Company Tax in Malaysia 2026: Rates, SME Tax and Budget 2027

Company tax in Malaysia isn't complicated once you see the moving parts. Your Sdn Bhd pays income tax on its profit. You pay personal tax on what you take out. And along the way there are a few other taxes, like SST and stamp duty, that may or may not apply to you.

This guide covers the rates for 2026, the Budget 2027 changes, when and how a company pays, and how to take money out without paying more tax than you need to. Budget 2027 was tabled on 9 October 2026, so its changes are marked as proposed until the Finance Act is passed.

Corporate income tax rates

Here are the rates side by side. "Chargeable income" is your profit after allowable expenses and capital allowances.

The 24% rate applies to all chargeable income of a company that doesn't qualify as an SME. That includes any company where more than 20% of the paid-up capital is owned by foreign companies or non-Malaysian citizens, however small it is.

The YA2027 SME rates are proposed in Budget 2027. They apply from YA2027 once the Finance Act is passed and gazetted. We'll update this page when that happens.

A YA, or year of assessment, follows your financial year. If your financial year ends on 30 June 2027, that year's profit is taxed in YA2027.

Who qualifies for SME rates

The lower rates only apply if your company meets all five conditions:

1. Paid-up capital of RM2.5 million or less at the start of the basis period.
2. Gross business income of RM50 million or less.
3. It doesn't control, and isn't controlled by, a company with paid-up capital above RM2.5 million.
4. No more than 20% of its paid-up capital is owned, directly or indirectly, by foreign companies or non-Malaysian citizens.
5. It is resident in Malaysia.

A note for foreign founders. Condition 4 trips up a lot of companies. If more than 20% of your company is owned by a foreigner or a foreign company, it pays 24% from the first ringgit. That's true even if the company is tiny. Plan your shareholding with this in mind, and see our guide for foreign founders.

How company tax is worked out

The steps are the same for every company:

1. Start with revenue. Everything the business earned in the financial year.
2. Take off deductible expenses. Costs "wholly and exclusively" incurred to earn that income: rent, salaries, employer EPF, marketing, software and so on. Some costs, like most entertainment and fines, aren't deductible or are only half deductible.
3. Take off capital allowances. You don't deduct equipment, furniture or vehicles in one go. Instead you claim capital allowances over several years.
4. What's left is chargeable income. Apply the rates above.

An example. Say your Sdn Bhd has RM500,000 revenue, RM330,000 of deductible expenses and RM20,000 of capital allowances. Its chargeable income is RM150,000. For YA2026 it pays RM22,500 (15% of RM150,000). Under the proposed YA2027 rates it would pay RM21,000.

Secretarial and tax filing fees are deductible. A company can deduct up to RM15,000 a year, combined, for fees paid to a registered company secretary and to an approved tax agent for its tax return and CP204 filings. Anything above RM15,000 isn't deductible.

When and how a company pays

Malaysia uses self-assessment. You estimate, pay in instalments, then file and settle the balance.

• Tax estimate (CP204). A company submits its estimated tax for the year at least 30 days before its financial year starts. It can revise the estimate in the 6th and 9th months.
• Monthly instalments. The estimate is paid in monthly instalments, starting from the 2nd month of the financial year.
• New company exemption. A new Malaysian company with paid-up capital of RM2.5 million or less doesn't need to submit CP204 or pay instalments for its first two years of assessment. This doesn't apply if more than 20% of its paid-up capital is owned by foreign companies or non-Malaysian citizens, or if it is linked to a company with paid-up capital above RM2.5 million. Those companies submit CP204 from their first year.
• Form C. The company files its tax return (Form e-C) within 7 months of its financial year end. Any balance of tax is due the same day.

Penalties, in one line each:

• Late instalment: 10% on the unpaid instalment.
• Late balance of tax: 10% on the amount unpaid.
• Estimate too low: if actual tax is more than 30% above your estimate, 10% on the difference above that 30%.
• Late or missing Form C: LHDN can impose a penalty under section 112(3) of the Income Tax Act, or take you to court.

