07 Nov 2025 Corporate Tax Rate in Malaysia: What Businesses Need to Know
Malaysia has a competitive business environment; staying up to date with regulatory changes is vital, especially when it comes to corporate tax in Malaysia.
Corporate tax rates can shape everything from annual profitability to long-term expansion strategies.
For companies employing foreign professionals, understanding the tax system is even more crucial, as it can impact salary planning, benefits, and compliance costs.
This article serves as a guide to Malaysia’s 2025 corporate tax landscape, with a special focus on companies employing foreign professionals, so you can keep your business both compliant and competitive.
The 2025 Corporate Tax Rate at a Glance
As of 2025, the standard corporate income tax (CIT) rate in Malaysia remains at 24% for resident companies.
However, there is good news for small and medium enterprises (SMEs) with a paid-up capital of less than RM2.5 million and a gross income of less than RM50 million. You enjoy a tier-based chargeable income:
| Chargeable Income Range | Tax Rate |
| First RM150,000 | 15% |
| RM150,001 to RM600,000 | 17% |
| RM600,001 and subsequent balance | 24% |
If you are an SME bringing in overseas talent, the lower-tier corporate tax rates mean you pay less tax on your first RM600,000 of chargeable income. That’s thousands in potential savings each year compared to paying the flat 24% rate from the start.
When hiring foreign talent, professional immigration and payroll services like Moore Bzi can help coordinate tax-efficient compensation structures with visa requirements to maximise these SME benefits.
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When managed correctly, these savings can be strategically reallocated into areas that directly support your foreign hires and overall business growth.
Expenses Category
- Recruitment costs: Work with specialist international recruiters to find top-tier talent.
- Relocation packages: Cover flights, moving allowances, and temporary accommodation without straining operating cash flow.
- Visa applications: Pay government processing fees, agency charges, and renewal costs without cutting into core budgets.
- Cross-cultural training programmes: Invest in workshops or team-building activities that help foreign and local staff integrate smoothly, boosting productivity.
By keeping accurate records and classifying these as tax-deductible expenses, you create a reinvestment loop where lower taxes provide more budget space for strategic talent investment, which leads to stronger business performance and greater incentive eligibility.
Tax Compliance Rules That Can Affect Your Business
When hiring foreign employees or working with overseas service providers, compliance is not just paperwork; it directly shapes your tax position, cash flow, and reputation with regulators.
Malaysia’s tax regime operates on a self-assessment system, meaning companies bear full responsibility for calculating, declaring, and paying the right amount of tax. Missing a step can trigger fines, tax audits, or even delays in your operations.
Key Compliance Areas to Manage
Withholding Tax
- Applies to payments made to non-resident individuals or foreign service providers (such as consultancy, technical services or royalties).
- If you fail to withhold the correct percentage for the Inland Revenue Board of Malaysia (IRBM), also known as Lembaga Hasil Dalam Negeri (LHDN), your company may face back taxes, penalties, and potential cash flow disruptions.
Monthly Tax Deduction (MTD/PCB)
- Employers must ensure that accurate monthly income tax deductions are made for both resident and foreign employees.
- Incorrect deductions can result in underpayment (leading to arrears) or overpayment (causing employee dissatisfaction).
Tax Clearance
- Employers must submit Form CP21 or CP22A to LHDN before releasing a foreign employee’s final salary when their contract ends or they leave Malaysia permanently.
- Failure to do so can make your company liable for the employee’s unpaid taxes.
Corporate Tax Filing
- Annual corporate tax returns (Form C) must be filed within 7 months after the end of the financial year, with timely settlement of any outstanding tax.
- Late filings or errors can attract surcharges, fines, and trigger a tax audit.
Record Keeping
- Companies are required to maintain proper accounting and tax records for at least 7 years, covering payroll, contracts, invoices, and supporting documents.
- Missing or incomplete records increase compliance risks and weaken your defence in case of an audit.
Why Compliance Matters
Poor compliance does not just mean paying fines; it can trigger tax audits, delay project timelines, and damage your credibility with regulatory authorities. On the other hand, accurate and timely compliance allows businesses to:
- Plan cash flow more effectively.
- Avoid unexpected tax liabilities.
- Build a strong compliance track record that supports smoother immigration and tax approvals in the future.
Managing regulatory compliance across both immigration and tax domains requires expertise to navigate MTD obligations, withholding tax, and work permit renewals simultaneously.
Need clarity on the intersection of tax and immigration compliance? Whether you are hiring foreign talent or seeking employment in Malaysia, our detailed breakdown of the Employment Pass requirements covers the compliance essentials you need to know.
Special Incentives That Can Benefit Companies
While Malaysia does not offer a direct corporate tax rate cut just for hiring foreign workers, you can leverage other incentives.
