Company Formation & Tax in Malaysia
Southeast Asia's manufacturing and shared-services base — 24% corporate tax with tiered SME rates, a sales-and-service tax instead of VAT, and full foreign ownership in most sectors.
Malaysia offers a 24% corporate tax with meaningfully lower tiers for smaller resident companies, no VAT — indirect tax runs through the narrower Sales and Service Tax (SST) — and 100% foreign ownership across most of the economy. Strong infrastructure, competitive costs and generous MIDA incentives keep it a first-choice location for regional manufacturing, distribution and shared-services operations.
The headline numbers
| Tax | Rate |
|---|---|
| Corporate tax (standard) | 24% |
| SME rate — first RM150,000 | 15% |
| SME rate — RM150,001–600,000 | 17% |
| Sales tax (goods) | 5% / 10% |
| Service tax | 6% / 8% |
There is no capital gains tax on most assets, though a capital gains tax now applies to disposals of unlisted Malaysian company shares, and real property gains are taxed separately under RPGT. Dividends flow to shareholders under the single-tier system without further corporate-level tax.
The SME rates come with a foreign-ownership catch
The 15%/17% preferential tiers apply only to resident SMEs with paid-up capital of RM2.5 million or less and turnover not exceeding RM50 million — and, critically, they are not available where more than 20% of shares are held by foreign companies or non-citizen individuals. Most wholly foreign-owned subsidiaries therefore pay the flat 24% from the first ringgit. This single condition is one of the most common surprises in Malaysian structuring, and it can shape whether a local partner or a different entry structure makes sense.
SST, not VAT
- Sales tax — a single-stage tax of 5% or 10% on taxable goods manufactured in or imported into Malaysia.
- Service tax — 8% on most taxable services (6% retained for food and beverage, telecoms, parking and logistics), with the taxable scope expanded materially through 2024–2025 to cover rental, construction, finance and private healthcare and education categories.
- No input-credit chain — unlike VAT, SST is generally a cost rather than a pass-through, so where it lands in your supply chain affects pricing.
Forming the company
The standard vehicle is the Sendirian Berhad (Sdn. Bhd.) — a private company limited by shares registered with SSM through the MyCoID system, typically within a few days. Requirements: at least one shareholder (100% foreign ownership permitted in most sectors), at least one director ordinarily resident in Malaysia, a licensed company secretary appointed within 30 days, and a registered office in Malaysia. Minimum paid-up capital is RM1, though sector licences and expatriate work passes often require higher amounts in practice.
Frequently asked questions
What is Malaysia's corporate tax rate in 2026?
24% standard. Qualifying resident SMEs pay 15% on the first RM150,000 and 17% up to RM600,000 — but these tiers are unavailable if foreign ownership exceeds 20%.
Does Malaysia have VAT?
No. Malaysia abolished GST in 2018 and applies the Sales and Service Tax instead — sales tax at 5%/10% on goods and service tax at 6%/8% on a defined list of services.
Can a foreigner own a Malaysian company fully?
Yes, in most sectors 100% foreign ownership is permitted, though a Malaysia-resident director is required and certain regulated sectors carry equity conditions.
What is a Sdn. Bhd.?
The Malaysian private limited company — the standard vehicle for foreign investors, registrable with SSM in days with RM1 minimum capital and one resident director.
Official sources
- LHDN / HASiL — corporate tax
- Companies Commission of Malaysia (SSM) — registration
- MIDA — investment incentives
This guide is general information prepared by ARM Management and is current as at July 2026. It is not legal or tax advice; SME-rate conditions, SST scope and incentive eligibility change. Confirm against LHDN, or with an advisor, before acting.
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