12 Ways to Reduce Company Tax in Malaysia (Plus 8 Tips to Boost Your Cash Flow)
- Chow Ping
- Sep 29
- 7 min read
Updated: Nov 12
Pay too much company tax = less profit.
Logical?
The solution → Pay less tax.
No, we’re not telling you to evade taxes.
Please absolutely do NOT evade your taxes.
What we’re saying is:
Don’t pay more taxes than you have to.
Today, we present you with 14 ways to reduce your company tax. And another 8 ways to maximise your cash flow.
(Based on our 32 years of experience)
12 ways to reduce company tax
1. Split your business into separate companies to enjoy lower taxes
In Malaysia, companies are taxed in tiers.
The first RM600,000 of a company’s annual profit is taxed at 17%.
Any profit above RM600,000 is taxed at a higher rate of 24%.
So, the first RM600,000 you earn in a company is charged less tax.
Now, if you run several profitable businesses or outlets under one company,
you’ll only enjoy that 17% tax rate once on the first RM600,000 of total profits.
The rest gets taxed at 24%.
But if you separate your outlets into different companies, each company gets its own RM600,000 tier taxed at 17%.
2. Pay yourself a director's salary (Up to RM10k/Month)
Many business owners in Malaysia don’t pay themselves a salary.
They leave all the profit in the company because they think, “Let the company grow first. I’ll take it later.”
They end up paying more tax because the money that stays inside the company is taxed at 17% (for the first RM600,000 profit).
Meanwhile, money you take out as a salary is taxed under your personal income tax, which can be as low as 10% if your monthly salary is around RM10,000.
Now, what if your company has no cash yet?
You can still record the salary (called accruing it). Meaning the company “owes” you the salary, but you don’t actually withdraw it yet.
You’ll still pay personal tax on it now, but later, when the company makes money, you can take out that amount tax-free, since you’ve already paid tax earlier.
3. Use capital allowances when you buy expensive assets
Let’s say your business buys something expensive, like a car, a machine, or office equipment.
You might wonder if you can deduct the full cost from your present-year income.
Nope — not all at once.
These items are considered assets, not regular expenses like rent or utilities.
You use them for several years, so the tax system doesn’t let you claim the full amount immediately.
Instead, Malaysia allows you to deduct their cost bit by bit each year through something called a capital allowance.
Think of it like tax-friendly depreciation.
The best part is that Malaysia doesn’t have a capital gains tax. So when you eventually sell that asset at its fair value, you don’t pay extra tax on the gain.
4. Write off old, useless items in your accounts
Over time, every business builds up things on its books that are no longer useful. For example:
obsolete equipment
expired/damaged stock
These items often stay in your accounts for years, even though they’re actually worth nothing in real life.
If you don’t remove them, your company’s accounts may show “profits” that aren’t real.
And you’ll end up paying tax on money you’ll never get.
That’s why it’s important to review your balance sheet regularly and write off anything that’s truly gone for good.
5. Claim every legitimate business expense
Many business owners forget to record smaller expenses that actually qualify as business costs.
These include things like:
Subscriptions (e.g. ClickUp, Dropbox, ChatGPT)
Online purchases (e.g. Shopee or Lazada tools)
Parking, petrol, meals during business meetings
Software, internet, phone bills, and courses related to work
Claim! Claim! Claim!
6. Maximise Benefits-in-Kind (BIK)
Instead of paying yourself cash, your company can provide non-cash benefits — like a driver, maid, housing, furniture, or accommodation.
The company gets to claim the full cost as a tax-deductible expense.
But you, the director, are only taxed on a smaller, fixed value — called the “deemed value”.
We strongly recommend it.
7. Match prepaid costs to their benefit period
If you pay big costs upfront — like insurance, lease, or project fees — don’t deduct everything in one year.
If you record the full amount as an expense this year, but the benefit actually stretches across several years, you might create a big loss now and have less to deduct later.
Instead, spread the cost across the years it benefits.
8. Carry forward & leverage unabsorbed losses (10 Years)
If your company made a loss this year, you can carry forward the loss for up to 10 years and use it to offset future profits to save on tax.
In fact, if you run multiple companies, a profitable company can acquire a loss-making one (under certain conditions) and use its losses to reduce tax.
9. Avoid deemed interest on director loans
When you take money out of your company without recording it properly, it’s treated as a loan from the company to you.
LHDN assumes the company should charge you interest, even if you didn’t actually pay any — this is called deemed interest.
To avoid this:
Repay the loan, or
Convert it into dividends or salary, properly documented.
10. Apply for Investment Tax Allowance (ITA)
If you’re upgrading your business — buying better machines, automation tools, or digital systems — you can apply for Investment Tax Allowance from MIDA.