Taking money out: salary vs dividends

Once the company has paid its tax, you have three main ways to pay yourself.

Dividends are single-tier. The company has already paid tax on the profit, so you don't pay it again on the first RM100,000 of dividends a year. From YA2025, individuals pay 2% on dividend income above RM100,000, and only on the part above. RM150,000 of dividends means 2% of RM50,000, which is RM1,000.

A salary often helps. It's deductible for the company and taxed at your personal rates, which start low. It also builds up EPF: the company pays 13% on wages up to RM5,000 a month (12% above), and you pay 11%. Non-Malaysian directors on salary pay 2% and the company 2%, compulsory since October 2025.

Taking everything as dividends usually costs more. At RM150,000 profit under the proposed YA2027 rates, an all-dividend payout leaves you about RM126,576, against RM136,894 with the best salary and dividend split. That's an estimate with our default costs, but the point stands: how you pay yourself matters as much as the structure.

Other taxes a Sdn Bhd deals with

Sales and service tax (SST). Service tax is 8% on most taxable services, and 6% on a few, such as food and beverage, telecoms, parking, logistics, rental, construction, education and private healthcare. You must register once your taxable services pass the threshold in any 12 months: RM500,000 for most services, and RM1.5 million for food and beverage. Sales tax (5% or 10%) applies to manufacturers of taxable goods with sales above RM500,000. We cover this in more detail in SST explained.

Withholding tax. When your company pays a non-resident that has no business presence in Malaysia, it may have to hold back part of the payment and pay it to LHDN. The main rates without a tax treaty are 15% on interest, 10% on royalties, 10% on services performed in Malaysia and on rental of movable property, and 13% on contract payments to non-resident contractors (10% for the contractor, 3% for its employees). Treaties can lower these. Malaysia has no withholding tax on dividends.

This can also catch everyday digital spending. LHDN treats payments for the use of software, and for ad platforms where you build your own campaigns (think Meta or Google ads), as royalties, so 10% withholding tax may apply when you pay a non-resident supplier. A subscription to foreign software such as a design tool can fall in the same group. If the supplier only provides a service and does all of it outside Malaysia, that service fee is exempt. Whether a payment is a royalty or a service, and whether the supplier has a Malaysian presence or treaty relief, depends on the facts. So check your foreign software and ad spend with your tax agent. If withholding tax was due and wasn't paid, LHDN can add a 10% increase and disallow the cost as a deduction until it's settled.

Stamp duty. Paid by the buyer on documents like property transfers (1% to 4%), share transfers and service or loan agreements. Budget 2027 includes some stamp duty changes for SMEs, so check before you sign.

Real property gains tax (RPGT). A Malaysian company selling land or property pays:

Capital gains tax on unlisted shares. Since 1 March 2024, a company that sells shares in an unlisted Malaysian company pays 10% on the net gain. For shares bought before 1 January 2024, it can choose 2% of the gross sale price instead. The return (e-CKM) and payment are due within 60 days of the sale.

E-invoicing. From 1 September 2026, businesses with yearly revenue below RM3 million don't have to issue e-invoices, up from RM1 million before. The exemption doesn't apply if a non-individual shareholder, holding company or related company has revenue of RM3 million or more.

Personal tax for directors and Enterprise owners

Director salaries and Enterprise profits are taxed at personal rates. Here are the resident bands:

Budget 2027 also proposes raising the individual relief from RM9,000 to RM12,000. To see what this means for a monthly salary, use our salary calculator.

Key dates

As an employer, your company also pays EPF, SOCSO and EIS for staff each month, and the HRD levy (1% of wages) once it has 10 or more employees. See what employers should know about EPF, SOCSO and EIS.

