What is Withholding Tax ?
Withholding Tax Breakdown
How to Calculate Withholding Tax?
|Payment Type||Income Tax Act 1967||Withholding Tax-Rate||Payment Form|
|Contract Payment||Section 107A (1) (a) & 107A (1) (b)||10%, 3%||CP 37A|
|Interest||Section 109||15%||CP 37|
|Royalty||Section 109||10%||CP 37|
|Special classes of income: Technical fees, payment for services, rent/payment for use of moveable property||Section 109B||10%||CP 37D|
|Interest (except exampt interest) paid by approved financial institutions||Section 109C||5%||CP 37C|
|Income of non-resident public entertainers||Section 109A||15%||Payment memo issued by Assessment Branch|
Real Estate Investment Trust (REIT)
||Section 109D||10%, 25%, 10%||CP 37E|
Family Fund/Takaful Family Fund/Dana Am
||Section 109E||8%, 25%||CP 37E(T)|
|Income under Section 4(f) ITA 1967||Section 109F||10%||CP 37F|
Non Resident Branch
Customer Services Unit
3rd Floor Left, Block 8
Government Office Complex
Jalan Duta, 50600 Kuala Lumpur,
what happens if i do not pay withdholding tax?
Interest paid to NR payee on 03/08/2006 = RM20,000
Withholding tax received by IRBM on 10/09/2006 later than 02/09/2006 = RM2000
Increase in tax imposed on payer (2000 @ 10 %) = RM200
Effective from 02/09/2006
Types and Rates of Payment
- 10% on the service portion of the contract payments on account of tax payable by the payee
- 3% of service portion of the contract payments on account of tax payable by employees of the payee
Interest paid to NR Payee is subject to withholding tax at 15%. Or any other amount as instructed under the Double Taxation Agreement between Malaysia and the payee’s country of origin .
- Responsibility for payment is within the Government or State Government
- Responsibility of payment is on the Malaysian resident
- Interest charged as an outgoing expense against any accruing income from Malaysia
- Interest paid to payee on approved loan
- Interest paid to payee by a licensed bank or a licensed finance company in Malaysia
Definition – Royalty : Payments made for the rights to use:
- artistic/scientific work,
- patents, designs, models,
- plans, secret processes or formulae, trademarks or
- tapes for radio or television broadcasting, motion picture films, films or video tapes or other means of reproduction where such films or tapes have been or are to be used or reproduced in Malaysia or other like property or rights.
- Information concerning technical, industrial, commercial or scientific knowledge, experience or skill.
- Income gained from the alienation of any property, information mentioned in above paragraph of this definition.
Payment for services provided by non-resident payee or his employee:
- technical advice
- use of property
- installation of operation / machinery purchased from the non-resident payee
- Definition : Public Entertainers – stage, radio, television artist , musician, athlete, or any individual exercising any profession of a similar nature.
- Withholding tax at 15% for non-residents in Malaysia for these services performed.
- A 15% withholding tax is required by the sponsor of a non-resident public entertainer before an entry permit can be obtained from the immigration Dept.
- Malaysia has 69 effective Double Taxation Agreements (DTA).
- For withholding tax refund, due to DTA, payee must forward application for refund to the Director, Non Resident Branch together with the following details:
- Tax resident certificate of the payee from the tax authority of the country where the payee is resident.
- Evidence to prove that the conditions stipulated in the DTA are met.
- Proof of payment of withholding tax.
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