Withholding Tax Rates Malaysia — Section, Rate, Form (2026)

30-second answer Reviewed 22 Jul 2026

Malaysian withholding tax rates are set by Schedule 1 of the Income Tax Act 1967, not by the charging sections. Interest to a non-resident is 15 per cent, royalty 10 per cent, special classes of income under s.4A 10 per cent, paragraph 4(f) income 10 per cent, non-resident public entertainers 15 per cent, and non-resident contractors 10 per cent plus 3 per cent. Almost all of these must be remitted within one month of paying or crediting the payee.

The rate lives in Schedule 1, the obligation lives in the charging section — cite both
One month after paying or crediting is the standard remittance rule, and crediting can fall before payment
Section 107D is the exception — payment is due by the end of the following calendar month, not one month later
Section 107A carries two rates on the same payment: 10 per cent for the contractor, 3 per cent for its employees
A treaty rate is available only if you hold a certificate of residence from the payee's tax authority
Failure to withhold triggers a 10 per cent increase and disallowance of the underlying expense

Who this applies to: Any Malaysian business, government body or resident person paying a non-resident, and any company paying resident agents, dealers or distributors.

Full explanation ≈4 min

The rate you need is almost never in the section you are reading. Section 109B tells you to withhold “at the rate applicable to such payments” and stops there — the 10 per cent is in Part V of Schedule 1. Section 109 does the same. Get into the habit of citing both, because an argument about rate is an argument about Schedule 1.

The full table

Payment type	ITA section	Rate	Form	Remit by
Contract payment to a non-resident contractor	s.107A, Sch 1	10% (contractor) + 3% (its employees)	CP37A	1 month after paying or crediting
Payment to a resident agent, dealer or distributor	s.107D, Sch 1	2%	CP107D	End of the following calendar month
Interest to a non-resident	s.109, Sch 1 Pt II item 1	15%	CP37	1 month after paying or crediting
Royalty to a non-resident	s.109, Sch 1 Pt II item 2	10%	CP37	1 month after paying or crediting
Interest or royalty, small value	s.109, Sch 1 Pt II	15% / 10%	CP37S	Half-yearly, 30 June or 31 December
Non-resident public entertainer	s.109A, Sch 1 Pt II item 3	15%	CP154 plus LHDN tax computation	1 month after paying or crediting
Special classes of income under s.4A	s.109B, Sch 1 Pt V	10%	CP37D	1 month after paying or crediting
Special classes of income, small value	s.109B, Sch 1 Pt V	10%	CP37DS	Half-yearly, 30 June or 31 December
Interest to a resident individual, paid by a bank or approved institution	s.109C, Sch 1 Pt VI	5%	—	1 month after paying or crediting
REIT or property trust distribution — non-resident company	s.109D, Sch 1 Pt X	24%	CP37E	1 month after paying or crediting
REIT or property trust distribution — foreign institutional investor	s.109D, Sch 1 Pt X	10%	CP37E	1 month after paying or crediting
REIT or property trust distribution — others, not a resident company	s.109D, Sch 1 Pt X	10%	CP37E	1 month after paying or crediting
Retail money market fund distribution to a non-individual unit holder	s.109DA, Sch 1 Pt XIX	24%	CP37E(NR) / CP37E(R)	1 month after paying or crediting
Family or takaful family fund distribution — non-resident company	s.109E, Sch 1 Pt XI	25%	CP37E(T)	1 month after paying or crediting
Family or takaful family fund distribution — others, not a resident company	s.109E, Sch 1 Pt XI	8%	CP37E(T)	1 month after paying or crediting
Paragraph 4(f) income to a non-resident	s.109F, Sch 1 Pt XIII	10%	CP37F	1 month after paying or crediting
Deferred annuity or PRS withdrawal before age 55	s.109G, Sch 1 Pt XVI	8%	CP37G	1 month after paying or crediting

The three things this table hides

“Paying or crediting” is not “paying”. Public Ruling 10/2019 para 13.1 defines crediting as more than a journal entry or an accrual — the amount must be available to or for the benefit of the payee. But a contra entry offsetting what the non-resident owes you counts, and the clock starts on the contra date. A company that never remits cash can still be a month late.

Section 107D has a different clock. Section 107D(1) requires payment “not later than the end of the following calendar month”, not one month after. It also only bites where the agent, dealer or distributor received more than RM100,000 from the payer in the immediately preceding basis year (s.107D(2)), and only where that person is a resident individual (s.107D(6)).

Treaty rates are conditional, not automatic. LHDN requires written confirmation from the payee’s revenue authority verifying residence, retained for compliance review. Public Ruling 10/2019 Example 16 applies a 5 per cent rate to a Hong Kong service provider only once residence is confirmed. Without the certificate you withhold at the domestic rate.

Common mistakes

Quoting a rate without the Schedule. “Section 109B is 10 per cent” is shorthand. The 10 per cent is Part V of Schedule 1, and Part V is what a treaty displaces.
Assuming the small-value forms are optional convenience. CP37S and CP37DS have two cumulative conditions: the tax must not exceed RM500 per payment transaction, and small-value transactions must occur more than once in the relevant six-month window. A single RM400 payment in a half-year does not qualify for deferment.
Treating s.107A as a final tax. It is not. Paragraph (a) is applied against the contractor’s own assessment; paragraph (b), the 3 per cent, is refunded to the contractor under s.107A(3)(b) as the Director General sees fit.
Withholding on the gross where the payment is partly outside scope. For s.4A(i) and (ii) income, only the portion attributable to services performed in Malaysia is taxable, apportioned on a fair and justifiable basis.

What’s next

The rate is the easy part. Two questions decide most real cases: whether the payment is “derived from Malaysia” at all, and whether it is royalty under s.109 or a special class of income under s.109B. Read withholding-tax-special-classes for the first and withholding-tax-digital-services for the second.

Frequently asked 4

What is the standard withholding tax rate in Malaysia?

There is no single standard rate. The rate depends on the class of income under Schedule 1 of the Income Tax Act 1967 — 15 per cent for interest, 10 per cent for royalty, 10 per cent for special classes of income under s.4A, and 10 per cent plus 3 per cent for non-resident contract payments. Treaty rates may reduce several of these.

When must withholding tax be paid to LHDN?

Within one month after paying or crediting the payee for ss.107A, 109, 109A, 109B and 109F. Section 107D is different — it is due not later than the end of the calendar month following the month of payment. If the due date falls on a weekend or public holiday, the next working day applies.

Is withholding tax a final tax?

For most non-resident income it is. LHDN treats withholding tax on interest, royalty, special classes of income, REIT distributions and paragraph 4(f) income as a final tax, so the non-resident has no further Malaysian filing obligation on that income. Section 107A is not final — it is an advance payment against the contractor's eventual assessment.

Do I still withhold if the contract says the fee is net of tax?

Yes. The obligation is on the payer regardless of what the contract says. Where the payer contractually bears the tax, LHDN confirmed in Public Ruling 10/2019 that from 5 December 2018 the s.109B tax is computed on the gross amount paid, with no regrossing — but the tax the payer bears is not deductible in its own accounts.

Sources & history 4 sources

⚑ Awaiting expert verification

The following are deliberately unstated or described only qualitatively until confirmed by a subject-matter expert:

Form CP107D and its appendix CP107D(1) for the s.107D 2 per cent deduction could not be retrieved from any live hasil.gov.my path — the rate, threshold and remittance rule below come from the Act itself, not from the form
Treaty rates for specific countries are not reproduced here — check each agreement on the LHDN DTA page, as reduced rates vary by article and by country

Sources

Change history

Version	Date	Change	By
01.00	20 Jul 2026	Approved and published.	—