Malaysian SMEs with paid-up capital of RM2.5 million or less pay 17% corporate tax on the first RM600,000 of chargeable income; anything above that is taxed at 24%. Form C must be filed within 7 months after your financial year ends via MyTax. If your financial year ended September 30, 2025 — your deadline is April 30, 2026 (19 days away). Estimated tax (CP204) must be submitted 30 days before your financial year begins. Miss any deadline and Section 112 ITA 1967 applies — a 10%–35% surcharge on outstanding tax.
Companies with a financial year ending September 30, 2025 must file Form C by April 30, 2026 — that is 19 days from today. Late filing triggers an immediate 10% surcharge on tax outstanding under Section 112 ITA 1967, and LHDN may raise an estimated assessment at figures higher than your actual liability. File now — or engage a licensed tax agent today.
Corporate tax confuses a lot of SME owners in Malaysia — not because it's impossible to understand, but because nobody explains it plainly. You've got two different rates, a filing form, an instalment system, and a separate portal. Meanwhile your accountant speaks in acronyms and your company secretary just keeps asking for audited accounts.
This guide gives you the full picture: how the rates work, how your taxable income is calculated, what you can deduct, and what the filing process actually looks like — whether you're based in Kuala Lumpur, Petaling Jaya, Penang, or anywhere else in Malaysia.
Corporate Tax Rates in Malaysia (2025)
Malaysia operates a two-tier corporate tax system. Your rate depends on whether your company qualifies as an SME under LHDN's definition:
| Company Type | First RM600,000 | Above RM600,000 | Conditions |
|---|---|---|---|
| Qualifying SME | 17% | 24% | Paid-up capital ≤ RM2.5M; ≥60% Malaysian-owned; not part of a large group |
| Standard company | 24% | 24% | Paid-up capital > RM2.5M, or controlled by a large company |
| Resident company (non-SME) | 24% | 24% | Flat rate regardless of profit level |
| Non-resident company | 24% | 24% | No SME rate — must be resident and Malaysian-owned to qualify |
Key gotcha: If your paid-up capital is RM2.5M or below, but another company in your group has capital above RM2.5M, you lose the SME rate. LHDN treats the group structure, not just your individual company.
How Chargeable Income Is Calculated
Your corporate tax is not calculated on accounting profit. It's calculated on chargeable income — which requires a full tax computation. Here's what that looks like for a typical SME:
| Line Item | Example (RM) | Notes |
|---|---|---|
| Revenue | 1,200,000 | Gross sales / service income |
| Less: Cost of goods sold | (480,000) | Direct costs, purchases, production |
| Gross profit | 720,000 | |
| Less: Allowable operating expenses | (290,000) | Salaries, rent, utilities, professional fees, insurance |
| Add back: Non-deductible expenses | +18,000 | Entertainment (50% disallowed), fines, depreciation |
| Adjusted income | 448,000 | Accounting profit adjusted for tax law |
| Less: Capital allowances (Schedule 3) | (42,000) | Replaces accounting depreciation |
| Less: Losses brought forward | (15,000) | Unabsorbed losses from prior years (if any) |
| Chargeable income | 391,000 | The amount LHDN taxes |
| Tax: 17% × RM391,000 | 66,470 | SME rate applies (within RM600K threshold) |
In this example, the SME saves RM27,370 compared to paying the standard 24% rate (which would be RM93,840). That's the value of maintaining your SME status.
Key Deductible Business Expenses
To be deductible, an expense must be "wholly and exclusively incurred in the production of income" under Section 33 of the Income Tax Act 1967. Here are the main categories:
| Expense Category | Deductible? | Notes |
|---|---|---|
| Staff salaries, bonuses, allowances | ✅ Yes (100%) | Must be arm's length — excessive director salaries can be queried |
| EPF / SOCSO / EIS contributions | ✅ Yes | Employer contributions are fully deductible |
| Office rent and utilities | ✅ Yes | Business premises only — home office requires apportionment |
| Professional fees (accounting, legal, secretarial) | ✅ Yes | Must relate to business income production |
| Marketing and advertising | ✅ Yes | Digital ads, print, trade shows — fully deductible |
| Business insurance premiums | ✅ Yes | Fire, public liability, professional indemnity |
| Repairs and maintenance | ✅ Yes | Maintenance only — improvements are capital expenditure |
| Bad debts (specific provision) | ✅ Yes (specific only) | Must identify specific debts as irrecoverable — general provisions not allowed |
| Business entertainment | ⚠️ 50% only | Meals, gifts, events with clients — only half is deductible |
| Accounting depreciation | ❌ No | Add back in full — replaced by capital allowances (Schedule 3) |
| Fines and penalties | ❌ No | Court fines, LHDN penalties, JPJ compounds — all non-deductible |
| Personal expenses claimed through company | ❌ No | Director's personal car fuel, holidays disguised as business trips |
Capital Allowances (Schedule 3)
When your company buys equipment, machinery, or other capital assets for business use, you can't deduct the full cost immediately — you claim capital allowances instead. These replace accounting depreciation for tax purposes:
| Asset Type | Initial Allowance (IA) | Annual Allowance (AA) | Full Write-Off In |
|---|---|---|---|
| Office furniture and fittings | 20% | 10% | 9 years |
| Machinery and equipment | 20% | 20% | 5 years |
| Computers and peripherals | 20% | 40% | 2–3 years |
| Motor vehicles | 20% | 20% | 5 years |
| Plant and factory equipment | 20% | 14% | 6–7 years |
In year 1, you claim both the IA and AA. From year 2 onwards, only the AA applies. Unused capital allowances (if your income is insufficient to absorb them) carry forward indefinitely.
