Corporate Income Tax Rate for SME

01Tax Rate - Companies

Resident companies are taxed at the rate of 24% while those with paid-up capital of RM2.5 million or less*, and gross business income of not more than RM50 million (strictly all business sources) are taxed at the following scale rates:

• SMEs will have a reduced corporate income tax rate of 15% for the first RM150,000 ringgit chargeable income.
• SMEs earning between RM150,00 to RM600,000 on the first chargeable income will be charged at 17%, and
• Balance (those earning more than RM600,000) will be charged the 24% tax rate.

* none of its related companies within the group ( by way of shareholding of more than 50%) paid up share (ordinary) exceeding RM2.5 million.

02Definition of SME for Tax Purpose

SME companies are defined

• Paid-up share capital not exceeding RM2.5 million
• Gross income (business source) not exceeding RM50 million

New Ruling on Foreign Shareholders (wef Year of Assessment 2024)

With effect from YA 2024, one more condition for SMEs to enjoy the preferential tax rate

If more than 20% of paid-up share capital is owned by a foreign company or non-Malaysia citizen, SME will not entitle to 15% and 17% preferential tax rate.

Tax Implication on Foreign Shareholding More Than 20%

Taxpayers will be subject to a 24% tax rate if the foreigner owns more than 20% shareholding.

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