{"id":102,"date":"2026-09-30T08:06:58","date_gmt":"2026-09-30T08:06:58","guid":{"rendered":"https:\/\/vivosgroup.com\/my\/insights\/malaysia-withholding-tax-guide\/"},"modified":"2026-10-07T23:43:02","modified_gmt":"2026-10-07T23:43:02","slug":"malaysia-withholding-tax-guide","status":"publish","type":"post","link":"https:\/\/vivosgroup.com\/my\/insights\/malaysia-withholding-tax-guide\/","title":{"rendered":"Malaysia Withholding Tax in 2026: Rates, Deadlines and Penalties on Payments to Non-Residents"},"content":{"rendered":"\n
\n

Insights \u00b7 Malaysia Tax<\/p>\n\n\n\n

Malaysia Withholding Tax in 2026: Rates, Deadlines and Penalties on Payments to Non-Residents<\/h1>\n\n\n\n

Malaysian payers must withhold tax from certain payments to non-residents and pay it to the Inland Revenue Board within one month of paying or crediting. In 2026 the standard rates are 15% on interest, 10% on royalties, 10% on special classes of income such as technical services performed in Malaysia and movable-property rental, 10% plus 3% on contract payments, and 10% on other income under section 4(f). Late payment adds 10%, and the expense is not deductible until the tax and the 10% increase are paid.<\/p>\n\n\n\n

This guide is for finance teams and directors who pay overseas consultants, licensors, lenders and contractors. It covers the rates, forms and deadlines, how double tax agreements reduce them, the 2% rule for local agents and dealers, and what has and has not changed for 2026.<\/p>\n<\/div>\n\n\n\n

\n
Payment to a non-resident<\/th>Standard rate, section and LHDN form<\/th><\/tr>
Interest<\/td>15%, section 109, Form CP37 (some interest is exempt)<\/td><\/tr>
Royalties, including self-serve digital advertising<\/td>10%, section 109, Form CP37<\/td><\/tr>
Special classes of income: technical services, installation services, rental of movable property<\/td>10%, section 109B, Form CP37D<\/td><\/tr>
Contract payments for services under a contract project in Malaysia<\/td>13%: 10% for the contractor plus 3% for its employees, section 107A, Form CP37A<\/td><\/tr>
Other income under section 4(f), such as guarantee fees<\/td>10%, section 109F, Form CP37F<\/td><\/tr>
Dividends<\/td>No withholding tax<\/td><\/tr>
Payment deadline<\/td>Within one month after paying or crediting the recipient<\/td><\/tr>
Late payment<\/td>10% increase on the unpaid tax; the expense is disallowed until the tax and the increase are paid<\/td><\/tr><\/tbody><\/table><\/figure>\n<\/div>\n\n\n\n
\n

What each withholding tax covers and how to pay it<\/h2>\n\n\n\n

Withholding tax collects the non-resident\u2019s Malaysian tax at source, so the obligation falls on the Malaysian payer. Interest paid to a non-resident is subject to 15% under section 109 of the Income Tax Act 1967, although some interest is exempt. Royalties bear 10%. The Inland Revenue Board of Malaysia (LHDN) treats payments for self-serve digital advertising on overseas platforms as royalties, because the advertiser is granted the right to use the platform\u2019s software to build its own campaigns.<\/p>\n\n\n\n

Section 109B imposes 10% on special classes of income under section 4A: fees for technical advice, assistance or services connected with the technical management or administration of a scientific, industrial or commercial undertaking; fees for services connected with the use of property or rights, or with installing or operating plant bought from the non-resident; and rent for movable property such as equipment. Since 6 September 2017, an exemption order has taken technical and installation services performed wholly outside Malaysia out of the charge. LHDN applies the tax only to the part of a fee attributable to services performed in Malaysia, but rental of movable property remains taxable wherever the asset is used.<\/p>\n\n\n\n

Contract payments to a non-resident contractor for services under a contract project in Malaysia are subject to section 107A: 10% on account of the contractor\u2019s own tax and 3% on account of tax on its employees. These amounts are credits against the contractor\u2019s final liability, not a final tax. Other income under section 4(f), a residual category covering items such as guarantee fees, bears 10% under section 109F.<\/p>\n\n\n\n

The deadline is the same for all of these: within one month after paying or crediting the recipient. Each payment is entered online in LHDN’s e-WHT system under the matching form (CP37 for interest and royalties, CP37D for special classes, CP37A for contract payments, CP37F for section 4(f) income), which generates a bill number for payment by FPX, e-TT or bank draft; the forms and supporting documents are kept on file, not sent to LHDN. If you pay late, the amount due is increased by 10%, and the underlying payment is disallowed as a deduction until the withholding tax and the increase are paid.<\/p>\n<\/div>\n\n\n\n

\n

Treaty rates, local agents and what changed for 2026<\/h2>\n\n\n\n

According to LHDN, the rate may be lower where the double taxation agreement between Malaysia and the recipient\u2019s country of residence prescribes one, and the treaty rate varies by country and by type of payment. The payer carries the risk, so before applying a reduced rate obtain a certificate of residence from the recipient\u2019s tax authority covering the period of payment, and keep it with the contract and invoices. Without that evidence, withhold at the domestic rate: an underpayment attracts the 10% increase and the deduction problem described above.<\/p>\n\n\n\n

A separate rule covers payments inside Malaysia. Since 1 January 2022, section 107D requires a company to withhold 2% from monetary payments to resident individual agents, dealers and distributors who received more than RM100,000 in monetary and non-monetary payments from that company in the preceding year. Credit notes, contra entries and discounts are outside the charge. Under LHDN\u2019s procedure revised in July 2022, the 2% is remitted by the last day of the following month with Form CP107D, which since 1 January 2025 must be submitted online through e-107D on MyTax and paid electronically against a bill number, and the payments are also reported on Form CP58. The agent can offset the amount against their final tax.<\/p>\n\n\n\n

For 2026 the rates are unchanged. Budget 2026 contained no withholding tax measures, and the Finance Act 2025, gazetted on 31 December 2025, did not amend sections 107A, 107D, 109, 109B or 109F. The offshore services exemption still applies, and digital advertising is still treated as a royalty. The practical changes are administrative: businesses within e-invoicing must issue self-billed e-invoices for payments to foreign suppliers and to agents, dealers and distributors, and since 5 May 2026 withholding tax adjustments, refunds and requests to remove the 10% increase go through e-Rayuan on MyTax.<\/p>\n<\/div>\n\n\n\n

\n

A withholding tax checklist for every overseas payment<\/h2>\n\n\n\n