Rates, Filing & SME Tax Guide (2026)
Corporate tax in Malaysia refers to the tax imposed on profits earned by companies operating in the country. Businesses are taxed based on their chargeable income after deducting allowable expenses and applicable tax deductions.
The Inland Revenue Board of Malaysia (LHDN) administers Malaysia’s corporate tax framework under the Income Tax Act 1967. The system includes a standard corporate tax rate as well as reduced tax rates and incentives to support small and medium-sized enterprises (SMEs).
This guide explains how corporate tax works in Malaysia, including tax rates, filing requirements, tax incentives, and key compliance responsibilities for businesses.
Corporate Tax in Malaysia at a Glance
| Item | Details |
| Standard corporate tax rate | 24% |
| SME tax rate | 15% on first RM150,000, 17% on next RM450,000 |
| Tax authority | Inland Revenue Board of Malaysia (LHDN) |
| Governing law | Income Tax Act 1967 |
| Filing system | MyTax e-Filing |
| Corporate tax form | Form C or e-C |
| Tax year | Year of Assessment (YA) |
These rates are from the latest guidance by LHDN and may change following future Budget announcements.
What Is Corporate Tax in Malaysia?
Corporate tax is the tax imposed on the profits of companies that operate in Malaysia. Companies are taxed on their chargeable income, which is calculated after deducting allowable business expenses and tax deductions.
Corporate tax generally applies to:
- locally incorporated companies
- foreign companies operating in Malaysia
- resident companies earning business income in Malaysia
Corporate Tax Rates in Malaysia
To support SMEs, Malaysia applies a tiered corporate tax structure.
For companies with paid-up capital of RM2.5 million or less and annual revenue not exceeding RM50 million, the SME corporate tax rates are generally:
| Chargeable Income | Tax Rate |
| First RM150,000 | 15% |
| RM150,001 – RM600,000 | 17% |
| Above RM600,000 | 24% |
Companies that do not qualify for SME rates are generally taxed at the standard corporate income tax rate of 24%.
SME Eligibility
To qualify for SME corporate tax rates, companies generally must meet conditions set by LHDN, including:
- paid-up capital not exceeding RM2.5 million at the beginning of the basis period
- gross business income not exceeding RM50 million
- not being controlled by or related to a larger company beyond specified thresholds
- not operating solely as an investment holding company
Businesses should refer to LHDN guidance for more details on eligibility requirements.
Example of Corporate Tax Calculation for an SME
If a qualifying SME reports RM500,000 in chargeable income, the corporate tax calculations are:
| Income Tier | Tax Rate | Tax Payable |
| First RM150,000 | 15% | RM22,500 |
| Remaining RM350,000 | 17% | RM59,500 |
| Total Tax Payable | RM82,000 |
This tiered structure allows smaller businesses to benefit from lower tax rates on their initial income.
Resident vs Non-Resident Company Tax in Malaysia
Corporate tax treatment may differ depending on whether a company is classified as a resident or non-resident company.
Resident Companies
A company is generally considered a tax resident if it exercises management and control in Malaysia.
This typically refers to where the company’s board of directors or controlling authority makes key strategic and policy decisions.
Resident companies may qualify for certain tax incentives available to Malaysian businesses.
Non-Resident Companies
Non-resident companies operating in Malaysia are also subject to Malaysian corporate tax on income derived from Malaysian sources. However, they may not qualify for certain incentives or preferential tax treatments available to resident companies.
Year of Assessment and Basis Period
Corporate tax in Malaysia is assessed based on the Year of Assessment (YA).
A company’s financial year end determines the basis period for that YA.
For example:
- Financial year: 1 January 2025 to 31 December 2025
- Income from this period is assessed under YA 2025
This system ensures that companies report income based on their financial accounting period.
How to Calculate Corporate Tax
Businesses calculate corporate tax based on their chargeable income.
