Withholding tax (WHT) is a tax deducted upfront when a Malaysian company pays a foreign (non-resident) company. The payer pays it to LHDN (Malaysia's tax authority) on behalf of the foreign company.

Any Malaysian company or individual that makes payments to a non-resident company for services like software subscriptions, licensing fees, consulting, or interest on loans. The Malaysian payer is responsible for deducting the tax and remitting it to LHDN.

Foreign companies don't file tax returns in Malaysia, so WHT is how Malaysia collects tax on money leaving the country. It's required under the Income Tax Act 1967. If you don't withhold, your company becomes liable for the tax amount and you lose the right to claim the payment as a tax-deductible expense.

WHT applies to payments made to non-residents in these categories:

• ●Royalties (10%): software licences, copyright fees, digital advertising (e.g. Google Ads, Meta Ads)
• ●Technical & management fees (10%): consulting, IT support, professional services
• ●Interest (15%): loan repayments, financing charges

Regular purchases of physical goods are generally not subject to WHT. A lower rate may apply if Malaysia has a Double Taxation Agreement (DTA) with the foreign company's country. Check the Country Rates table to find the rate for your payment.

WHT is calculated on the gross payment amount, which excludes SST. SST is not subject to WHT as it is a government tax and does not form part of the contractor's income.

WHT amount = gross payment (excluding SST) × WHT rate

For example, if a foreign vendor invoices RM 10,600, made up of a RM 10,000 service fee and RM 600 SST, the gross payment subject to WHT is RM 10,000. Applying a 10% WHT rate, the WHT amount is RM 10,000 × 10% = RM 1,000. The RM 600 SST is excluded from the calculation as it is handled separately.

Use the Calculator to work this out: just enter your invoice amounts and it does the rest.

To remit WHT to LHDN (using the relevant CP37 form), you'll need:

• ●The non-resident company's TIN (Tax Identification Number)
• ●Your company's tax reference number
• ●The applicable WHT rate
• ●The gross payment amount (excluding SST)

The TIN is often the hardest to track down, so search the Company Directory on the homepage to find TINs for common non-resident companies like Google, Microsoft, and AWS.

WHT must be paid to LHDN within one month from the date you pay the non-resident.

For small payments of RM500 or less each, you don't have to remit one by one. Instead, you can consolidate them using the CP37S form, which is submitted twice a year: by 30 June for payments made from December to May, and by 31 December for payments made from June to November. Check the submission timeline on the homepage to see the current window.

WHT is paid to LHDN (Lembaga Hasil Dalam Negeri), Malaysia's Inland Revenue Board. You can make payment online through the MyTax portal or at any LHDN branch office.

A 10% penalty is added on top of the unpaid WHT amount. For example, if you owe RM1,000 in WHT and miss the deadline, you'll pay an extra RM100 in penalty. Use the Calculator to estimate the penalty: toggle the late penalty option to see the total.