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As of 2026, the Malaysian tax environment has fully transitioned into a high-transparency, digital-first model. The Inland Revenue Board (LHDN) and the Royal Malaysian Customs Department now operate with real-time data visibility, primarily driven by the full implementation of the national e-invoicing mandate.
For business owners, manual reconciliation has been replaced by automated, validated reporting. This guide provides the definitive breakdown of corporate and personal income tax, Sales and Service Tax (SST), and the critical deadlines you must observe to remain compliant in this digital era.
Key Takeaways
- Full E-Invoicing Compliance: As of July 1, 2025, e-invoicing became mandatory for all businesses in Malaysia. Every B2B and B2C transaction must be validated via the MyInvois portal to be tax-deductible.
- Tiered SME Rates: Micro, Small, and Medium Enterprises (MSMEs) benefit from a preferential three-tier tax rate starting at 15%.
- SST Status: The standard Service Tax is 8%, with essential categories like F&B, telecommunications, and logistics maintained at 6%.
- Tax Identification Number (TIN): The TIN is the universal identifier for all legal and financial transactions, including property transfers and vehicle registrations.
- SAS Audit Focus: Under the Self-Assessment System (SAS), LHDN utilizes AI-driven risk profiling to detect discrepancies between e-invoice data and tax filings.
1. Corporate Income Tax (For Sdn Bhd)
Malaysia maintains a competitive tiered structure for resident companies. For the current Year of Assessment (YA), the rates are:
SME Tax Rates (MSMEs)
To qualify for these lower rates, a company must meet all of the following criteria at the start of the basis period:
- Paid-up capital of ordinary shares
RM2.5 million (RM2.5 million or less).
- Gross income from business source(s)
RM50 million (RM50 million or less).
- Ownership Rule: Not more than 20% of the paid-up capital is owned by a company with paid-up capital exceeding RM2.5 million.
| Chargeable Income | Tax Rate |
| First RM150,000 | 15% |
| RM150,001 to RM600,000 | 17% |
| Above RM600,000 | 24% |
Note: The symbol means “less than or equal to.”
Non-SME / Standard Corporate Rate
| Chargeable Income | Tax Rate |
| All Chargeable Income | 24% |
2. Personal Income Tax (Resident Individuals)
Resident individuals are taxed at progressive rates. The following tiers apply to current income reporting:
| Chargeable Income (RM) | Tax Rate (%) |
| 0 – 5,000 | 0% |
| 35,001 – 50,000 | 6% |
| 50,001 – 70,000 | 11% |
| 100,001 – 400,000 | 24% |
| 600,001 – 2,000,000 | 28% |
| Above 2,000,000 | 30% |
3. Sales and Service Tax (SST)
Managed by the Royal Malaysian Customs Department, SST is a single-stage consumption tax.
- Sales Tax: Typically 5% or 10% on manufactured or imported goods.
- Service Tax (): Applied to most taxable services including IT, digital services, legal, and accounting.
- Service Tax (): Maintained for Food & Beverage, Telecommunications, Logistics, and Vehicle Parking.
Registration Threshold: Mandatory once annual taxable turnover exceeds RM500,000.
4. Critical LHDN Filing Deadlines
LHDN enforces strict penalties for late submissions. Automated alerts via the MyTax portal notify taxpayers before these deadlines.
| Form | Description | Submission Deadline |
| Form E | Employer’s Return (Reporting employee salaries) | 31 March |
| Form BE | Individual (Residents without business income) | 30 April |
| Form B | Individual (Residents with business income/Sole Prop) | 30 June |
| Form C | Company Return (Sdn Bhd) | 7 months after financial year-end |
| CP204 | Estimate of Tax Payable (Monthly installments) | By the 15th of every month |
The Reality of LHDN E-Invoicing
E-invoicing is now the operational standard for all Malaysian entities:
- No Validation, No Deduction: Expenses not backed by an LHDN-validated e-invoice (UUID) are generally non-deductible for corporate tax purposes.
- Consolidated E-Invoices: Retailers and small merchants must issue consolidated e-invoices within seven days after the end of each month for customers who do not require individual e-invoices.
- AI Risk Profiling: LHDN automatically compares SST-02 filings against MyInvois data. Any significant variance triggers automated clarification requests.
Did You Know?
As of the current mandate, the Tax Identification Number (TIN) is required for all stamped documents. Failure to provide a TIN during the digital stamping process on the STAMPS portal will result in the rejection of the instrument.
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Conclusion: Data Integrity as a Defense
Taxation in Malaysia has moved from a periodic filing event to a “compliance with every transaction” reality. By leveraging e-invoicing-ready payment gateways and accounting software, you protect your business from the administrative bottlenecks of the digital economy. Staying compliant not only avoids penalties but also provides the real-time financial clarity needed to scale.
Frequently Asked Questions (FAQs)
1. Is there still a transition period for e-invoicing?
No. The general transition period ended in 2025. All businesses, including SMEs and individual taxpayers with business income, are now required to issue validated e-invoices for all transactions.
2. Can I still claim “Love and Affection” stamp duty relief?
Yes. Property transfers between spouses remain 100% exempt. For transfers between parents and children, the first RM1 million is 100% exempt, with a 50% reduction on the remaining balance.
3. What is the penalty for not issuing an e-invoice?
Failure to issue a validated e-invoice can result in a fine of up to RM20,000 per instance. LHDN monitors compliance through the digital UUID trail.
4. How does the 8% Service Tax affect digital services?
If you provide digital services (SaaS, online advertising, etc.) and your turnover exceeds RM500,000, you must charge 8% Service Tax and file bi-monthly returns via the MySST portal.
