Withholding Tax Malaysia

The amount withheld from income received by a non-resident (payee) and paid to the Malaysian Inland Revenue Board is known as withholding tax or LHDN withholding tax. This amount has to be paid to LHDN. Simply put, if you pay non-local suppliers, you must withhold a set percentage of the invoiced amount and pay LHDN withholding tax, leaving the remainder to be remitted to your foreign vendor.

Withholding tax in Malaysia is not new; it goes back to the Income Tax Act of 1969. It includes payments such as:

  • Royalties
  • Interests
  • Income of non-resident people
  • Payments for the use of any item carried, such as rent or other fees
  • Contract payments

Each payment will have a separate withholding tax rate, and if Malaysia and the country in which the non-resident is a tax resident have a double tax agreement, the non-resident can benefit from a lower tax rate.

The non-compliance includes the following:

  • The payer fails to pay the required amount of withholding tax (regardless of whether it is withheld or not).
  • The payer pays tax at the source with a delay (more than one month after the date of payment/crediting to the HP recipient).
  • The payer does not pay the tax surcharge imposed on him as a result of late payment or non-payment of withholding tax.

With the exception of non-resident public performers, all withholding tax payments must be made using the appropriate payment forms along with copies of invoices issued by the NR payee and copies of payment documents as proof of the date of payment/credit to the NR payee.

The relevant payment forms, the invoices issued by the non-resident payee, and a copy of the payment documents as proof.

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How To File A Withholding Tax Malaysia 2022 And Pay It?

Telegraphic transfer, Giro, Interbank, and Wire transfer are all options for royalties and a special class of income payments. The payment must be accompanied by the relevant payment forms and invoices of the non-resident recipient and copies of payment documents as confirmation.

How To Pay Withholding Tax Malaysia Online?

LHDN has created an online payment system called e-TT, allowing consumers to make tax payments from April 1, 2022. e-TT is a payment identification method that uses a virtual account number (VA).

Taxpayers wishing to use the E-TT system must complete the following steps:

  • Visit https://mytax.hasil.gov.my to access the MyTax website.
  • Click on the e-TT submenu under Perkhidmatan ezHasil.
  • Fill out the form to get a VA number.
  • When making a payment through online banking or the cashier, the VA number must be indicated as the account number.
  • You will most likely have to make your withholding tax payments every month, or at least every other month within one month of the payment being made.
  • When filing the Withholding Tax Malaysia return form by eligible authorized agents, dealers, and distributors, the withholding tax of 2% will be recognized as advance tax and deducted from the “balance of tax payable.

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