The process generally involves:
- Calculating total business income for the financial year
- Deducting allowable business expenses
- Applying capital allowances or tax deductions
- Determining chargeable income
- Applying the relevant corporate tax rate
Maintaining proper accounting records is important to support tax calculations and compliance.
Allowable and Non-Allowable Business Expenses
Businesses may reduce taxable income by claiming allowable expenses that are incurred wholly and exclusively in generating business income.
Examples of allowable expenses may include:
- office rent and utilities
- employee salaries and statutory contributions
- marketing and advertising costs
- professional services such as accounting or legal fees
- software subscriptions and digital tools
Certain expenses are considered non-allowable and cannot be deducted for tax purposes.
Assets such as machinery or equipment may qualify for capital allowances, which allow businesses to claim deductions over time.
Tax Incentives Available to Businesses
Malaysia offers various tax incentives designed to support business investment, innovation, and digital transformation.
Examples include:
- tax rebates for newly incorporated SMEs
- automation and digitalisation incentives
- investment tax allowance for capital investments
- deductions related to technology adoption or compliance requirements
Get the full list of SME tax incentives and deductions here, and explore how to reduce the business tax burden while investing in growth and productivity.
Corporate Tax Filing in Malaysia
Companies in Malaysia must submit corporate tax returns annually through the LHDN MyTax e-Filing system.
Corporate tax returns are generally submitted using Form C or e-C.
Companies are responsible for:
- preparing financial statements
- calculating chargeable income
- submitting corporate tax returns
- paying the tax due within the given deadline
Maintaining accurate accounting records helps ensure compliance with Malaysian tax regulations.
Corporate Tax Filing Timeline in Malaysia
Corporate tax compliance in Malaysia typically follows a structured timeline.
CP204 Estimated Tax Payable
Companies must submit an estimate of their tax payable using Form CP204, usually within three months from the start of the financial year.
Estimated tax is generally paid in monthly instalments throughout the year.
Financial Year End
At the end of the financial year, companies prepare their financial statements and determine their actual chargeable income.
Corporate Tax Return Submission
Companies must submit Form C or e-C through the MyTax portal.
Corporate tax returns are generally due within seven months after the end of the company’s financial year.
Final Tax Adjustment
After filing the tax return, companies reconcile the actual tax payable with the instalments paid during the year. Any remaining balance must be settled with LHDN.
Corporate Tax and Cash Flow Management
Corporate tax payments can affect business cash flow, particularly when they coincide with other operational expenses.
Costs such as payroll, supplier payments, and operating expenses may occur around the same time as tax obligations.
Some SMEs explore financing options to help manage working capital during these periods. Access to business financing can provide additional liquidity while businesses manage their financial commitments.
Final Thoughts
Corporate tax is a key part of operating a business in Malaysia. Understanding corporate tax rates, filing requirements, and available tax incentives can help companies manage their financial obligations more effectively.
Malaysia’s corporate tax framework also includes various incentives to support SME development, investment, and digital transformation.
Because tax regulations and eligibility requirements may change over time, businesses should refer to official guidance from the Inland Revenue Board of Malaysia or consult qualified tax professionals when preparing their filings.
Corporate Tax Frequently Asked Questions (FAQs)
What is the corporate tax rate in Malaysia?
The standard corporate tax rate in Malaysia is 24%. SMEs with paid-up capital of RM2.5 million or less and revenue below RM50 million may qualify for reduced tax rates of 15% on the first RM150,000 and 17% on the next RM450,000 of chargeable income.
Who needs to pay corporate tax in Malaysia?
Corporate tax applies to companies that earn income from business activities in Malaysia, including locally incorporated companies and foreign companies operating in the country.
What expenses are tax deductible for businesses in Malaysia?
Businesses may claim deductions for expenses incurred wholly and exclusively in generating business income. These may include operating costs, employee salaries, marketing expenses, and professional services.
What is the difference between corporate tax and personal income tax?
Corporate tax applies to profits earned by companies. Personal income tax applies to income earned by individuals such as employment income, business income, or investment income.
