Withholding Tax in Malaysia

INTRODUCTION

Various cross border transactions for payments to non-residents are subject to withholding tax, depending on the nature of the transactions. Besides, with effective from 1/1/2022, payments to residents, such as payments to agent, dealer or distributor are also subjected to withholding tax. Therefore, it is important to understand the principal and concepts of withholding tax. It helps to determine the compliance requirements. Non-compliance give rise to the imposition of penalties and non-tax deduction of the payments made. Nevertheless, Malaysia has concluded about 74 effective Double Taxation Agreements (DTA). There is opportunity for preferential rates of withholding tax to be applied on certain payments to non-residents. In addition, withholding tax is also an area focused by our revenue authority (Malaysian Inland Revenue Board) during tax audit and enforcement.

COURSE OUTLINE

• An overview of the Malaysian Withholding Tax

• Payments which subject to withholding tax

  -Contract fee (S107A)

  -Interest/Royalty (S109)

  -Technical service/Rental of moveable property (S109B)

  -Gains or profit under Section 4(f) (S109F)

  -Public entertainment (S109A)

  -Payments to agent, dealer or distributor (S107D)

• An overview of Permanent Establishment and Double Taxation Agreements

• Tax relief for withholding tax, i.e. bilateral and unilateral credit

• Application of relief under income tax for withholding tax

• Compliance procedures, administrative aspects and penalties for non-compliance

• 2025 tax audit framework on withholding tax audit

• Tax impact on withholding tax arises from the implementation of eInvoice