Guides
Withholding Tax on Payments to Non-Residents: Rates & Obligations
Updated: 8 November 2026 Independently fact-checked.
What is withholding tax?
Withholding tax is the amount withheld by the payer against income received by the recipient (an individual or a person other than an individual), arising from Malaysia for certain transactions, and paid to LHDNM. (Source: HASiL — Withholding Tax — R1.)
Who is the payer? The Government, a State Government or local authority, or a resident, or any person who claims the payment as an expense in a business account carried on in Malaysia. The payer must deduct withholding tax for payments to both resident and non-resident recipients. (Source: R1.)
Remittance period: correctly and properly withheld withholding tax must be remitted to LHDNM within one month after paying or crediting the recipient. (Source: R1.)
Types of payments, sections, rates and forms
The following full table is confirmed from the official HASiL page (R1), supported by HASiL 2026 Navigation (R2) and the Withholding Tax e-Book (R3):
| Payment to non-resident | Section / Schedule | Rate | Form |
|---|---|---|---|
| Contract (services) | 107A | 10% (service portion) / 3% (service portion to employee recipient) | CP37A |
| Interest | 109, Schedule 1 Part II | 15% | CP37 |
| Royalties | 109, Schedule 1 Part II | 10% | CP37 |
| Interest & royalties of small value | 109 | 15% / 10% | CP37S |
| Public entertainer | 109A, Schedule 1 Part II | 15% | CP154 (calculation issued by LHDNM) |
| Special class income | 109B, Schedule 1 Part V | 10% | CP37D (CP37DS for small value) |
| REIT/Property Trust Fund income distributions | 109D, Part X | 24% (non-resident company); 10% (foreign institutional investor); 10% (otherwise) | CP37E |
| Retail money market fund income distributions | (continuation of table on R1 page) | — | — |
Contract payments — breakdown: 10% on the service portion of contract payments to a non-resident recipient; 3% on the service portion of contract payments to a non-resident employee recipient. (Source: R1, R2.)
Note: Do not confuse withholding tax with PCB (monthly payroll deductions) or CP500/CP38 (instalments) — these are separate matters. This article covers only payments to non-residents.
Failure to remit: tax increase
If tax due is not paid within one month after paying/crediting, the tax will be increased by 10% of the amount not paid (note on Form CP37, per subsection 109(2) ACP). (Source: R1.)
Rates under Double Taxation Agreements (PPPDK/DTA)
The rates above are the minimum rates before treaty considerations. Rates may be lower if provided under a Double Taxation Agreement (e.g. royalties — "or any other rate specified under a Double Taxation Agreement"). (Source: R1, R3.) Do not assume the rates above are final without checking the applicable agreement.
Special class vs payments under section 4A/4(f)
Special class income to non-residents (section 109B) is withheld at 10% (CP37D). Please note: the full mapping between section 109B and section 109F (payments under s.4A vs s.4(f)) is not confirmed — two sources show variance (R1: 109B; R3: 109F for s.4(f)). This item still awaits official confirmation from HASiL — check again with HASiL before deciding.: verify the full mapping of the "special class" scope of s.109B vs s.109F from the act text before publication.
Related questions
Do I need to withhold tax if my overseas supplier demands full payment? The obligation to withhold lies with the payer as defined in R1, and the remittance period is one month. If you claim the payment as a business expense in Malaysia, make sure you check whether withholding tax needs to be deducted. This item still awaits official confirmation from HASiL — check again with HASiL before deciding.: whether the withholding obligation applies to non-business individuals as payers — the payer definition (R1) is confirmed; the individual scope has not been tested in official examples.
How do I know the rate after taking the DTA into account? Rates can differ under agreements. The effect of PPPDK/DTA on the rate for each payment type (the PPPDK rate table on HASiL's international portal) has not been re-confirmed at this review — refer to Appendix F/Handbook and confirm before calculating. This item still awaits official confirmation from HASiL — check again with HASiL before deciding.
What is the definition of a royalty? The definition of "royalty" (including technical service fees and software payments) is not final — the General Ruling on software royalties (2026) has not been gazetted; do not state an extended definition before the gazette. This item still awaits official confirmation from HASiL — check again with HASiL before deciding.
What is the legal basis of these sections? The full text of sections 107A, 109, 109A, 109B, 109D, 109F (and Schedule 1) has not been fully verified at this review — check the act text before citing. This item still awaits official confirmation from HASiL — check again with HASiL before deciding.
Official sources
All sources below were reviewed on 8 November 2026. Official HASiL pages and documents: