Withholding tax is an amount withheld by the party making payment (payer) on income earned by a non-resident (payee) and paid to the Inland Revenue Board of Malaysia.
'Payer' refers to an individual/body other than individual carrying on a business in Malaysia. He is required to withhold tax on payments for services rendered/technical advice/rental or other payments made under any agreement for the use of any moveable property and paid to a -resident payee.
'Payee' refers to a non-resident individual/body other than individual in Malaysia who receives the above payments.
Withholding Tax Deduction (detail)
The Income Tax Act, 1967 provides that where a person (referred herein as "payer") is liable to make payment as listed below (other than income of non-resident public entertainers) to a non-resident person ( NR payee), he shall deduct withholding tax at the prescribed rate from such payment and (whether such tax has been deducted or not) pay that tax to the Director General of Inland Revenue within one month after such payment has been paid or credited to the NR payee.
| Payment Type | Income Tax Act 1967 | Withholding Tax Rate |
|---|---|---|
| Contract Payment | Section 107A (1) (a) & 107A (1) (b) | 10%, 3% |
| Interest | Section 109 | 15% |
| Royalties | Section 109 | 10% |
| Special classes of income: Technical fees, payment for services, rent/payment for use of moveable property | Section 109B | 10% |
| Interest (except exempt interest) paid by approved financial institutions | Section 109C | 5% |
| Income of non-resident public entertainers | Section 109A | 15% |
| Real Estate Investment Trust (REIT) | Section 109D | |
| (i) Other than a resident company | 10% | |
| (ii) Non Resident company. | 25% | |
| (iii) Foreign investment institution (effective from 01/01/2007) | 10% | |
| Family Fund/Takaful Family Fund/Dana Am | Section 109E | |
| (i) Individual and other | 8% | |
| (ii) Non Resident Company | 25% | |
| Income under Section 4(f) ITA 1967 | Section 109F | 10% |
