Corporate Tax Service: What Business Need to Know

Published: 4 September 2025

Introduction

Understanding corporate tax in Malaysia is crucial for business compliance and long-term sustainability. Whether you're a local SME, startup, or foreign-owned company operating in Malaysia, staying compliant with tax regulations can save you from hefty tax penalties. Below, we have provided frequently asked questions and highlight some lesser-known facts about corporate tax in Malaysia.

1. What is the current corporate tax rate in Malaysia?

As of the latest update:

1.1 Resident companies (not SME):

• 24% flat rate on chargeable income.

1.2 Resident Companies (SME*):

• 15% on the first RM 1 to RM 150,000 chargeable income
• 17% on the first RM150,001 to RM 600,000 chargeable income
• 24% on the remaining chargeable income

Note: The definition of SME for corporate tax purposes differs slightly from general business classification. It refers to a resident company and incorporated in Malaysia with:

• Paid-up ordinary shares (OS) capital of RM2.5 million and below at the beginning of the basis period for a year of assessment (YA);
• Gross business income of not more than RM50 million;
• No related company (with more than 50% shareholding) within the Group has paid up OS capital of more than RM2.5 million at the beginning of the basis period for a YA; and
• Not more than twenty 20% of the paid-up capital in respect of OS of the company at the beginning of the basis period for a YA is directly or indirectly owned by one or more companies incorporated outside Malaysia or by one or more individuals who are not Malaysian citizens.

2. What is considered as chargeable income?

The corporate tax computation begins with Net Profit before Tax as reported in the audited financial statement. From there, adjustments are made to determine the statutory business income which involves assessing the deductibility of expenses incurred by the Company and taxability of others income (e.g. dividend income).

Once the statutory business income has been derived, it is further reduced by approved donation (should there be any) to arrive at the chargeable income.

Example:

Net Profit before Tax – Non-taxable Income + Disallowed Expenses – Special Deduction – Capital Allowance = Statutory Business Income

Statutory Business Income – Approved Donation = Chargeable Income

3. When is the corporate tax due in Malaysia?

There are two key components:

• CP204 (Estimate of Tax Payable):
  • Where a company first commences operation in a year of assessment, it must be submitted within 3 months from the date of commencement of business operations or the receipt of income.
  • Where a company is already in operations, it must be submitted not later than 30 days before the beginning of the basis period (financial year).
  • Monthly installment payments are due by the 15th of each month
• Form C (Tax Return Filing):
  • Submission due date is 7 months after the end of each financial year.

4. What are tax-deductible expenses for companies?

Some common deductible business expenses include:

• Employee salaries and EPF contributions
• Business rental and utilities
• Advertising and marketing costs
• Professional and legal fees
• Software, domain, hosting, and subscriptions (if used for business)
• Approved charitable donations (limited to 10% of aggregate income)

Tip: Travel expenses must be business-related and well-documented to be ranked for tax deduction.

5. What penalties can companies face for non-compliance?

The Inland Revenue Board (LHDN) imposes the following penalties:

Offense	Penalty
Late submission of CP204	Up to RM20,000 fine or 6 months imprisonment or both
Underestimation of Tax Payable	10% penalty on the difference
Late payment of CP204	10% penalty on unpaid amount
Late submission of Form C	From 15% to 300% the amount of tax
Incorrect Form C	From 15% to 100% on the tax undercharged
Tax evasion	Up to 300% the amount of tax; and compound up to RM20,000 or imprisonment, or both

6. Are newly incorporated companies required to file corporate tax?

Yes. Even if a company is dormant, it must:

• The Tax Identification Number (TIN) will be generated automatically by the Inland Revenue Board of Malaysia (IRBM)
• To submit CP204 and Form C annually

Important: The SME companies can be exempted from submission of CP204 subject to the conditions set out in the Section 107C of the ITA.

7. Can I claim capital allowances on business assets?

Yes. You can claim capital allowances on the following assets (not an exhaustive listing):

• Office equipment (e.g., laptops, printers)
• Machinery and factory equipment
• Motor vehicles (with limits)
• Factory building

These allowances are spread over several years depending on asset classification.

8. Do foreign companies pay corporate tax in Malaysia?

Yes. Foreign companies operating in Malaysia (also known as Permanent Establishment) are taxed on income derived from Malaysian sources. They are subject to the same 24% corporate tax rate, with some exceptions based on Double Tax Agreements (DTA) executed with other countries.

9. What tax incentives are available for businesses?

Malaysia offers several incentives:

• Reinvestment Allowance
• Pioneer Status
• Investment Tax Allowance
• Green Investment Tax Incentives

You must apply and get approval from the Government agencies i.e. Malaysian Investment Development Authority (MIDA), Malaysia Digital Economy Corporation (MDEC).

10. Should I hire a tax agent or corporate tax service provider?

It is highly recommended, especially if:

• Your business has complex transactions or multiple income sources
• You are unsure which expenses are qualified for special tax deduction
• You want to maximize tax savings
• You need support with IRBM’s tax audit or investigation or appeal

A licensed tax agent under Section 153 of the ITA will ensure full compliance and assist you avoid costly mistakes or overlooked benefits.

Bonus: Lesser-Known Corporate Tax Facts in Malaysia

• Advance rental payment (e.g., payment covering multiple years) are not immediately tax deductible – it must be apportioned over the period to which they relate.
• Unutilized losses can be carried forward for up to 10 consecutive years.
• Payment to non-resident contractors or freelancers for services performed in Malaysia will attract withholding tax.
• IRBM e-Filing for Form C is now mandatory – no more paper forms.

Conclusion

Understanding your corporate tax responsibilities in Malaysia is not just about avoiding hefty penalties — it's about strategic planning and improving your company’s financial efficiency. Whether you're a startup or growing enterprise, working with a licensed tax professional can help you stay compliant and uncover tax-saving opportunities.

Need Help with Corporate Tax in Malaysia?

Get in touch with a licensed tax service provider who can help you:

• File CP204 and Form C
• Maximize tax deductions
• Handle IRBM’s correspondence
• Plan tax strategies for growth