Sales tax is a single-stage tax imposed on taxable goods manufactured locally by a registered manufacturer, and on taxable goods imported by any person. Sales tax is generally an ad valorem tax. Specific rates of sales tax are currently only imposed on certain classes of petroleum (generally, refined petroleum). The ad valorem rates are 5% or 10% depending on the class of goods.
Service tax is a consumption tax levied and charged on any taxable services provided in Malaysia by a registered person in carrying on one's business. The rate of service tax is 6%.
Import duties are levied on goods that are subject to import duties and imported into the country. Import duties are generally levied on an ad valorem basis but may also be imposed on a specific basis. The ad valorem rates of import duties range from 2% to 60%. Raw materials, machinery, essential foodstuffs, and pharmaceutical products are generally non-dutiable or subject to duties at lower rates.
Excise duties are imposed on a selected range of goods manufactured and imported into Malaysia. Goods that are subject to excise duty include beer/stout, cider and perry, rice wine, mead, un-denatured ethyl alcohol, brandy, whisky, rum and tafia, gin, cigarettes containing tobacco, motor vehicles, motorcycles, playing cards, and mahjong tiles.
The rate of excise duties vary from a composite rate of MYR 1.10 per litre and 15% of the value for certain types of spirituous beverages, to as much as 105% of the value of motorcars (depending on engine capacity).
Property tax is levied on the gross annual value of property as determined by the local state authorities.
Real property gains tax (RPGT)
RPGT is charged upon gains from disposals of real property, which is defined as:
- any land situated in Malaysia, as well as any interest, option, or other right in or over such land, or
- shares in a real property company (RPC), which is a controlled company holding real property or shares in another RPC or a combination of both, where the total defined value is not less than 75% of its total tangible assets.
RPGT is imposed on companies as follows:
|Holding period from date of acquisition||RPGT rate (%)
|Incorporated in Malaysia||Incorporated outside Malaysia|
|Up to three years||30||30|
|In the fourth year||20||30|
|In the fifth year||15||30|
|Exceeding five years||10||10|
Malaysia imposes stamp duty, which is payable by the buyer/transferee, on chargeable instruments. Some examples are provided as follows:
|Transaction type||Value chargeable||Stamp duty rate (%)|
|Sale/transfer of properties (excluding stock, shares, or marketable securities)||Consideration paid or market value, whichever is higher||1 to 4|
|Sale/transfer of stock, shares, or marketable securities||Consideration paid or market value, whichever is higher||0.1 to 0.3|
|Service/loan agreements||Value of services/loans||0.5|
Under the Monthly Tax Deduction scheme, employers are required to deduct the prescribed amount of tax from employees’ salaries each month, to be remitted to the tax authorities not later than the 15th day of each calendar month.
Social security contributions
Employees’ Provident Fund (EPF)
The Malaysian EPF is a compulsory pension scheme for all Malaysians. The EPF provides for compulsory retirement savings and contributions for all Malaysian citizens and Malaysian permanent residents who are working in Malaysia. It is not compulsory for non-Malaysian citizens and non-Malaysian permanent residents to contribute to the EPF, but they may elect to do so.
|Contribution by||Malaysian citizens and permanent residents (mandatory)||Expatriates and foreign workers (voluntary)|
|% of contribution of employee’s wages (minimum)|
|Below age 60:|
|Income > MYR 5,000||12.0%||11.0%||MYR 5 per person||11.0%|
|Income ≤ MYR 5,000||13.0%|
|Age 60 and above:|
|Income > MYR 5,000||4.0% - Malaysian
6.0% - Permanent resident
|0% - Malaysian
5.5% - Permanent resident
|MYR 5 per person||5.5%|
|Income ≤ MYR 5,000||
4.0% - Malaysian
6.5% - Permanent resident
Social Security Organisation
Malaysia also has a Social Security Organisation (SOCSO) who administers the Employment Injury Scheme (EIS) and the Invalidity Scheme (IS). All employees with monthly wages below MYR 5,000 are covered by the schemes, and employees who qualify for the schemes will continue to remain within the schemes notwithstanding that their monthly wages may subsequently exceed MYR 5,000. A monthly contribution must be made and may fall under one of two categories:
- Both the employer and employee make monthly contributions to EIS and IS. The sum is based on the employee’s monthly wages and is restricted to a maximum of MYR 86.65 for the employer and MYR 24.75 for the employee.
- In respect of an employee who is not eligible to be covered under the IS (above 60 years), the employer’s contribution to the EIS is restricted to a monthly maximum of MYR 61.90.
Malaysian employers are required to contribute to SOCSO on a monthly basis for all their foreign employees (including expatriates).
Human resource development levy
Employers in all industry sectors with ten or more employees must contribute to the Human Resource Development Fund (HRDF). The levy required to be paid is at the rate of 1% of the employees’ monthly wages on a monthly basis.
Windfall profit levy
A levy is imposed on crude palm oil and crude palm kernel oil where the price exceeds MYR 3,000 per ton in Peninsula Malaysia and MYR 3,500 per ton in the states of Sabah and Sarawak.
A levy of 0.125% on contract works having a contract sum above MYR 500,000 is imposed on every registered contractor by the Construction Industry Development Board.