Withholding tax is an amount withheld by the payer from certain payments and paid to HASiL. HASiL's withholding tax guidance describes it as tax withheld on income derived from Malaysia for certain transactions, and places the obligation on the payer. A payer includes a resident person, or any person who claims the payment as an expense of a business carried on in Malaysia.
Payments to non-residents
HASiL lists the types of payment covered by the Income Tax Act 1967, each with its own prescribed rate and form. For non-resident payees these include contract payments, interest, royalties, payments to public entertainers, special classes of income, and other income within paragraph 4(f) of the Act. Identify the payment’s substance, the payee’s tax residence, the relevant statutory category and any applicable tax treaty or exemption before deciding the rate and amount to withhold.
Remittance
The general deadline is one month after payment or crediting to the payee, whether or not tax was deducted. For qualifying payments under sections 109 and 109B, HASiL permits deferment where withholding tax does not exceed RM500 per transaction and small-value transactions occur more than once in the relevant six-month period. Remit by 30 June for transactions from 1 December to 31 May, or by 31 December for transactions from 1 June to 30 November. Its guidance also explains that failing to deduct and remit on time can increase the amount due and can affect whether the payment is allowed as a business deduction.
Overseas software and online services raise their own questions; see our article on withholding tax on foreign SaaS and AI subscriptions. Withholding tax can also come up in a tax audit.
This article is general information only. Requirements depend on each company's circumstances; please refer to HASiL's official guidance, and see Saifudin & Co's tax advisory and compliance services if you would like assistance.