Sole proprietor tax rate on high profit
My enterprise profit is RM500,000. What rate applies?
The situation
A sole proprietor pays resident individual rates, reaching 26% on income between RM400,001 and RM600,000.
The law
- Part I, Schedule 1, Income Tax Act 1967: Resident individual rates from 0% to 30% (30% above RM2 million for YA 2025)
What it means for you
At this level a company may save tax, but costs and extraction must be compared. Reliefs reduce chargeable income slightly. Get a side-by-side calculation before converting.
What to do
- Compute tax as an individual.
- Compute tax as a company plus extraction.
- Compare costs.
- Decide before next year.
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