{"id":19003,"date":"2026-02-02T07:53:15","date_gmt":"2026-02-02T07:53:15","guid":{"rendered":"https:\/\/curlec.blog.razorpay.in\/blog\/?p=19003"},"modified":"2026-02-02T07:53:16","modified_gmt":"2026-02-02T07:53:16","slug":"withholding-tax-in-malaysia","status":"publish","type":"post","link":"https:\/\/curlec.com\/blog\/guides\/withholding-tax-in-malaysia\/","title":{"rendered":"Withholding Tax in Malaysia: Meaning, Rates, Examples &amp; How It Works"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">When a Malaysian business engages with international expertise\u2014whether by paying a software developer in India, licensing a brand from the UK, or paying interest on a loan from a Singaporean bank\u2014it triggers a specific tax obligation known as <strong>Withholding Tax (WHT)<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Withholding Tax is not a tax on your business, but a tax on the <strong>non-resident<\/strong> recipient. However, the law places the responsibility of collection and remittance squarely on the Malaysian payer. In the fully digital tax landscape of 2026, where LHDN has real-time visibility into cross-border transactions through <strong>e-invoicing<\/strong>, managing WHT correctly is essential to avoid heavy penalties and disallowed business expenses.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This guide provides a clear breakdown of the types of payments subject to WHT, the current rates for 2026, and a step-by-step process for compliance.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Takeaways<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>What It Is:<\/strong> An amount &#8220;withheld&#8221; from payments made to non-residents and remitted to the Inland Revenue Board (LHDN).<\/li>\n\n\n\n<li><strong>The Responsibility:<\/strong> The Malaysian business (the payer) is legally responsible for withholding and paying the tax.<\/li>\n\n\n\n<li><strong>The Deadline:<\/strong> You must remit the tax to LHDN within <strong>one month<\/strong> of paying or crediting the non-resident.<\/li>\n\n\n\n<li><strong>2026 E-Invoicing Impact:<\/strong> Cross-border payments must now be backed by validated <strong>Self-Billed e-invoices<\/strong>, making WHT discrepancies instantly visible to LHDN.<\/li>\n\n\n\n<li><strong>DTA Relief:<\/strong> <strong>Double Taxation Agreements<\/strong> can often reduce the standard WHT rates.<\/li>\n\n\n\n<li><strong>Non-Compliance Penalty:<\/strong> Failure to withhold results in a 10% penalty on the unpaid tax, and the entire payment becomes <strong>non-deductible<\/strong> for your own tax purposes.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Common Types of Payments and WHT Rates (2026)<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Under the Income Tax Act 1967, specific categories of income derived from Malaysia by a non-resident are subject to WHT.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Payment Category<\/strong><\/td><td><strong>Section (ITA 1967)<\/strong><\/td><td><strong>Standard Rate<\/strong><\/td><td><strong>Description<\/strong><\/td><\/tr><tr><td><strong>Interest<\/strong><\/td><td>Section 109<\/td><td>15%<\/td><td>Interest on loans or indebtedness.<\/td><\/tr><tr><td><strong>Royalties<\/strong><\/td><td>Section 109<\/td><td>10%<\/td><td>Use of patents, copyrights, software, or brand names.<\/td><\/tr><tr><td><strong>Technical Fees<\/strong><\/td><td>Section 109B<\/td><td>10%<\/td><td>Services of a technical or professional nature.<\/td><\/tr><tr><td><strong>Rental of Moveable Property<\/strong><\/td><td>Section 109B<\/td><td>10%<\/td><td>Rental of machinery, equipment, or vehicles.<\/td><\/tr><tr><td><strong>Public Entertainers<\/strong><\/td><td>Section 109A<\/td><td>15%<\/td><td>Payments to artists, musicians, or athletes.<\/td><\/tr><tr><td><strong>Contract Payments<\/strong><\/td><td>Section 107A<\/td><td>10% + 3%<\/td><td>10% for the foreign company, 3% for its employees.<\/td><\/tr><tr><td><strong>Other Income<\/strong><\/td><td>Section 109F<\/td><td>10%<\/td><td>Gains or profits not falling under the above categories.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>The 2026 Standard: Self-Billed e-Invoices for WHT<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">In 2026, the transition to e-invoicing is complete. Since non-residents cannot issue Malaysian e-invoices, the Malaysian payer must issue a <strong>Self-Billed e-Invoice<\/strong>.<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Trigger:<\/strong> Upon receiving a foreign invoice, log into the <strong>MyInvois portal<\/strong>.<\/li>\n\n\n\n<li><strong>Creation:<\/strong> Issue a Self-Billed e-invoice using the foreign supplier\u2019s details and your own TIN.<\/li>\n\n\n\n<li><strong>Validation:<\/strong> LHDN provides a <strong>UUID<\/strong> for this invoice instantly.<\/li>\n\n\n\n<li><strong>Correlation:<\/strong> This UUID is the digital anchor that LHDN uses to ensure the corresponding WHT payment is made within one month.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>How to Remit WHT: LHDN Forms<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">You must use the correct form based on the type of payment. These are now filed electronically via <strong>MyTax<\/strong>:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Form CP37:<\/strong> For Interest and Royalties.<\/li>\n\n\n\n<li><strong>Form CP37D:<\/strong> For Technical Fees, Rental of Moveable Property, and Section 4A income.<\/li>\n\n\n\n<li><strong>Form CP37A:<\/strong> For Contract Payments (Section 107A).