Industries with annual commission of more than RM100,000 may be subject to 2% withholding tax.
The government has proposed a new section 107D in the Finance Bill tabled in Parliament. Which will impose a 2% withholding tax on industries involving commissions. The withholding tax will be levied on agents, dealers and distributors whose annual commission exceeds RM100,000.
Industries with annual commissions exceeding RM100,000 include the insurance, real estate, electrical, automotive and direct sales industries. The odd-job economy such as Grab drivers, FoodPanda delivery workers or those with lower commissions are not affected.
Commissions are eligible for withholding tax regardless of whether they are paid in the form of money or goods. Groups that pay commissions in the form of goods are assessed on the market value and are subject to withholding tax once the value of the commission exceeds RM100,000.
Under the proposed section 107D, the Inland Revenue Department (LHDN) may also issue a written notice to the company requiring withholding tax on commissions at a rate of more or less than 2%.
This government proposal is to reduce the incidence of tax evasion and omission. Withholding tax operates on the same principle as the monthly payroll withholding tax (PCB).
