It’s clear that Malaysia has had its tax system which was implemented since many years ago. However, how many people of you really familiar with that? Generally, there’re broadly 2 categories of taxes, which are direct and indirect. A direct tax means the tax which bear by person and he/she need to pay for it. An indirect tax is paid by a person who claims it from the consumer of his goods or services.
Is income tax a direct tax or indirect tax? Yes, income tax is a direct tax because the taxpayer files his/her annual tax return and liable to pay the tax due. On the other hand, the trader who imports goods is responsible for paying the import duty and sales tax. He does not bear the tax but passes it on to the consumer by including the hidden amount in the price of goods.
Commonly, companies are subject to tax at a fixed rate of 25%. There’re some tax breaks for small and medium companies. For those new startup company, normally they have a lower starter rate of 20% due to they need to have certain time period to achieve the for the first earning of RM500,000, then followed by the standard rate of 25% for the remaining income.
For individual, they can enjoy personal tax relief, and the remaining taxable income is subject to scale rates from 0% – 26% at the RM100,000 threshold. However, non-resident individuals will not enjoy the aforesaid personal tax relief and they are subject to tax at the fixed rate of 26%.
There are some of the other tax rates that might be interest of you. Service tax is 6%, sales tax ranges from 5% – 10% and exercise duty can be as high as 105%. Stamp duty for stock trading is at a low 0.3%, and etc.
All told, the tax in Malaysia is relatively low when compared with more advanced countries and even with some of our neighbour in the Asia Pacific. But, it’s higher than in Singapore and Hong Kong.