Tax system in Malaysia
Malaysia taxes individuals on income accruing in or derived from Malaysia. Resident individuals are also taxed on foreign-sourced income received in Malaysia, although most foreign-sourced income received by resident individuals is exempt from 1 January 2022 to 31 December 2036 subject to conditions.
The headline personal income tax rate runs up to 30% for residents, while non-residents are taxed at 30% on most taxable income. Malaysia also applies a 2% tax on dividend income above RM100,000 from resident companies, uses self-assessment, and keeps annual filing deadlines.
Malaysia is not a VAT country. It uses sales tax and service tax instead, and payroll planning still needs EPF, SOCSO and EIS. On the corporate side, most companies pay 24% tax, with lower scale rates for some smaller resident companies and separate rules for petroleum income, Labuan entities and Pillar Two top-up tax.
Tax rates at a glance
- Personal income tax
- 0% - 30%Progressive
- Non-resident income tax
- 30%
- Dividend tax
- 2%Over RM100,000
- Corporate tax
- 24%
- Capital gains tax
- 0% / 10%
- VAT / GST
- No
- Sales / service tax
- 5% - 10% / 6% - 8%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
FoundersRegional operatorsInvestorsExpatsSMEs
Watch out for
- Malaysia does not have a general VAT or GST regime, but SST, payroll taxes, EPF, SOCSO, EIS, stamp duty and RPGT can still make the real cost higher than the headline income tax rate.
- Budget 2026 proposals include a 2% LLP distribution tax above RM100,000 and an extension of foreign-sourced income exemptions to 2030, but those proposals still depend on enactment.
- Carbon tax is slated for next year for the iron, steel and energy sectors, and the 1 July 2025 SST expansion is already live.
Frequently asked questions
Is Malaysia a low-tax country?
Malaysia is not a zero-tax country. It has moderate personal and corporate taxes, but there is no net wealth tax and no inheritance tax, and some foreign-sourced income exemptions still apply to residents.
Which taxes matter most in Malaysia?
The main ones are personal income tax, corporate income tax, dividend tax on resident-company dividends above RM100,000, RPGT on property, CGT on unlisted shares for companies and SST, plus payroll social contributions.
Is Malaysia good for founders?
It can be, especially for operating businesses that want a regional base. The right structure still depends on payroll, SST, banking, residence and whether Labuan or onshore Malaysia fits the actual activity.