Types of Incentives
Double Deductions
- Claim double the amount spent on approved training programmes recognised by HRD Corp or other authorised bodies.
- Application: Spending RM20,000 on a certified technical course for local and foreign staff allows a RM40,000 tax deduction.
Pioneer Status & Investment Tax Allowances (ITA)
- For high-tech, high-value, or priority-sector companies. Pioneer Status grants a partial income tax exemption for up to 5 years. In contrast, ITA offsets a portion of capital expenditure against future income.
- Allocation: Foreign hires with in-demand skills (such as robotics, biotech, or renewable energy) can help meet eligibility criteria.
Green Technology Incentives
- Companies that invest in renewable energy, energy-efficient manufacturing processes, or sustainable waste management initiatives may qualify for tax exemptions or special allowances.
- Application: Sustainability specialists or environmental engineers can help execute qualifying projects and align with Environment, Social and Governance (ESG) standards.
By aligning your hiring strategy with these incentive programmes, you can turn your foreign recruitment budget into a dual-purpose investment, one that strengthens your workforce and also trims your tax bill.
Are you looking to hire foreign talent while maximising tax efficiency? Our guide on Work Permit Types in Malaysia We Can Help shows you how to choose the right visa category that aligns with your business goals and compliance requirements.
What to Watch Out for in Budget 2025?
Malaysia’s Budget 2025 is a roadmap that directly shapes how businesses operate, invest, and hire. The measures announced each year can shift tax liabilities, open new incentive windows, or tighten compliance rules.
Digital Economy Incentives
- Companies can benefit from tax deductions, allowances, or grants when investing in automation, artificial intelligence (AI), cloud computing, and cross-border e-commerce projects.
- Example: Hiring a foreign software engineer to lead an AI-powered logistics upgrade could help secure tax reliefs on hardware and training expenses.
Tighter Transfer Pricing Requirements
- Stricter documentation will be required for related-party transactions, especially for companies with foreign ownership or cross-border dealings.
- Hiring foreign professionals in finance or compliance can help maintain accurate records and prevent penalties related to service fees, royalties, or management charges.
Updates to Expatriate Visa & Levy Policies
- Potential changes are expected in Employment Pass (EP) and Residence Pass-Talent (RP-T) criteria, including salary thresholds, visa validity periods, and levy structures.
- These updates could mean higher levies or shorter visa terms, raising hiring costs. Engaging immigration experts can help companies stay compliant and avoid delays.
Want to learn more about work permits in Malaysia? Read more on the article Foreigner Work Permit & Visa Malaysia: Employer’s Guide.
How Moore Bzi Can Help
Corporate tax is more than just remitting payment to LHDN. It is about building the proper structure so your business remains compliant while still taking advantage of every incentive and deduction available.
At Moore Bzi, we do not just tick the compliance boxes; we take a proactive approach to corporate tax planning, blending local regulatory expertise with an international perspective.
We are renowned for our reliability and expertise in various business-essential services, and we can assist.
Whether you are a Malaysian SME bringing in niche talent or a multinational scaling operations here, our goal is simple: to help you grow sustainably, keep your operations tax-smart, and give you the peace of mind that your cross-border workforce is an asset, not a liability.
Get in touch with Moore Bzi today and discover how smart tax planning can fuel your business growth.
FAQ
What is the corporate tax rate for non-resident companies in Malaysia in 2025?
Non-resident companies in Malaysia are taxed at a flat rate of 24% on income earned from Malaysian sources. Unlike resident companies, they are not eligible for SME tax rates or certain local incentives.
Are there any tax exemptions for income earned outside Malaysia?
Yes. Under Malaysia’s territorial tax system, income earned outside Malaysia is generally not taxed unless it is received in Malaysia by a resident company. However, from 2022 onwards, foreign-sourced income received in Malaysia by certain entities may be taxable, subject to exemptions and conditions set by LHDN.
How does Malaysia’s tax system treat capital gains for companies?
Malaysia does not impose a general capital gains tax on the disposal of investments or assets. However, Real Property Gains Tax (RPGT) applies on the disposal of real property or shares in real property companies, with rates varying based on ownership duration and entity type.
Is there a requirement for companies to pay advance corporate tax in Malaysia?
Yes. Companies may be required to pay monthly instalments of tax (CP204) based on their estimated tax payable for the year. These advance payments help manage cash flow and avoid a large lump sum at the end of the year.
Are tax incentives available for companies in Free Industrial Zones (FIZ) or Licensed Manufacturing Warehouses (LMW)?
Yes. Companies operating in FIZ or LMW can benefit from duty and tax exemptions on raw materials, components, and machinery used for export-oriented manufacturing. This can significantly reduce production costs and improve competitiveness in global markets.