Is my company an SME or Non-SME for tax purposes? Boss, knowing your company status can save you up to RM 45,000 off your tax savings!

Published: 29 Nov 2024

Hello Bosses!

Have you ever wondered what qualifies your company as an SME or a non-SME status for tax purposes?  After running your business for many years, do you know that it has probably grown from SME to a non-SME?

Let’s first explore the conditions a company must fulfil to be considered as an SME for tax purposes.

• The company is a resident company in Malaysia with a paid-up ordinary share capital of RM2.5 million or less at the beginning of the basis period for a year of assessment.
• The company’s gross income from business sources does not exceed RM50 million.
• The company neither controls nor is directly or indirectly controlled by a related company with a paid-up ordinary share capital exceeding RM2.5 million at the beginning of the basis period for a year of assessment.
• Not more than 20% of the paid-up ordinary share capital is owned by a foreign company or non-Malaysian citizens.
• Further reading of additional criteria: Practice Note 4/2020

Do you know why it is important for you to find out if your company qualifies as an SME or otherwise?

Different tax rates between SMEs and Non-SMEs

YES! Tax rates differ for an SME and non-SME entity!

SME enjoy tax rates based on a three-tier system:

• 1st RM 150,000 = 15%
• Next RM 150,001 – RM 600,000 = 17%
• From RM 600,001 and subsequent balance = 24%

Non-SMEs on the other hand have a fixed tax rate of 24% on their taxable income. 

Let’s look at a simple tax rate calculation example for an SME and non-SME company; with assumption that the chargeable income is RM 1 million for both companies.

Tax Savings difference for an SME vs non-SME: RM 240,000 – RM 195,000 = RM 45,000

The company with a SME status can benefit from tax savings off their taxable income of up to RM 45,000!

Significant Amount of Tax Savings Once Again!

Boss, just imagine what you can do with that extra tax savings of RM 45,000!

That’s enough to foot the salaries of 10-11 members of your staff at an executive level; or you can even use the money as a down payment for the Mazda CX-5 that your daughter has always dreamed of!

Regardless of how you plan to use it, always remember that no amount of savings are too little nor too much.

If there are smart strategies available out there that help you save, then you should most definitely make full use of it.

Who Should You Look For?

Tax savings are always vital for any organization.

With the right tax advice and knowledge from your reliable tax consultant, it will help you avoid any unnecessary tax penalties which can be detrimental to your company.

If you have any tax related questions that needs to be addressed, you can always contact us at https://www.yycadvisors.com/contact-us.html or fill in the form below

Our tax experts and consultants will be happy to assist you!