This incentive lets you claim 60% of your spending as a special tax deduction (on top of normal capital allowances).
11. Invoice your company for your own services
If you’re actively working in your business, you can bill your company for the work you do — just like a contractor.
This creates:
A deductible expense for the company,
Personal income for you, usually at a lower rate,
And losses the company can carry forward for future tax savings.
It’s especially useful if your company is in a start-up phase or still loss-making.
12. Run legitimate lifestyle costs through the company
As a business owner, many of your daily expenses are business-related — client lunches, petrol, parking, or even work-related travel.
Expense them through the company, so they become deductible costs.
Let your accountant decide what qualifies, but always record first, decide later.
At Douglas Loh & Associates, we help you see the bigger picture. Not just how to pay less tax, but how to structure your business for lasting profit and growth.
Wanna get a taste of how we can help you keep more of what you earn?? Let’s chat.
Or if you prefer WhatsApp...
8 tips to maximise company cash flow
1. Keep track of your leaks (benchmark your spending)
Cash flow is like water in a bucket.
If you’re not watching, it’ll leak out through small holes you didn’t even know existed.
That’s why at Douglas Loh & Associates, our service includes spotting leaks for you.
For example, if you have 10 employees but buy 100 packets of biscuits every month, something is wrong.
We’ll make recommendations to help you plug that leak.
2. Hire contract staff strategically
Full-time employees come with extra costs — EPF, SOCSO, EIS, annual leave, bonuses, and compliance.
These add up to about 20–30% above their base salary.
By hiring contract staff where possible, you avoid these extra contributions and pay only for the work done.
Another perk:
Contractors earning under RM40,000 per year don’t pay personal tax, so it’s efficient for them too.
3. Time invoicing wisely
Tax is invoice-based.
You owe tax the moment you issue an invoice, even if the client hasn’t paid.
That means issuing invoices too early can hurt cash flow, because you’re paying tax before you receive money.
The smarter move:
Use a proforma invoice first (acts like a quote)
Only issue the actual invoice after payment is confirmed
This way, tax is triggered only after cash comes in
This also helps with year-end timing. By delaying invoices into the next financial year,
you can smooth out revenue recognition and manage liquidity better.
4. Pay dividends from retained earnings
Many business owners forget they can withdraw money through dividends.
After your company has paid corporate tax, the remaining profit becomes retained earnings.
This is your money as a shareholder.
Dividends distributed from retained earnings are tax-free in your hands (because the company has already paid tax).
This is a great way to free up trapped cash without triggering additional taxes.
5. Put idle cash to work
Leaving large sums in your current account earns zero return.
Instead, park excess funds in:
Fixed deposits (FDs)
Money market funds (MMFs)
Short-term investments with safe, liquid access
Even a 2–3% return can make a big difference on six-figure balances.
6. Don’t overpay taxes
We had a new client who planned his tax installment poorly. This led to massive overpayments year after year.
In the end, LHDN owed him RM93,000.
But because it's such a large amount, they decided to audit his calculations instead of just processing the refund.
(Of course they won’t just hand him the money. It’s LHDN, guys.)
Overpaying tax isn't "playing it safe" — it's creating problems.
Large overpayments trigger audits that tie up your money indefinitely.
So if you want to boost your cash flow, plan your tax installments throughout the year so you pay what you owe, not more.
Want to check if you're overpaying taxes? Grab our free Are You Overpaying Taxes checklist now. Click HERE.
7. Verify Unknown Bank Deposits Before Recording
If money appears in your bank account and you can’t identify the source, don’t immediately record it as income.
You must first match each deposit with an invoice or transaction.
If you record it wrongly, it may trigger tax on amounts you didn’t actually earn.
Instead:
Hold it under “unidentified deposits” temporarily,
Investigate,
Then record it correctly once confirmed.
8. Make sure what’s on paper matches what’s in your bank account
Your accounts should reflect what’s really happening with your money — not just what’s written on paper.
Some businesses record income the moment they issue an invoice (even if the client hasn’t paid yet), but record expenses only when cash actually leaves the account.
That mismatch makes your books look like you’ve earned more than you really have, which can mess up your cash flow.
To avoid this:
Record income only when money is actually received, or
Be consistent if you’re using accrual — record expenses the same way, too.
The key is: whatever your books say should match your actual cash.
It’s easy to miss these things when you’re managing it yourself.
That’s why it’s important to have a solid accountant on your side. You need an accountant who thinks like a business strategist, not a glorified number-puncher.
If your accountant doesn't understand where you're headed, your whole system will wobble.
At Douglas Loh & Associates, we help you see the bigger picture. Not just how to pay less tax, but how to structure your business for lasting profit and growth.
Wanna get a taste of how we can help you keep more of what you earn?? Let’s chat.
If you prefer WhatsApp...
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