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Malaysia Provides Withholding Tax Payment Deferral for Small Recurring Payments of Royalties, Interest, and Special Classes of Income — Orbitax Tax News & Alerts

The Inland Revenue Board of Malaysia published a media release on 27 September 2022 that announces a deferral of the payment of "small" withholding tax on payments of royalties, interest, and special classes of income to non-residents beginning 1 August 2022. Normally, tax withheld must be remitted (paid) to the tax authority within one month from the date payment to a non-resident is made. In order to make it easier for payers making small recurring withholding tax payments, a deferral is introduced so that withholding tax can be paid once every six months for the following income categories:

  • Interest or royalty income paid to non-resident recipients under Section 109 of the ITA 1967; and
  • Certain special classes of income paid to non-resident recipients under Section 109B of the ITA 1967, which includes:
    • payments for services rendered in connection with the use of property or rights owned by the non-resident, or the installation or operation of any plant, machinery, or other apparatus purchased from the non-resident;
    • payments for advice, assistance, or services rendered in connection with management or administration of any scientific, industrial, or commercial undertaking, venture, project, or scheme; and
    • rent or other payments made under any agreement or arrangement for the use of any moveable property.

To qualify for deferred payment every six months:

  • The amount of the withholding tax payment must not exceed MYR 500 per transaction; and
  • The transaction must be recurring, meaning that the payer knows that withholding tax payments will be required more than once during the extended 6-month period.

If the conditions are met, withholding tax payments may be remitted through a single payment form by the following deadlines:

  • On or before 30 June for payment transactions made to non-resident recipients between 1 December of the previous year and 31 May of the current year; and
  • On or before 31 December for payment transactions made to non-resident recipients between 1 June and 30 November of the current year.

The credit date payment column in Payment Form CP37 or CP37D must be filled with the date 30 June or 31 December according to the transaction period concerned. These forms are available on the tax authority's Withholding Tax webpage. Taxpayers taking advantage of the deferral are advised to keep a list of relevant small withholding tax payment recipients for review by the tax authority if necessary.