<\/li>\n\n\n\n<li><strong>Form CP39A:<\/strong> For Public Entertainers.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>The Danger of Non-Compliance<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">LHDN\u2019s AI Risk Profiling now flags missing WHT payments by comparing your &#8220;Purchases&#8221; (Self-Billed invoices) in the MyInvois portal against your remittance history.<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Late Payment Penalty:<\/strong> A 10% penalty is automatically added to the unpaid tax amount if not settled within the deadline.<\/li>\n\n\n\n<li><strong>Disallowed Deduction:<\/strong> This is the most significant risk. Under Section 39(1)(f), if the WHT is not paid, the entire expense is <strong>disallowed<\/strong> for your corporate tax filing.<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>Example:<\/em> Missing a RM1,000 WHT payment on a RM10,000 service could result in you paying an extra RM2,400 (24% corporate tax rate) in taxes because the RM10,000 expense was disallowed.<\/li>\n<\/ul>\n\n\n\n<ol start=\"3\" class=\"wp-block-list\">\n<li><strong>Stoppage at Exit:<\/strong> Directors of companies with significant unpaid WHT may be barred from leaving Malaysia under Section 104.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Using DTAs to Reduce Your Tax Burden<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Malaysia has Double Taxation Agreements (DTAs) with over 70 countries. These treaties often reduce WHT rates significantly.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Common DTA Rates:<\/strong> Technical fees or Royalties may be reduced from 10% to 5% or 8%.<\/li>\n\n\n\n<li><strong>Mandatory Document:<\/strong> To apply a DTA rate, you <strong>must<\/strong> obtain a <strong>Certificate of Residence (COR)<\/strong> from the foreign supplier to prove their tax residency.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Ready to Streamline Your Malaysian Business?<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Streamline your financial operations with a unified <a href=\"https:\/\/curlec.com\/payment-gateway\/\">payment gateway<\/a> designed for Malaysia. Accept FPX, DuitNow, cards, and digital wallets effortlessly while keeping your finances reconciled and compliant with the latest IRBM e-invoicing and withholding tax standards.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Explore Payment Solutions from <a href=\"https:\/\/curlec.com\/?utm_source=blog&amp;utm_medium=blog-cta&amp;utm_campaign=malaysia-article\">Razorpay Curlec<\/a><\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Frequently Asked Questions (FAQs)<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>1. Does WHT apply to physical goods?<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">No. WHT does not apply to the &#8220;straight&#8221; purchase of inventory or raw materials. It applies to services, rights (royalties), and interest.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>2. What if I pay the non-resident via credit card?<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">WHT still applies. Even if the payment is automated via a card, the Malaysian business is responsible for calculating, withholding, and remitting the tax to LHDN within one month.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>3. Can I remit WHT in foreign currency?<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">No. WHT must be remitted to LHDN in <strong>Malaysian Ringgit (MYR)<\/strong> using the exchange rate provided by LHDN for the date the payment was made.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>4. Is software-as-a-service (SaaS) a Royalty or a Service?<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">In 2026, most cloud-subscriptions are treated as <strong>Royalties<\/strong> (10%) if they involve the use of copyright, or <strong>Technical Services<\/strong> (10%) if they involve customization. Always check the specific DTA definitions for the supplier&#8217;s country.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>When a Malaysian business engages with international expertise\u2014whether by paying a software developer in India, licensing a brand from the UK, or paying interest on a loan from a Singaporean bank\u2014it triggers a specific tax obligation known as Withholding Tax (WHT). Withholding Tax is not a tax on your business, but a tax on the [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[5],"tags":[],"class_list":["post-19003","post","type-post","status-publish","format-standard","hentry","category-guides"],"_links":{"self":[{"href":"https:\/\/curlec.com\/blog\/wp-json\/wp\/v2\/posts\/19003","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/curlec.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/curlec.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/curlec.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/curlec.com\/blog\/wp-json\/wp\/v2\/comments?post=19003"}],"version-history":[{"count":1,"href":"https:\/\/curlec.com\/blog\/wp-json\/wp\/v2\/posts\/19003\/revisions"}],"predecessor-version":[{"id":19005,"href":"https:\/\/curlec.com\/blog\/wp-json\/wp\/v2\/posts\/19003\/revisions\/19005"}],"wp:attachment":[{"href":"https:\/\/curlec.com\/blog\/wp-json\/wp\/v2\/media?parent=19003"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/curlec.com\/blog\/wp-json\/wp\/v2\/categories?post=19003"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/curlec.com\/blog\/wp-json\/wp\/v2\/tags?post=19003"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}