LHDNM - Implementation of 2% Withholding Tax Deduction Under Budget 2022

On 12 January 2022, Lembaga Hasil Dalam Negeri (LHDNM) issued a Media Release on the implementation of a 2% withholding tax on payments by a paying company to agents, distributors, and dealers that are resident individuals who received RM100,000 or more in monetary and non-monetary payments in the preceding year.

The Government through the 2022 Budget Presentation has introduced section 107D, Income Tax Act 1967 (ITA 1967) which came into force on 1 January 2022, where every paying company is required to withhold a 2% tax for each cash payment made to its agents, distributors, and dealers, and to remit such tax to LHDNM within 30 days.

To ensure that all paying companies are able to make appropriate preparations and notifications to all agents, distributors, and dealers, LHDNM has deferred the implementation of the remittance of withholding tax under section 107D of ITA 1967 until 31 March 2022.

Accordingly, the paying company is allowed to remit the 2% withholding tax from 1 April 2022 onwards for the months of January to March 2022, without incurring any penalty.

Amendment on Section 106A of the ITA, 1967 introduced on 18.12.2021 (Updated - 28.12.2021)

That LHDNM's right to access taxpayer's bank information without taxpayer consent now restricted to it can only exercise such power for the purpose of making an application to the court for a garnishee order (i.e. the recovery of taxes due and payable by a taxpayer to the government) where there are already court judgments on civil recovery and for no other purposes. In view of this updates, taxpayers who have been complying with their income tax obligations should have no cause for worry on the new Section 106A.

Special Income Remittance Programme for Residents tax payer

On 16.11.2021, LHDNM issued a Media Release stating that, as tabled at the Budget for 2022 foreign-sourced income received in Malaysia to be taxed, LHDNM is offering a Special Income Remittance Programme (PKPP) to be implemented from 1 January 2022 to 30 June 2022 to residents in Malaysia who have been receiving foreign-sourced income. Taxpayers are encouraged to participate in this special programme in order to update their tax position.