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Withholding Tax Planning & Advisory

Withholding Tax Planning And Advisory Services

The Withholding Tax is a percentage of income earned by a non-resident (payee) that is withheld by the party making payment (payer) and paid to the Malaysian Internal Revenue Board (IRB).

The term ‘payer’ refers to any individual or organization other than an individual operating a business in Malaysia. The taxpayer is required to withhold tax from payments made under any agreement for the use of the moveable property to a non-resident payee for services rendered, technical advice, rental, or other payments.

The term ‘payee’ refers to the individual/body that receives the above payments who is not a Malaysian resident.

Under the Income Tax Act, 1967, when a person (referred to herein as a “payer”) is liable to make payments to a non-resident individual (NR payee), he must deduct withholding tax at the prescribed rate from such payments and pay that tax to the Director-General of Inland Revenue within one month after such payments have been paid or credited.

Payments Liable To Withholding Tax

Payments subject to withholding tax are:

  • Contract Payments to Non-Resident Contractors (Payee)
  • Interest Paid to Non-Resident Persons (Payee)
  • Royalty Paid to Non-Resident Persons (Payee)
  • Technical fees, payments for services, rent/payments for moveable property (Special classes of income)
  • Income of non-resident public entertainers
  • Real Estate Investment Trust (REIT)
    1. Other than a resident company
    2. Non-Resident company.
    3. Foreign investment institution
  • Family Fund/Takaful Family Fund/Dana Am
    1. Individual and other
    2. Non-Resident Company
  • Income under Section 4(f) ITA 1967

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