litre + 15% per litre Cigarettes - RM0.18 per stick + 20%

Source:

Royal Malaysian Customs- www.customs.gov.my

Rates of Capital Allowances

Capital allowances are given on qualifying capital expenditure. Initial allowances are given only once while annual allowances are given every year by the straightline method. Some of the items accorded allowances are shown below. For plant and machinery, companies are advised to verify with the Inland Revenue Board on the specific items which qualify.

Initial Allowances

Industrial buildings 10% Computer and IT equipment 20% Environmental control equipment 40% Heavy machinery & motor vehicles 20% Plant and machinery 20% Others 20%

Annual Allowances

Industrial buildings 3% Computer and IT equipment 40% Environmental control equipment 20% Plant and machinery - Motor vehicles, heavy machinery 20% - Plant and machinery 14% - Others 10% Sources: Inland Revenue Board - http://www.hasil.org.my/