Deferment of 2 % Remittance of Payment by Payer Companies to Agents, Dealers or Distributors

As announced in Budget 2022, the government introduced a new Section 107D under the Malaysia Income Tax Act 1967 (“ITA”), which requires companies to withhold 2 percent on gross payment to Agents, Dealers, or Distributors. Section 107D of ITA is effective 1 January 2022.

Scope of Applicability

This withholding tax is applicable only if the total payment (cash and non-cash) to resident individual Agents, Dealers, or Distributors exceeds RM100,000 in the immediate preceding year of assessment.

On 12 January 2022, the Malaysian Inland Revenue Board (“IRB”) announced that the implementation of the remittance of withholding tax on payments made to agents, dealers and distributors under Section 107D of the ITA will be deferred until 31 March 2022, to ensure that all companies making the payments are able to prepare and provide appropriate notification to all agents, dealers and distributors.

With the deferment announced, companies are allowed to remit the 2 percent tax withheld on payments made to agents, dealers or distributors for January to March 2022 from 1 April 2022 without incurring any increase in tax.

Post 1 April 2022, tax withheld must be remitted to the IRBM within 30 days from the payment date. If companies do not comply with the requirements under Section 107D of the ITA, they may be subject to an increase in tax of 10 percent of the amount to be remitted and the underlying expenses would be denied a tax deduction.

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