Quick answer: When a Malaysian company pays certain income to a non-resident, it must deduct tax and pay it to LHDN within one month after the payment is made or credited. LHDN lists 10% on royalty, 15% on interest, 10% on special classes of income, and 10% plus 3% on contract payments for work in Malaysia. If the tax is paid late, the amount increases by 10% and the payment is disallowed as an expense until the tax and increase are paid.
- Pay to LHDN within one month after payment is made or credited.
- Royalty 10%, interest 15%, special classes 10%, public entertainers 15%.
- Contract payments to non-residents: 10% and 3% under section 107A.
- Late payment: 10% increase, and the expense is disallowed until paid.
- Treaty rates may be lower, with written proof of the payee's residence.
Rates and Forms
| Payment | Section | Rate | Form |
|---|---|---|---|
| Royalty | 109 | 10% | CP 37 |
| Interest | 109 | 15% | CP 37 |
| Contract payments | 107A | 10% and 3% | CP 37A |
| Special classes of income | 109B | 10% | CP 37D |
| Public entertainers | 109A | 15% | CP154 |
Timing and Late Payment
| Item | Rule |
|---|---|
| Deadline | Within one month after the payment is made or credited to the payee |
| How to pay | e-WHT or e-TT |
| Late payment | Unpaid amount increases by 10% and becomes a debt to the Director General |
| Expense deduction | Disallowed until the tax and increase are paid |
Example
A Malaysian company credits a non-resident with RM200,000 royalty. Withholding tax at 10% is RM20,000. If the RM20,000 is paid late, a 10% increase of RM2,000 applies, as in LHDN's own example. The RM200,000 expense is also disallowed until the tax and increase are paid.
Treaties and Small Payments
A double tax agreement may give a lower rate, but LHDN requires written confirmation of residence from the other country's revenue authority. For interest, royalty and special-class payments of RM500 or less per transaction, LHDN allows Form CP 37S or CP 37DS and deferral to 30 June or 31 December, depending on the period of the transaction. The HASiL page does not list technical fees as a separate row, so check whether a service payment falls within special classes of income or a treaty before you decide the rate.
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Mistakes
Paying the supplier in full and fixing it later
The late increase and expense disallowance follow.
Applying a treaty rate without residence proof
LHDN requires written confirmation.
Missing the one-month deadline
It runs from payment or crediting, whichever comes first.
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Frequently Asked Questions
Quick answers.
What is withholding tax on non-residents?
Tax a Malaysian payer deducts from certain payments to non-residents and pays to LHDN.
What is the rate on royalty?
10% under section 109.
What is the rate on interest?
15% under section 109.
What are the rates on contract payments?
10% on the non-resident contractor and 3% on the contractor's employees under section 107A.
What are special classes of income?
Income under section 109B, taxed at 10%.
When must it be paid?
Within one month after the payment is made or credited.
How is it paid?
Through e-WHT or e-TT.
What is the penalty for paying late?
A 10% increase on the unpaid amount.
Can I still claim the expense?
Not until the tax and the increase are paid.
Can a treaty reduce the rate?
It may, with written confirmation of the payee's residence from the other country's authority.
Is there a simplified process for small payments?
Yes, for payments of RM500 or less per transaction using CP 37S or CP 37DS.
Can you handle the filing?
Yes. We check the rate and prepare the submission.
Sources
Official sources
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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