WHT on payments made to agents, dealers and distributors

Withholding tax (WHT) on payments made to agents, dealers and distributors

Pursuant to the Finance Act 2021, effective from 1 January 2022, Section 107D was introduced into the Income Tax Act 1967 to provide that companies making payments in monetary form to agents, dealers or distributors arising from sales, transactions or schemes carried out, will be required to withhold tax at a rate of 2% on the gross amount. This applies to agents, dealers or distributors who are individual residents and who have received more than RM100,000 (in monetary and/or non-monetary form) from the said company in the immediate-preceding YA.

The tax withheld is to be remitted to the Inland Revenue Board (IRB) within 30 days from the date the amount was paid or credited to the agent, dealer or distributor, failing which a tax increase of 10% may be imposed. A tax deduction will not be allowed on the expense in cases where the WHT has not yet been remitted to the IRB.

Following the above, on 12 January 2022, the IRB issued a media release stating that to ensure that impacted taxpayers are able to make the necessary preparations and notify their agents, dealers or distributors accordingly, the remittances of the above-mentioned WHT can be deferred until 31 March 2022. Taxpayers will be allowed to remit the WHT in relation to payments for the months of January until March 2022 from 1 April 2022, without being subject to any tax increase.

The IRB has also stated that a Frequently Asked Documents (FAQs) document in relation to the above-mentioned matter will be issued in due course. It is hoped that further clarity on when specifically the WHT in relation to payments for the months of January until March 2022 needs to be remitted to the IRB (e.g. whether this must be done by 30 April 2022 or some other date on or after 1 April 2022), will be clarified in the FAQs.