{"id":99,"date":"2026-09-30T08:06:49","date_gmt":"2026-09-30T08:06:49","guid":{"rendered":"https:\/\/vivosgroup.com\/my\/insights\/malaysia-corporate-tax-rates-smes-2026\/"},"modified":"2026-10-07T23:42:58","modified_gmt":"2026-10-07T23:42:58","slug":"malaysia-corporate-tax-rates-smes-2026","status":"publish","type":"post","link":"https:\/\/vivosgroup.com\/my\/insights\/malaysia-corporate-tax-rates-smes-2026\/","title":{"rendered":"Malaysia Corporate Tax Rates for SMEs in 2026: The 15%, 17% and 24% Bands Explained"},"content":{"rendered":"\n
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Insights \u00b7 Malaysia Tax<\/p>\n\n\n\n

Malaysia Corporate Tax Rates for SMEs in 2026: The 15%, 17% and 24% Bands Explained<\/h1>\n\n\n\n

For years of assessment 2025 and 2026, Malaysian companies pay corporate income tax at 24%. A qualifying SME pays 15% on its first RM150,000 of chargeable income, 17% on the next RM450,000 and 24% above RM600,000. To qualify, the company must be incorporated and resident in Malaysia, have paid-up ordinary share capital of RM2.5 million or less, gross business income of RM50 million or less and, since YA 2024, no more than 20% foreign ownership, direct or indirect.<\/p>\n\n\n\n

This guide is for founders, directors and finance leads of Malaysian private limited companies. It explains who qualifies for the SME bands, how the group and foreign-ownership tests work, a worked example, the other taxes owners often miss, and the Form e-C and CP204 deadlines.<\/p>\n<\/div>\n\n\n\n

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Item<\/th>Position for YA 2025 and YA 2026<\/th><\/tr>
Standard corporate rate<\/td>24% of chargeable income<\/td><\/tr>
SME first band<\/td>15% on the first RM150,000<\/td><\/tr>
SME second band<\/td>17% on RM150,001 to RM600,000, then 24% on the balance<\/td><\/tr>
Paid-up capital limit<\/td>RM2.5 million or less in ordinary shares, at the start of the basis period<\/td><\/tr>
Business income limit<\/td>Gross business income of RM50 million or less for the basis period<\/td><\/tr>
Foreign ownership limit (from YA 2024)<\/td>No more than 20%, held directly or indirectly by foreign companies or non-citizens<\/td><\/tr>
Form e-C<\/td>Due within seven months of the financial year end, with any balance of tax<\/td><\/tr>
CP204 estimate<\/td>Due 30 days before the basis period; instalments from the second month (first month from YA 2028)<\/td><\/tr><\/tbody><\/table><\/figure>\n<\/div>\n\n\n\n
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Who qualifies for the 15% and 17% SME bands<\/h2>\n\n\n\n

The tiered rates sit in Schedule 1 of the Income Tax Act 1967, and the Inland Revenue Board of Malaysia (LHDN) explains how it applies them in Public Ruling No. 8\/2025, issued on 22 December 2025. The company must be resident and incorporated in Malaysia, have paid-up capital in respect of ordinary shares of RM2.5 million or less at the beginning of the basis period, and have gross income from business of no more than RM50 million for that period. Fail any one test and all chargeable income is taxed at 24%.<\/p>\n\n\n\n

The foreign-ownership condition catches many founders. From YA 2024, the SME bands are denied if more than 20% of the company\u2019s paid-up ordinary share capital, at the start of the basis period, is owned directly or indirectly by companies incorporated outside Malaysia or by individuals who are not Malaysian citizens. The test is citizenship, not residence, so a permanent resident counts as foreign, and shares held through a Malaysian holding company are traced to the people and companies behind it. The same 20% test now governs the CP204 exemption for new companies.<\/p>\n\n\n\n

Splitting one business into several small companies does not work either. Under the anti-avoidance rules, the bands are also denied where the company is tied to a larger company: broadly, where a related company with paid-up ordinary share capital above RM2.5 million owns more than 50% of it, where it owns more than 50% of such a company, or where a third company owns more than 50% of both. A subsidiary of a large group therefore pays 24%.<\/p>\n\n\n\n

A worked example shows what is at stake. Take a company with RM1 million of paid-up capital, owned entirely by Malaysian citizens, with RM6 million of revenue and RM800,000 of chargeable income for YA 2026. Tax is RM22,500 on the first RM150,000 at 15%, RM76,500 on the next RM450,000 at 17% and RM48,000 on the last RM200,000 at 24%: RM147,000 in total, an effective rate of about 18.4%. If a Singaporean co-founder had held 25% of the shares at the start of the year, all RM800,000 would be taxed at 24%, giving RM192,000, which is RM45,000 more.<\/p>\n<\/div>\n\n\n\n

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Other taxes that surprise owners, and what changed for 2026<\/h2>\n\n\n\n

Capital gains tax applies to companies, limited liability partnerships, trust bodies and co-operatives that dispose of shares in unlisted Malaysian companies. The regime started on 1 January 2024, but disposals up to 29 February 2024 were exempted, so in practice it applies from 1 March 2024. According to LHDN\u2019s guidelines, the rate is 10% of the chargeable gain or, for shares acquired before 1 January 2024, the seller may elect 2% of the gross disposal price instead. The return and the tax are due within 60 days of the disposal. From 1 January 2026, the Finance Act 2025 widened \u201cdisposal\u201d to cover events such as share redemptions and capital reductions.<\/p>\n\n\n\n

Dividends paid by a Malaysian company are generally exempt in shareholders\u2019 hands, because profits are taxed at company level. From YA 2025, however, individual shareholders, resident or non-resident and including those holding through nominees, pay 2% on chargeable income from dividends above RM100,000 a year, under Part XXII of Schedule 1 and rules gazetted on 7 May 2025; the first RM100,000 is exempt. The Finance Act 2025 applies the same 2% charge to individual partners\u2019 profit distributions from limited liability partnerships above RM100,000 from YA 2026, so converting to an LLP no longer sidesteps it.<\/p>\n\n\n\n

Budget 2026 left the corporate and SME rates unchanged. The main change for owners is cash-flow timing. Under the Finance Act 2025, gazetted on 31 December 2025, CP204 instalments will start in the first month of the basis period from YA 2028, one month earlier than now. YA 2027 is a transition year with eleven instalments, all paid within the basis period. Until then, instalments start in the second month and are due by the 15th of each month.<\/p>\n<\/div>\n\n\n\n

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A filing checklist for SME owners<\/h2>\n\n\n\n