Tax Rate for Micro, Small, and Medium Enterprises
The finance ministry has announced that the lower tax rate for micro, small, and medium enterprises is aimed at enhancing their competitiveness and supporting economic growth.
No Plans to Lower Corporate Income Tax Rate
The government does not intend to lower the corporate income tax rate to attract more foreign investment to Malaysia. In a written reply to Senator Lau Hui Yew, the finance ministry stated that the government remains committed to improving tax services and administration to enhance efficiency and service quality for taxpayers.
Prioritizing Fiscal Position and Progressive Taxation
The government must ensure that future studies or reviews of income tax rates do not jeopardize the country’s fiscal position, while maintaining a more equitable and progressive taxation system, said the ministry. This is to ensure that Malaysia’s corporate income tax rate remains competitive compared to other countries in the region, while tax incentives for various sectors continue to support overall economic growth.
Tax Rate Structure
The effective tax borne by companies is lower than the standard rate, depending on various factors such as tax incentives, deductions, exemptions, reliefs, and capital allowances available to each company. Companies with paid-up capital of RM2.5 million and below as well as less than RM50 million in income would be taxed 15% on the first RM150,000 they make, followed by 17% (RM150,001 to RM600,000) and 24% (RM600,001 and above). The tax rate is fixed at 24% for other companies.
Calls to Raise Corporate Income Tax Rate
Calls to raise the corporate income tax rate are not new, but economists have warned in the past that such a move could deter investments and economic growth. Last December, a backbencher proposed that the government raise the corporate income tax rate on large corporations from 24% to 27%. Hassan Karim (PH-Pasir Gudang) told the Dewan Rakyat that this was necessary to ensure greater government revenue could be distributed to Malaysians, with tax collection crucial for Putrajaya’s coffers.
Conclusion
In conclusion, the government’s decision to lower the tax rate for micro, small, and medium enterprises is aimed at enhancing their competitiveness and supporting economic growth. The government is committed to improving tax services and administration to enhance efficiency and service quality for taxpayers, while maintaining a more equitable and progressive taxation system.
FAQs
- What is the current corporate income tax rate in Malaysia?
- The current corporate income tax rate is 24%.
- What is the tax rate for micro, small, and medium enterprises?
- Companies with paid-up capital of RM2.5 million and below as well as less than RM50 million in income would be taxed 15% on the first RM150,000 they make, followed by 17% (RM150,001 to RM600,000) and 24% (RM600,001 and above).
- Are there any plans to lower the corporate income tax rate to attract foreign investment?
- No, the government does not intend to lower the corporate income tax rate to attract more foreign investment to Malaysia.