Calculating 2% Agent Commission Withholding Tax: Inclusive or Exclusive?

It is important to understand that the 2% withholding tax on agent commissions is not applicable to all agents, dealers, or distributors. This tax is only imposed if the total amount received by the recipient from a single company in the preceding year exceeds RM 100,000. To calculate the 2% withholding tax for agent commissions, you can use the following formula:

Withholding Tax Amount = Commission Amount x Withholding Tax Rate

Example 1:

In 2022, Agent A received commission of RM 101,000 from SQL Property Agency.
In 2023, Agent A received commission of RM 30,000 from SQL Property Agency.

Tax treatment:
Since the total amount received in 2022 was RM 101,000, Agent. A is required to pay a Withholding Tax in 2023. Only the RM 30,000 is subject to 2% withholding tax. The calculated amount of Withholding Tax is 2% x RM 30,000, which is RM600.

Example 2:

In 2021, Agent B received commission of RM 30,000 from SQL Property Agency.
In 2022, Agent B received commission of RM 101,000 from SQL Property Agency.

Tax treatment:
The commissions received by Agent A in the year 2022 are not subject to a 2% withholding tax because the commissions received in the previous year, 2021(RM 30,000), did not exceed the threshold value of RM 100,000.

However, the commissions received by Agent A in the year 2022 exceed RM 100,000, then the commissions received in the year 2023 will be subject to a 2% withholding tax.

If an agent receives commissions from multiple companies and the total amount exceeds RM 100,000 in the preceding year. Agent A may be subject to a 2% withholding tax on the payments received from each individual company. It is important to note that the threshold value determination applies to payments received from a single paying company only. For example, Agent A receives cash and non-cash commissions from three different paying companies as follows: