Sole proprietor vs Sdn Bhd: which pays less tax?
By the Lejar team · Updated
A sole proprietor pays personal tax on the profit, at 0% to 30% on the resident scale after the RM9,000 self relief. A Sdn Bhd that meets the SME conditions pays 15% on the first RM150,000, 17% up to RM600,000 and 24% above that. Single-tier dividends are tax free for you up to RM100,000 a year, and 2% applies above that from YA 2025.
Enter your yearly profit. For the Sdn Bhd, add the salary you pay yourself; the rest is paid out as dividends. The calculator shows both totals and the arithmetic.
0 if you take everything as dividends.
0 if you are not sure.
See the conditions below the result.
Enter your yearly profit to compare.
Assumptions
- You are the only owner and the only shareholder.
- You are a resident individual with no other income. EPF, SOCSO and EIS are left out.
- The YA 2025 resident scale. LHDN publishes this scale for YA 2023 to 2025.
- All company profit after tax and salary is paid out as single-tier dividends.
The company gets the SME rates if it:
- is resident and incorporated in Malaysia;
- has paid-up ordinary share capital of RM3 million or less at the beginning of the basis period;
- has gross business income of RM50 million or less;
- is not more than 50% owned, directly or indirectly, by a related company with paid-up capital above RM3 million (or the reverse);
- from YA 2024, is not more than 20% owned, directly or indirectly, by foreign companies or by individuals who are not Malaysian citizens.
A guide, not tax advice. Figures checked against the sources below on 4 November 2026. LHDN changes the rules, so confirm with them before you rely on a result.
Do this in Lejar
Lejar keeps the books for a sole proprietor or a Sdn Bhd, with the MPERS chart of accounts built in and the profit and loss ready for your tax return.
Questions
What are the SME company tax rates in Malaysia?
From YA 2023, an SME company pays 15% on the first RM150,000 of chargeable income, 17% on RM150,001 to RM600,000, and 24% above RM600,000. A company that is not an SME pays 24% on all of it.
Which companies get the SME rates?
A company gets the SME rates if it: is resident and incorporated in Malaysia; has paid-up ordinary share capital of RM3 million or less at the beginning of the basis period; has gross business income of RM50 million or less; is not more than 50% owned, directly or indirectly, by a related company with paid-up capital above RM3 million (or the reverse); from YA 2024, is not more than 20% owned, directly or indirectly, by foreign companies or by individuals who are not Malaysian citizens.
Are dividends from my Sdn Bhd taxed?
Single-tier dividends are exempt for an individual up to RM100,000 a year. From YA 2025, dividend income above RM100,000 is taxed at 2%.
What does this calculator leave out?
It assumes you are the only owner and the only shareholder, a resident individual with no other income, uses the YA 2025 scale (LHDN publishes it for YA 2023 to 2025), and ignores EPF, SOCSO and EIS. A Sdn Bhd also has costs that are not tax: an audit unless the company is exempt, a company secretary and the annual return to SSM.