Taxation (Corporate and Indirect)
What is tested
Taxation tests corporate income tax, the SME rate, deductions, dividends and indirect taxes. The secretary must know filing dates and how tax interacts with distributions.
Core rules
- The standard corporate rate is 24%. A qualifying SME resident company pays 15% on the first RM150,000 and 17% on the next RM450,000, with the balance at 24%; conditions include paid-up capital of not more than RM2.5 million and gross income of not more than RM50 million.
- Deductions require expenses wholly and exclusively incurred in producing gross income; capital expenditure is relieved through capital allowances.
- Malaysia operates a single-tier dividend system: dividends paid by resident companies are exempt in shareholders' hands.
- Indirect tax is SST: sales tax at 5% or 10% and service tax at 6%, with 8% for certain services from March 2024. GST was abolished in 2018.
- From 2024, capital gains tax applies to disposals of unlisted shares, subject to exemptions. Form C is due within seven months of year end; CP204 estimates are due within three months of commencement.
Worked example
An SME with chargeable income of RM500,000 pays 15% x RM150,000 = RM22,500 plus 17% x RM350,000 = RM59,500, totalling RM82,000. That is an effective rate of 16.4%. If gross income exceeded RM50 million, the SME rate would not apply and tax would be RM120,000 at 24%.
Traps
Applying SME rates when either threshold fails; deducting private or capital expenses; treating exempt dividends as taxable; confusing SST with the old GST; missing CP204 instalments; ignoring CGT on unlisted shares.