2% withholding tax on commission

01Overview

Recent Budget 2022 proposed the Company needs to pay 2% withholding tax on commission paid to the individual agent, dealer, and distributor to IRB.

02Effective date

With effective from 1/1/2022 under Section 107D

03Key takeaway

You will understand:

(a) Payer who needs to withhold 2% of commission and remit to IRB

(b) Payee who is subject to withholding tax

(c) Penalty for not remitting the 2% withholding tax

Summary of learning

Payer:

• Company pays monetary commission to the individual agent, dealer and distributor

• Company remits the withholding tax to IRB within 30 days from payment date

Payee:

• Individual resident

• Received more than RM100k of commission whether in monetary or otherwise (such as accrual) from the same company in the calendar year 2021

• Exclude the commission of employees reported in Form E

• Income tax payable can be deducted by withholding tax

Penalty:

• 10% penalty if the payer fails to remit 2% to IRB within 30 days

• Commission is not allowed for tax deduction

Scenario

Company A paid RM120,000 commission to individual agent B in the calendar year 2021.

So, agent B is subject to withholding tax.

From 1/1/2022, Company A needs to withhold 2% of the commission paid to agent B and remit it to IRB within 30 days.

Agent B individual tax return:

Tax payable x

(-) Tax instalments xx

(-) Withholding tax xxx_

Balance tax payable/ refund xxxx

Sources

https://bit.ly/3HkBGSr

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