Quick answer: A resident company that meets the SME tests pays 15% on the first RM150,000 of chargeable income, 17% on the next RM450,000 (RM150,001 to RM600,000) and 24% on the balance. A company that does not qualify pays 24%. To qualify, paid-up ordinary share capital must be RM2.5 million or less and gross business income RM50 million or less, and from Year of Assessment 2024 foreign ownership above 20% disqualifies the company unless an exception in LHDN's public ruling applies.
- Standard company rate: 24%.
- SME rates: 15% to RM150,000, 17% to RM600,000, 24% above.
- Paid-up capital must be RM2.5 million or less, and gross business income RM50 million or less.
- From YA 2024, more than 20% foreign ownership removes the SME rate, subject to the related-company exception.
- The tests are measured at different points in the basis period.
The Rates
| Chargeable income | SME rate | Other companies |
|---|---|---|
| First RM150,000 | 15% | 24% |
| RM150,001 to RM600,000 | 17% | 24% |
| Above RM600,000 | 24% | 24% |
The Tests for the SME Rate
| Test | Requirement |
|---|---|
| Residence | Resident company incorporated in Malaysia (LLPs registered in Malaysia are covered by the same ruling) |
| Paid-up capital | Paid-up ordinary share capital of RM2.5 million or less at the beginning of the basis period |
| Gross business income | RM50 million or less in the basis period |
| Foreign ownership (from YA 2024) | Not more than 20% of capital owned directly or indirectly by a foreign company or a non-citizen individual |
| Exclusions | Business trusts and special-purpose companies issuing asset-backed securities |
Worked Example
A qualifying SME has chargeable income of RM700,000. Tax is RM150,000 at 15% (RM22,500), plus RM450,000 at 17% (RM76,500), plus RM100,000 at 24% (RM24,000), a total of RM123,000. A company that does not qualify would pay RM168,000 at 24%.
The Foreign Ownership Rule
LHDN's public ruling says the 20% restriction does not apply where a related company holds more than 50% of the company's capital (or the other related-company ownership links in paragraph 5.3.3(a) apply), provided the related company's paid-up ordinary share capital is above RM2.5 million. Ownership is traced to the ultimate holding company. The gross income test does not involve related companies. Because this exception turns on the group structure, check it against the ruling before relying on it.
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Mistakes
Testing paid-up capital at year end
The ruling measures it at the beginning of the basis period.
Ignoring foreign shareholders
Above 20% foreign ownership removes the SME rate from YA 2024.
Assuming the first RM600,000 is at one rate
That was the position for YA 2020 to 2022. From YA 2023 there are three bands.
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Accounts and filings
- Keep your accounting records and prepare year-end financial statements.
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Accounting, payroll and company set-up under one roof
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Frequently Asked Questions
Quick answers.
What is the standard corporate tax rate in Malaysia?
24%, for companies that do not meet the SME criteria.
What are the SME tax rates?
15% on the first RM150,000, 17% on RM150,001 to RM600,000 and 24% above RM600,000.
What is the paid-up capital limit?
RM2.5 million or less in paid-up ordinary share capital at the beginning of the basis period.
What is the gross income limit?
Gross income from business sources of RM50 million or less in the basis period.
Do both tests apply?
Yes. LHDN's rate page requires paid-up capital and gross business income to both be within the limits.
Does foreign ownership matter?
From YA 2024, a company with more than 20% of its capital owned directly or indirectly by a foreign company or non-citizen individual is not eligible, subject to the related-company exception.
What is the related-company exception?
It applies where, for example, a related company holds more than 50% of the capital and has paid-up ordinary share capital above RM2.5 million. See paragraph 5.3.3(a) of the public ruling.
Which companies are excluded?
Business trusts and special-purpose companies issuing approved asset-backed securities.
Do LLPs get the same rates?
The public ruling covers companies and LLPs under the same criteria, using capital contribution for LLPs.
What were the rates before YA 2023?
For YA 2020 to 2022, 17% on the first RM600,000 and 24% on the balance.
Is the rate the same every year?
Check LHDN's rate page and public ruling each year. The rates above are those LHDN lists from YA 2023.
Can you check if my company qualifies?
Yes. We review your capital, income and shareholding against the ruling.
Sources
Official sources
- LHDN (HASiL), Company tax rates
- LHDN (HASiL), Public Ruling on tax treatment for micro, small and medium enterprises
This page is general information, not legal advice. Agencies change their requirements, so confirm the current rules with LHDN, the Royal Malaysian Customs Department and SSM, or with us, before you act. Checked November 2026.
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