Corporate Tax Rate Malaysia 2026

SME companies: First RM150,000 @ 15%, RM150,001-RM600,000 @ 17%, above RM600,000 @ 24%. Non-SME companies (paid-up capital > RM2.5m OR gross income > RM50m): flat 24%. The 15% tier for first RM150,000 was introduced in Budget 2024 to reduce SME burden. Source: LHDN / Income Tax Act 1967.

To qualify for SME tax rates, a company must meet BOTH: (1) paid-up ordinary share capital ≤ RM2.5 million at start of basis period, AND (2) gross business income ≤ RM50 million in the basis period. Fail either = treated as non-SME with flat 24%. Additional: the company must not be controlled by another company with paid-up capital > RM2.5m (to prevent group fragmentation).

RM500,000 chargeable income for SME: RM150,000 × 15% = RM22,500 + RM350,000 × 17% = RM59,500 = Total RM82,000 tax (effective rate 16.4%). Non-SME pays RM500,000 × 24% = RM120,000 (RM38,000 more). This RM38,000 gap is why maintaining SME status matters.

Form C (tax return) is due within 7 months after the end of your financial year. Estimated tax (CP204) must be filed 30 days before basis period starts. Monthly tax instalments required based on CP204 estimate. Final balance paid by Form C due date. Penalty for late Form C: 10% of unpaid tax + potential court action.

Key strategies: (1) Stay below RM2.5m paid-up to maintain SME status; (2) Claim Capital Allowances on fixed assets (plant, machinery, vehicles); (3) Reinvestment Allowance 60% for manufacturing reinvestment; (4) Approved Donations (restricted to 10% of income); (5) R&D Double Deduction via MIDA; (6) Group Relief for losses across related companies; (7) Time dividends — use RPGT exemption when selling assets. Consult tax agent for specific situation.