In the past, you were required to make Malaysia’s withholding tax payment over the counter at selected LHDN offices. However, due to the current “lockdown” situation across Malaysia, LHDN has provided an alternative for making the WHT payment online.
Table of Contents
What is Withholding Tax (WHT)?
Withholding tax is an amount withheld by the party making payment (payer) on income earned by a non-resident (payee). The Withholding Tax is to be paid to the Inland Revenue Board of Malaysia (IRB).
‘Payer’ refers to an individual/body aside from the 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 utilization of any moveable property and paid to a non-resident payee.
‘Payee’ refers to a non-resident individual/body aside from an individual in Malaysia who receives the above payments.
How to determine if you failed to adhere to the Withholding Tax compliance in Malaysia?
- The payer fails to pay withholding tax at the prescribed rate (whether deducted or not).
- The payer pays the withholding tax late (not within one month after the date of payment/crediting to the NR payee).
- The payer fails to pay the penalty in the tax imposed on him for late payment of withholding tax or failure to pay the withholding tax.
Consequences of failure in paying your Withholding Tax
If you failed to deduct and pay your Withholding Tax in Malaysia to LHDN within the time given, you might be facing these consequences:
- Late payment penalties (10% of the unpaid tax) will be imposed.
- The expenses are going to be disallowed as a deduction on the qualifying capital expenditure paid to a non-resident
- No capital allowances shall be available on the qualifying capital expenditure paid to a non-resident
- The Withholding Tax and penalties can be recovered from the payer as a debt due to the Government.
WeCorporate content team comprises experienced in-house and freelance writers who share trending and insightful content to empower and aspire entrepreneurs to change their gameplay in their business in Asia.