It’s common to have questions about the tax distinctions between Enterprise (sole proprietorship) and Sdn Bhd (private limited company). Let’s break down the key differences in their tax treatment:
Sole Proprietorship (Enterprise)
Income Tax: Not subject to corporate tax. Instead, the business income is added to the personal income of the sole proprietor or partners.
Personal Income Tax Rates:
Minimum: 0%
Maximum: 30%
Private Limited Company (Sdn Bhd)
Corporate Tax: Sdn Bhd companies pay a lower corporate tax rate, with rates based on taxable income:
First RM600,000: 17%
Income above RM600,000: 24%
SME Advantage: These rates are particularly favorable for small and medium-sized enterprises (SMEs).
Example Comparison
If your income is RM250,000, here’s how taxes compare:
Enterprise: Tax payable is RM46,700 (using personal tax rate).
Sdn Bhd: Tax payable is only RM42,500 (17% on RM250,000).
Why Switch to Sdn Bhd?
If your income exceeds RM250,000, converting to an Sdn Bhd can save you money, as the Sdn Bhd’s tax rate of 17% is lower than the personal tax rate of 21% applied to enterprises at similar income levels.
Converting to an Sdn Bhd can lead to substantial tax savings as your business grows, offering you greater tax efficiency and long-term financial benefits.
Sdn Bhd
0%
30%
Sdn Bhd
Sdn Bhd
RM600,00017%
RM600,00024%
SME
RM250,000
RM46,700
Sdn Bhd RM42,500RM250,000 17%
Sdn Bhd
RM250,000 17% 21%
US 5988 
GB 4445 
CA 4186 
AU 4036 
IE 3239 
NZ 946 
BR 773 
SG 574 
