Withholding tax is an amount withheld by the party making payment (payer) on income earned by a non-resident (payee) and paid to the Inland Revenue Board of Malaysia.
‘Payer’ refers to an individual/body other than individual carrying on a business in Malaysia. He is required to withhold tax on payments for services rendered/technical advice/rental or other payments made under any agreement for the use of any moveable property and paid to a -resident payee.
‘Payee’ refers to a non-resident individual/body other than individual in Malaysia who receives the above payments.
The Income Tax Act, 1967 provides that where a person (referred herein as “payer”) is liable to make payment as listed below (other than income of non-resident public entertainers) to a non-resident person (NR payee), he shall deduct withholding tax at the prescribed rate from such payment and (whether such tax has been deducted or not) pay that tax to the Director General of Inland Revenue within one month after such payment has been paid or credited to the NR payee.
Payments Liable To Withholding Tax
Payment Liable to withholding tax are:
- Contract Payment
- Special classes of income: Technical fees, payment for services, rent/payment for use of moveable property
- Interest (except exampt interest) paid by approved financial institutions
- Income of non-resident public entertainers
- Real Estate Investment Trust (REIT)
- Other than a resident company
- Non Resident company.
- Foreign investment institution
- Family Fund/Takaful Family Fund/Dana Am
- Individual and other
- Non Resident Company
- Income under Section 4(f) ITA 1967