Corporate Tax Filing Deadlines — By Financial Year End
The rule is fixed: Form C must be filed within 7 months after your company's financial year end. Here's what that means for the most common FYE dates — and where you stand right now:
| Financial Year End | Year of Assessment | Form C Deadline | Status (April 2026) |
|---|---|---|---|
| March 31, 2025 | 2025 | October 31, 2025 | Overdue — file immediately |
| June 30, 2025 | 2025 | January 31, 2026 | Overdue — file immediately |
| September 30, 2025 | 2025 | April 30, 2026 ⚠ | 19 days away — act now |
| December 31, 2025 | 2025 | July 31, 2026 | ~3 months remaining — prepare now |
Not sure of your financial year end? Check your latest audited financial statements or ask your company secretary — they'll have it on record within minutes. Your SSM registration documents also confirm the financial year.
Alongside Form C, there's an instalment system running throughout the year:
| Obligation | Form | Deadline | What It Is |
|---|---|---|---|
| Estimated tax submission | CP204 | 30 days before financial year starts | Your estimate of tax payable for the coming year |
| Monthly instalment payments | CP207 | 15th of each month (month 2 to 12) | 1/12 of your CP204 estimate, paid monthly |
| Instalment revision (optional) | CP204A | 6th or 9th month of financial year | Revise estimate if actual profits differ significantly |
| Annual tax return | Form C | 7 months after financial year end | Actual tax computation + reconciliation vs instalments paid |
| Balance tax payment | (via Form C) | Same as Form C deadline | If actual tax > CP207 instalments paid, settle the difference |
Example timeline for a Jan 1 – Dec 31 financial year: CP204 due by December 1 (prior year) → CP207 instalments Feb–Dec → CP204A revision available in June or September → Form C due July 31 (following year).
Common Mistakes That Cost SMEs Money
| Mistake | What Goes Wrong | How to Avoid It |
|---|---|---|
| Claiming full entertainment as deductible | 50% disallowance added back — increases chargeable income | Track entertainment separately; apply 50% in tax computation |
| Forgetting to add back accounting depreciation | Double deduction — depreciation stays in P&L but must be added back for tax | Always start tax computation by adding back all depreciation in accounts |
| Underestimating CP204 | If actual tax exceeds estimate by >30%, LHDN imposes a 10% penalty on the difference | Use CP204A in month 6 or 9 to revise upward if profits are higher than expected |
| Claiming personal expenses through the company | LHDN disallows on audit — adds back to chargeable income + potential penalty | Maintain clear separation between business and personal accounts |
| Missing the Form C deadline | Automatic 10% penalty on tax payable under Section 112 ITA 1967 | Set calendar reminders. Engage your tax agent early — don't wait for audited accounts to arrive late |
| Losing SME status unknowingly | Group restructuring or share transfer pushes paid-up capital over RM2.5M — 17% rate lost | Review SME eligibility annually, especially after any share issuance or group changes |
| Not carrying forward capital allowances | Unabsorbed allowances expire if not tracked and brought forward | Ensure your tax computation tracks and carries forward unabsorbed IA/AA each year |
How to File Form C — Step by Step
Filing is done entirely online via the MyTax portal (mytax.hasil.gov.my). Here's the process:
- Close your financial year accounts — finalise management accounts and send to your auditor. Audited financial statements are required before the tax computation can be completed.
- Prepare the tax computation — adjust accounting profit: add back non-deductible expenses, replace depreciation with capital allowances, apply reliefs and incentives. This is the technical step most SMEs get wrong on their own.
- Confirm SME eligibility — verify paid-up capital ≤ RM2.5M and ≥60% Malaysian shareholding. Apply 17% to the first RM600K of chargeable income if eligible.
