What is withholding tax and when do I pay it on foreign vendors?
Withholding tax is tax deducted from certain payments to non-residents — royalties, interest, technical or service fees — and remitted to LHDN, usually within a month. Rates vary by payment type and treaty. Failing to withhold attracts a penalty and can disallow the expense entirely.
Statutory figures: Income Tax Act 1967 LHDN withholding tax guidelines
Also asked as: withholding tax malaysia rates; bayar vendor luar negara cukai; WHT services malaysia; pay foreign contractor tax.
This one bites modern SMEs hardest: overseas software licences, foreign consultants, offshore contractors. Flag foreign vendor payments to your accountant before you pay, not at year end.
Key facts
- Applies to royalties, interest, technical/service fees, contract payments to non-residents
- Rates vary by type and treaty; remit within a month
- Non-compliance: penalty + expense disallowed
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