FAQ

What is the corporate tax rate in Malaysia? The standard rate is 24% of chargeable income. Small and medium companies that meet the SME conditions pay lower rates on their first RM600,000: 15% and 17% for YA2026, and a proposed 14% and 16% from YA2027 under Budget 2027.

What is the SME tax rate for 2026? For YA2026, an SME company pays 15% on its first RM150,000 of chargeable income, 17% on RM150,001 to RM600,000, and 24% on the rest.

Is a Sdn Bhd taxed twice? Mostly not. The company pays tax on its profit, and dividends are single-tier, so the first RM100,000 of dividends you receive in a year is tax-free. From YA2025, individuals pay 2% on dividends above RM100,000, on the excess only.

When does a new company pay its first tax? A new Malaysian company with paid-up capital of RM2.5 million or less doesn't have to submit tax estimates (CP204) or pay monthly instalments for its first two years of assessment, unless more than 20% of it is owned by foreign companies or non-Malaysians. It pays any tax due when it files Form C, within 7 months of its financial year end.

What changed in Budget 2027? Budget 2027 proposes cutting the SME rates to 14% on the first RM150,000 and 16% on RM150,001 to RM600,000 from YA2027. For individuals, it proposes a higher RM12,000 relief and lower rates between RM70,001 and RM150,000. These are proposals until the Finance Act is passed. Read more in our Budget 2027 guide for SMEs.

Ready to set up? You can register your Sdn Bhd with us for RM1,599, including the SSM fee (excl. SST). Our company secretary plans start at RM1,188 a year (RM99/month, billed yearly, plus SST). For bookkeeping and tax filing, our sister company Ollie offers accounting from RM300/month. Questions? WhatsApp us.

Sources

• Ministry of Finance: Budget 2027 Tax Measures (MSME and individual rates, individual relief). Checked 12 October 2026.
• Ministry of Finance: Budget 2027 speech. Checked 12 October 2026.
• PwC Worldwide Tax Summaries: Malaysia taxes on corporate income (SME conditions). Checked 12 October 2026.
• PwC Worldwide Tax Summaries: Malaysia tax administration (Form C, CP204, instalments). Checked 12 October 2026.
• PwC Worldwide Tax Summaries: Malaysia withholding taxes. Checked 12 October 2026.
• PwC Worldwide Tax Summaries: Malaysia other taxes (service tax, RPGT, stamp duty, PCB, HRD levy). Checked 12 October 2026.
• PwC Worldwide Tax Summaries: Malaysia individual income determination (2% dividend tax). Checked 12 October 2026.
• LHDN Public Ruling No. 8/2025: Tax treatment for micro, small and medium companies (SME conditions, CP204 exemption under section 107C(4A)). Checked 12 October 2026.
• LHDN Practice Note No. 1/2018: Digital advertising provided by a non-resident and LHDN guidelines on e-commerce (software and ad platform payments as royalties). Checked 12 October 2026.
• LHDN: company tax payment and penalties. Checked 12 October 2026.
• LHDN: Return Form Filing Programme 2026 (Form B and Form C deadlines and grace periods). Checked 12 October 2026.
• LHDN: Guidelines on capital gains tax for unlisted shares (21 July 2025). Checked 12 October 2026.
• LHDN media statement: e-invoice exemption threshold raised to RM3 million (30 August 2026). Checked 12 October 2026.
• MySST (Royal Malaysian Customs): registration thresholds and service tax FAQ. Checked 12 October 2026.
• Income Tax (Deduction for Expenses in relation to Secretarial Fee and Tax Filing Fee) Rules 2020 [P.U.(A) 162/2020], as amended by P.U.(A) 471/2021, explained in LHDN's draft Public Ruling on legal and professional expenses (2026). Checked 12 October 2026.

This guide is general information and an estimate of how the rules apply, not tax advice. Budget 2027 measures are proposals until the Finance Act is gazetted. Last updated: 12 October 2026.

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