Enjoy Better Tax Treatment On Joint Ventures With Foreign Shareholding

Though this guide will be useful for fully foreign-owned companies in Malaysia, it is mainly aimed at those planning incorporated joint ventures with 20% or more foreign ownership.

As of 2025, such entities are taxed at a flat 24% regardless of revenue and number of foreign shareholders.

outstreched hand to show high 24% corporate income tax for joint ventures in malaysia with 20% or more foreign shareholding — *First it taketh, then it taketh more.*

To enjoy better tax rates, partners may consider reducing foreign ownership to below 20%.

Below, we take a quick look at the potential tax reductions.

Quantifying ‘better’ joint venture tax treatment

If partners in a joint venture reduce foreign shareholding to below 20%, and the business qualifies as an SME (paid-up capital not exceeding RM2.5 million and annual revenue under RM50 million) the business enjoys a progressive tax rate instead of the flat 24%.

As of 2025, the SME tax rate is:

15% on the first RM150,000
17% on RM150,001 to RM600,000, and
24% on anything above RM600,000

To show how much the business could save this way, the table below compares tax owed under both systems for profits from RM100,000 to RM1,000,000.

Profit	Flat 24% Tax	Tiered Tax	Difference
100,000	24,000	15,000	9,000
150,000	36,000	22,500	13,500
200,000	48,000	30,000	18,000
300,000	72,000	47,000	25,000
400,000	96,000	64,000	32,000
500,000	120,000	81,000	39,000
600,000	144,000	98,000	46,000
700,000	168,000	122,000	46,000
800,000	192,000	146,000	46,000
900,000	216,000	170,000	46,000
1,000,000	240,000	194,000	46,000

Of course, whether this reduction in tax owed is worth lower ownership in the joint venture is up to the partners to decide. We will say that even an extra RM9,000 goes a long way towards paying for annual company operating costs!

And those who are interested in exploring the idea are welcome to get in touch with us.

Set up a joint venture in Malaysia with MISHU

MISHU’s team is here to support you and your partners in setting up your joint venture, including preparing the necessary legal documents to ensure clarity and protection for all parties involved.