- Log in to MyTax — use your company's income tax file number. Navigate to e-Filing → Form C for the relevant year of assessment.
- Complete Form C — enter adjusted income, capital allowances, chargeable income, and final tax payable. Attach the tax computation and audited accounts.
- Submit and settle balance — file before the 7-month deadline. Pay any shortfall between CP207 instalments and actual tax due. Overpayments are refunded by LHDN (typically within 30–90 days).
- File CP204 for the next year — 30 days before your next financial year starts, submit your new estimate. Monthly CP207 instalments begin in month 2 of the new year.
Most Sdn Bhd owners engage a registered tax agent for steps 2–7. The tax computation requires professional judgment — errors in it are your legal liability, not your accountant's.
Corporate tax getting complicated? Let us help.
We work with licensed tax agents across Malaysia who handle Form C, CP204 planning, and LHDN correspondence for SMEs. No jargon, clear pricing, and you'll know exactly what to expect before April 30.
Frequently Asked Questions
What is the corporate tax rate for SMEs in Malaysia?
Qualifying SMEs pay 17% on the first RM600,000 of chargeable income and 24% on the remainder. To qualify: paid-up capital must be RM2.5M or less, at least 60% Malaysian-owned, and not controlled by a company with capital above RM2.5M.
What's the difference between the SME and standard corporate tax rate?
Standard corporate tax is a flat 24% on all chargeable income. The SME rate of 17% applies only to the first RM600K for qualifying resident companies. For an SME earning RM600K in chargeable income, this saves RM42,000 compared to the standard rate.
When is the corporate tax filing deadline in Malaysia?
Form C must be filed within 7 months after your financial year ends. For a 31 December year-end, the deadline is 31 July. CP204 (estimated tax) is due 30 days before your financial year begins — it's easy to miss this if you're not tracking the calendar.
What is CP204 and why does it matter?
CP204 is your estimated tax payable for the upcoming financial year, filed 30 days before the year starts. Monthly instalments (CP207) are based on this estimate. If your actual tax exceeds your CP204 estimate by more than 30%, LHDN charges a 10% penalty on the excess — making accurate estimation worth the effort.
What business expenses are deductible for corporate tax?
Salaries, EPF/SOCSO, rent, utilities, professional fees, marketing, insurance, repairs, and specific bad debts are fully deductible. Business entertainment is 50% deductible. Accounting depreciation, fines, and personal expenses are non-deductible and must be added back in the tax computation.
What are capital allowances and how do they work?
Capital allowances are tax deductions for business assets (equipment, machinery, computers). They replace accounting depreciation. In year 1, you claim an Initial Allowance (20%) plus an Annual Allowance. Computers qualify for 40% AA; machinery 20%; motor vehicles 20%. Unabsorbed allowances carry forward indefinitely.
What happens if I file Form C late?
A 10% penalty applies to the tax payable under Section 112 of the Income Tax Act 1967. LHDN may also issue a deemed assessment at their own estimate — usually higher than your actual liability. If you need more time, contact LHDN before the deadline to request an extension.
How do I file corporate tax online in Malaysia?
Form C is filed via the MyTax portal at mytax.hasil.gov.my using your company's income tax reference number. You'll need audited accounts and a completed tax computation. Most SMEs use a licensed tax agent — the computation requires adjusting accounting profits for Malaysian tax law, which is technical work.
Does a dormant Sdn Bhd need to file corporate tax?
Yes. Even a completely dormant company must file Form C annually with LHDN. The penalties for non-filing apply regardless of whether the company had any income. If the company is no longer needed, apply to SSM for a strike-off to end the obligation.
What is the difference between accounting profit and chargeable income?
Accounting profit is prepared under MFRS/MPERS. Chargeable income adjusts it for tax law: non-deductible expenses are added back, accounting depreciation is replaced with capital allowances, and prior losses are deducted. The two figures are almost always different — and tax is calculated on chargeable income, not accounting profit.
Can I carry forward tax losses in Malaysia?
Yes — unabsorbed business losses and capital allowances carry forward indefinitely to offset future income from the same source, as long as the business continues. If more than 50% of your company's shareholding changes, LHDN may disallow use of those carried-forward losses.
April 30 is closer than you think.
Don't let the corporate tax deadline creep up on you. Get your tax computation done properly — with a licensed professional who knows Malaysian tax law. Talk to us today.
Director's Personal Income Tax (Form B)
Sdn Bhd directors receiving director fees or dividends must also file personal income tax (Form B) — separate from the company's Form C. Form B deadline: 15 July 2026. Directors with sole proprietorship income file Form B; those with salary only from a company file Form BE.
Form B vs Form BE Malaysia 2026 — Full Guide → Calculate Your Personal Income Tax →