Malaysia operates a territorial tax system. This page states federal rates, which apply uniformly across Peninsular Malaysia. Sabah and Sarawak, however, hold unique constitutional authority (Article 95B/112C of the Federal Constitution) to levy their own State Sales Tax, currently applied mainly to petroleum products, that does not exist in the 11 Peninsular states, and Labuan operates under its own distinct offshore tax regime covered on this site's Special Zones page; confirm the applicable state-level position separately for Sabah- or Sarawak-specific transactions.
The Malaysian tax year (Year of Assessment) is the calendar year. The individual e-filing deadline is generally 30 April (non-business income) or 30 June (business income) of the following year; corporate filing deadlines follow the company's own financial year-end.
Malaysia's headline corporate income tax (CIT) rate is 24%.
The headline personal income tax (PIT) rate is 30% (residents and non-residents).
The standard VAT/GST (or equivalent consumption tax) rate is 10% (sales tax) / 8% (service tax).
Under Section 7(1) of the Income Tax Act, an individual is Malaysian tax resident via any of four tests: physical presence 182 days or more in the basis year (days need not be consecutive); presence under 182 days but linked to a run of 182+ consecutive days in the immediately preceding or following year; presence of 90 days or more where resident/present 90+ days in at least three of the preceding four years; or, without physical presence at all, having been resident the preceding three years and expected to be resident the following year. Residents are taxed at progressive rates (0-30%); non-residents face a flat 30% rate with no reliefs or deductions available. Malaysia applies a broadly territorial system, though foreign-sourced income remitted to Malaysia by resident individuals has been subject to tax since January 1, 2022; a transitional exemption for that income (other than partnership-business income) currently runs through December 31, 2036, per Budget 2026 (PwC, confirmed June 2026), having been extended from an original 2026 sunset date.
A non-Malaysian entity has a Malaysian permanent establishment through a fixed place of business or a dependent agent habitually concluding contracts in Malaysia on the entity's behalf, following the OECD Model Treaty definition as applied under Malaysian domestic law and any applicable tax treaty.
Malaysia has no Controlled Foreign Company regime.
Malaysia has no formal debt-to-equity thin capitalization rule (though enabling legislation exists for one to be introduced by regulation, it has not been activated). Instead, deductible interest expense on each business source is capped at 20% of that source's EBITDA; disallowed interest carries forward indefinitely, but the carryforward is forfeited if a company undergoes a substantial change in shareholders in the following year.
Malaysia does not use an elective check-the-box classification system; entity classification generally follows the entity's actual legal characteristics. Malaysia does not have a comprehensive ATAD2-style anti-hybrid regime.
No foreign bank account or foreign financial asset reporting regime exists requiring residents to separately disclose foreign accounts; consistent with Malaysia's territorial (or primarily source-based) system described in Tax System above, foreign-source income generally falls outside the domestic tax base rather than being reported and then taxed.
Malaysia's territorial tax system already exempts most foreign-sourced income from Malaysian tax for both companies and individuals (see Tax System above), functioning as a broader substitute for a conventional participation exemption - a real, current wrinkle worth noting: since Year of Assessment 2025, Malaysia introduced a 2% dividend tax on dividend income exceeding MYR 100,000 received by individual shareholders from Malaysian companies specifically, a domestic-dividend development distinct from the foreign-sourced income exemption.
Malaysia has a real foreign tax credit regime for foreign tax paid on foreign-source income also taxed in Malaysia - though given Malaysia's territorial system already exempts most foreign-sourced income (see Tax System above), the credit's practical application is narrower than in worldwide-taxation jurisdictions, mainly relevant to the specific categories of foreign income that remain taxable.
Malaysia has tax treaties with more than 70 countries. Notably, Malaysia has no comprehensive income tax treaty with the United States.