Malaysia is one of Asia’s most attractive destinations for foreign entrepreneurs and not only because of its strategic location and business-friendly environment, but also because of its competitive and transparent tax structure. However, tax rules differ significantly depending on your business activity, company structure, and whether you operate through a Malaysia Sdn. Bhd. or a Labuan Company.
This guide breaks down exactly how much tax foreign-owned companies pay in Malaysia in 2025, in simple, clear language.
1. Corporate Tax for Foreign-Owned Sdn. Bhd. Companies
A Sdn. Bhd. (Private Limited Company) operating in Malaysia is taxed the same as a locally owned company with one key difference:
– Foreign-owned companies DO NOT qualify for SME tax incentives.
Corporate Tax Rate:
- 24% flat corporate tax
Applicable to all taxable income earned in Malaysia.
What income is taxable?
- Revenue earned from Malaysian customers
- Fees charged for services performed inside Malaysia
- Profits from Malaysian operations
What income is NOT taxable?
- Foreign-sourced income remitted into Malaysia (not taxable under current exemption)
- Capital gains on the sale of shares (in most cases)
Withholding tax may apply to:
- Payments to foreign contractors
- Royalty payments
- Technical services
- Digital services (if provided by non-resident companies)
2. Corporate Tax for Labuan Company (Foreign-Friendly Jurisdiction)
Labuan is a Federal Territory with its own tax system, designed for international business.
Tax Options for Labuan Companies:
You may choose:
Option 1 – 3% Corporate Tax
3% tax on audited net profit
(Only for trading companies)
Option 2 – Flat RM20,000 Tax
A fixed annual tax of RM20,000
(Only for trading companies)
Option 3 – 0% Tax
Applicable for non-trading (holding) companies involved in:
- owning property
- shareholding
- investment holding
- passive income
Important:
A Labuan company cannot operate business physically in Malaysia without additional licensing and tax implications.
3. Service Tax (SST): Do Foreign-Owned Companies Pay It?
If your company sells taxable services in Malaysia, you must register for SST once exceeding RM 500,000 revenue per year.
SST Rates:
- 8% for most services
- 10% for certain goods
- 5% for selected industries
- 0% for exported services
Exported (international) services are not subject to SST, making Malaysia attractive for consulting, IT, and digital service companies.
4. Tax for Trading, Retail, Import & Export Businesses
Foreign-owned trading companies require a WRT License and typically pay:
- 24% corporate tax on Malaysian profit
- SST on certain goods (10%)
- Import duties depending on product category
- Customs duties / excise for regulated items
Digital importers or e-commerce sellers may also be subject to digital service tax.
5. Tax for Consulting / IT / Digital Service Companies
Good news is that, these businesses usually enjoy the simplest and most favourable tax structure:
If registered as Sdn. Bhd.:
- 24% corporate tax on Malaysian-sourced revenue
- 0% SST on exported services
- No tax on foreign income brought into Malaysia (under exemption)
If registered in Labuan:
- 0% to 3% tax depending on activity
- Multi-currency accounts allowed
- Lower compliance costs
This is why many global entrepreneurs use Malaysia as a base for digital businesses.
6. Tax for Education, F&B, Logistics & Special Industries
Education Centers:
- 24% corporate tax
- SST not applicable for academic institutions
F&B / Restaurants:
- 24% corporate tax
- SST 8% if meeting thresholds
- Service charges optional
Logistics Companies:
- 24% corporate tax
- SST applies to logistics services (8%)
7. Summary Table: Tax for Foreign-Owned Companies in Malaysia
| Company Type | Tax Rate |
| Sdn. Bhd. | 24% corporate tax |
| Labuan Trading Company | 3% or RM20,000 flat |
| Labuan Holding Company | 0% |
| SST (Most Services) | 8% |
| SST (Goods) | 10% |
| Export Services | 0% SST |
| Import Duties | Varies |
Malaysia offers one of Asia’s most flexible tax systems for foreign entrepreneurs.
Whether you choose a Sdn. Bhd. or Labuan structure, your total tax cost depends on:
- where your customers are
- how your business operates
- what licenses you need
- whether your income is Malaysia-sourced or foreign-sourced
Choosing the right structure from the beginning can save you thousands of ringgit every year.
Need help determining the right tax structure for your business?
Horizon Hub Consulting guides foreign entrepreneurs through tax planning, company setup, licensing, and compliance — fast, safe, and effective.
📲 WhatsApp: +60 11-3773 0699
📧 Email: info@horizonhubconsulting.com