Withholding Tax: The What, The Complex, and The Ugly

Why are Malaysian businesses effectively footing the tax bill for foreign players like Facebook and Google when it comes to Withholding tax? We explore this and much more with Thanneermalai, Managing Director of Thannees Tax Consulting Services.

On this edition of P&L, we're zeroing in on Withholding Tax in Malaysia. We'll explore the foundational elements of withholding tax: what it is, why it's important, and its impact on various types of payments, including royalties, technical fees, and contract payments. Thanneermalai will guide us through the standard rates, the calculation methods, and the necessary documentation for compliance.

We’ll also spend time on the intricacies of withholding tax for foreign digital services, such as those provided by Meta and Google, and why their withholding taxes have unfortunately and essentially become a cost of doing business for Malaysia businesses.

We'll also delve into how Malaysia's Double Taxation Agreements affect withholding tax rates and the common interpretational challenges businesses face, especially around the definition of 'royalties.'