Corporate tax is one of the most important areas for any Malaysian business owner to understand.This beginner-friendly guide explains how corporate tax works in Malaysia, what the current rates are after Budget 2026, and what you need to know for the next filing year.
Latest Update: Budget 2026
Malaysia’s Budget 2026 was tabled on 10 October 2025.
There are no changes to the standard corporate tax rates for both SMEs and non-SMEs.
However, Budget 2026 introduced a few new measures such as:
A carbon tax framework, beginning with selected high-emission sectors like energy and heavy industry
Expanded green investment incentives for companies adopting low-carbon technology
For most businesses, the existing corporate tax structure remains unchanged for Year of Assessment 2026.
Table of Contents
🕒 Estimated reading time: 5–6 minutes
What Is Corporate Tax?
Corporate tax is the income tax that registered companies in Malaysia must pay on their yearly profit.
It is managed by the Lembaga Hasil Dalam Negeri Malaysia (LHDN) under the Income Tax Act 1967.
How does it work:
If your company earns profit in Malaysia, corporate tax applies.
Both resident and non-resident companies are taxed on income made in Malaysia.
Resident companies may also be taxed on foreign income that is received in Malaysia, unless it is specifically exempted.
Year of Assessment (YA) & Financial Year End (FYE)
FYE means your company’s Financial Year End, which is the closing date of your accounting year.
YA means Year of Assessment, which is the year LHDN uses to assess your income.
Example:
If your financial year ends on 31 December 2025, that income will be taxed under YA 2026,
and your Form C must be filed by 31 July 2026.
Corporate Tax Rates in Malaysia (YA 2026)
Chargeable Income
Tax Rate
First RM150,000
15%
RM150,001 – RM600,000
17%
RM600,001 and above
24%
SME Companies
To qualify for the SME tax rate, your company must:
- Have paid-up capital of RM2.5 million or less
- Have gross business income of RM50 million or less
- Have foreign ownership of not more than 20 percent
- Not be related to another company with paid-up capital above RM2.5 million
Other Companies
All other resident and non-resident companies pay a flat 24 % corporate tax rate. These rates remain unchanged under Budget 2026, as confirmed by LHDN and the Ministry of Finance.
What Income Is Taxable?
Corporate tax applies to your chargeable income, which includes:
Business or service profits
Rental income from business-used properties
Royalties, licensing fees, and commissions
Interest or investment income (in some cases)
Certain gains from the sale of business assets
Resident companies must also declare foreign-sourced income brought into Malaysia unless it is exempt.
What Expenses are Tax-Deductible?
Certain business expenses may be deductible if they are wholly and exclusively for producing business income, directly tied to your operations, and supported with proper records.
Some examples of deductible expenses (subject to LHDN rules
- Staff salaries and employer contributions (EPF, SOCSO, EIS)
- Office rent, utilities, and business-related maintenance
- Advertising or marketing done for business purposes
- Interest on business loans used to generate income
- Business travel and transport for work activities
- Repairs and maintenance for business assets
- Professional, accounting, tax, and compliance service fees
- Bad debts written off (must be proven irrecoverable and business-related)
- Donations to approved institutions (within allowable limits)
- Software subscriptions and ICT tools used for business operations
Special Capital Allowances & Incentives - Some expenses are claimed under special allowances or govermenment-approved incentives instead of normal deductions.
- Capital allowances for qualifying assets (machinery, equipment, computers, vehicles)
- Reinvestment Allowance (RA) for manufacturing or agriculture companies reinvesting in production assets
Export promotion incentives or double deductions (subject to MATRADE/MOF approval)
- Automation Capital Allowance for approved automation or digital upgrades
- Green technology or environmental-related incentives (MOF/MIDA approval)
Different expenses follow different rules. Some are fully deductible, some partly deductible, and some have limits. Keep supporting documents for at least seven years in case LHDN requests verification.
When and How to File Corporate Tax
(Based on LHDN’s official filing guide)
| Task | Form | Timeline | Details |
|---|---|---|---|
| Submit estimated tax payable | CP204 | 30 days before the start of your financial year | New companies: within 3 months after starting operations |
| Start monthly instalments | CP207 | 2nd month of the basis period | Pay by the 15th day of each month |
| Revise your estimate | e-CP204A | During month 6, 9 or 11 of your financial year | Up to 3 revisions allowed each year |
| File your annual return | Form C / e-C | Within 7 months after FYE | Example: FYE 31 Dec 2025 → file by 31 Jul 2026 |
| Pay any balance of tax | CP207 | Same date as Form C deadline | 10 % penalty if payment is late |
Penalties to Avoid
Late Filing of Form C
Up to RM 20,000 and/or imprisonment
Late payment of tax
10 % penalty on unpaid amount
Under-reporting or incorrect returns
Additional 45 % penalty
Failure to keep records
Audit adjustments and possible fines
Even unintentional errors can lead to penalties. Always double-check your numbers or let a licensed tax agent handle your filing.
Smart Tax Planning Tips
Review your estimated tax (CP204) every year
Make qualifying purchases or investments before FYE to claim capital allowances
Keep proof of payment for all deductions
Explore industry incentives such as pioneer status or investment tax allowance
Maintain digital records for faster LHDN reviews
Why Work With a Licensed Tax Agent
Corporate tax filing involves more than submitting forms. It requires proper calculation, understanding deductions, and staying compliant with LHDN rules.
At Firm Care Management Services Sdn Bhd,
our accounting and tax team helps you:
Prepare tax computations and Form C filing
Calculate and revise CP204 estimates
Identify eligible deductions and allowances
Liaise with LHDN on your behalf
We have assisted over 300 Malaysian businesses with smooth, compliant tax submissions and practical planning.
Final Thoughts
Corporate tax may seem complex at first, but with the right understanding and preparation it becomes a manageable part of running your business. Knowing your Year of Assessment, key deadlines, and allowable deductions helps you stay compliant and avoid unnecessary penalties.
For most Malaysian companies, the 2026 tax structure remains stable. Still, every business has different needs, and early planning is the best way to stay ahead of changes in tax laws or incentives.
If you have not reviewed your company’s tax position recently, this is the perfect time to do so and start preparing for your next filing year.
Need Tax Help?
At Firm Care Management Services, we help Malaysian companies handle corporate tax with clarity and confidence.
Our licensed tax and accounting team takes care of everything — from calculating your estimates to preparing Form C and liaising with LHDN.
Our goal is to make compliance simple while helping you take advantage of every eligible deduction and incentive.
Get in touch with us to see how we can help your business stay compliant and tax-ready for 2026.
Grow
your business
with our expertise
Outsourcing your accounting services to Firm Care Management Services Sdn Bhd offers several advantages, allowing you to focus on growing your business while we handle the complexities of financial management.
Grow your business with our expertise
Outsourcing your accounting services to Firm Care Management Services Sdn Bhd offers several advantages, allowing you to focus on growing your business while we handle the complexities of financial management.