Figma Subscriptions & Malaysian Withholding Tax: What Every Business Paying FIGMA, INC Must Know

If your Malaysian business subscribes to Figma — the industry-leading UI/UX design and collaborative prototyping platform — you are almost certainly triggering a Malaysian Withholding Tax (WHT) obligation every single billing cycle. Yet the vast majority of finance teams process these payments as routine software expenses, unaware that the Inland Revenue Board of Malaysia (LHDN) classifies them as royalty payments subject to a 10% withholding tax under Section 109 of the Income Tax Act 1967.

Ignorance of this obligation carries serious financial consequences, including 100% expense disallowance and compounding late penalties. This comprehensive guide walks Malaysian businesses through the legal basis, gross-up mechanics, DTA relief opportunities, and the correct filing pathway using Form CP37 or CP37S via the e-WHT portal.

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Section 1: The Legal Basis — Why Payments to FIGMA, INC Are Classified as Software Royalties

FIGMA, INC is a United States-incorporated company headquartered in San Francisco, California. When a Malaysian business pays for a Figma Professional, Organisation, or Enterprise subscription, it is paying a non-resident entity for the right to use proprietary software. Under Malaysian tax law, this is the textbook definition of a royalty.

Section 2 of the Income Tax Act 1967 defines a royalty to include any sum paid as consideration for the use of, or the right to use, any software. LHDN’s Practice Note No. 3/2023 further solidifies this position by explicitly addressing payments made to foreign digital service and software-as-a-service (SaaS) providers, confirming that subscription fees for cloud-based software platforms constitute royalty income derived from Malaysia.

Under Section 109 of the Income Tax Act 1967, when a Malaysian tax resident — whether a company, partnership, or sole proprietor — makes a royalty payment to a non-resident, the payer is legally required to:

• Withhold 10% of the gross payment at source
• Remit that withheld amount to LHDN within one month of paying or crediting the royalty
• File the appropriate declaration form (CP37 or CP37S)

Figma’s subscription billing is automated, typically charged to a company credit card or via invoice. The platform does not self-withhold Malaysian tax. That legal duty falls entirely on the Malaysian paying entity — which is you.

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Section 2: The Gross-Up Reality — Your True Cost of Paying for Figma

Here is where most Malaysian finance departments are caught off guard. When FIGMA, INC charges your corporate credit card USD 45 (or whatever the applicable plan rate is), that transaction represents 100% of the agreed contract price. The vendor does not reduce its invoice to accommodate Malaysian WHT. There is no deduction at source happening on their end.

Malaysian law requires WHT to be calculated on the gross amount of the royalty. Because you cannot deduct from a payment that has already been processed at full price, you must perform a tax gross-up — meaning the WHT liability comes out of your company’s own pocket, on top of the subscription fee you already paid.

How the Gross-Up Calculation Works

Description	Amount (Example in MYR)
Figma subscription payment (net amount paid to vendor)	RM 1,000.00
Gross-up formula: Net ÷ (1 − 10%) = Gross	RM 1,000 ÷ 0.90 = RM 1,111.11
WHT payable to LHDN (10% of Gross)	RM 111.11
Total effective cost to your business	RM 1,111.11

This gross-up scenario applies any time a Malaysian company cannot contractually deduct WHT from the vendor’s payment. For recurring SaaS subscriptions like Figma — billed automatically at full price — the gross-up method is standard practice and must be reflected accurately in your WHT remittance calculations.

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Section 3: Section 39(1)(f) Risks — The Cost of Non-Compliance

Failing to withhold and remit WHT on your Figma payments is not merely a procedural oversight. It triggers a cascade of financial penalties under the Income Tax Act 1967.

Section 39(1)(f) is the key provision businesses must fear. It states that any outgoing payment — including royalties — made to a non-resident without proper WHT remittance shall be wholly disallowed as a tax deduction. This means:

• Every Figma subscription fee you have ever paid without remitting WHT becomes a non-deductible expense
• Your taxable income increases by that full amount
• You pay corporate income tax at 24% (or SME rate of 17%) on income you could have legitimately deducted

Beyond disallowance, LHDN imposes a 10% late payment penalty on any WHT amount not remitted within the stipulated deadline. If the non-compliance spans multiple years of Figma subscriptions, the cumulative exposure — disallowed deductions, back taxes, and compounding penalties — can reach significant sums for a relatively modest SaaS subscription.

LHDN audit risk for digital service payments has increased substantially following the introduction of Practice Note No. 3/2023. Businesses that cannot demonstrate WHT compliance on foreign software payments are increasingly flagged during tax audits.

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Section 4: Double Taxation Agreement (DTA) Relief — Can You Pay Less Than 10%?

FIGMA, INC is a United States entity. Malaysia and the United States do not have a comprehensive Double Taxation Agreement (DTA) in force. This is a critical point. Unlike payments to vendors resident in treaty-partner countries such as Singapore, the United Kingdom, or Ireland, payments to US-resident companies like FIGMA, INC do not automatically benefit from a reduced WHT rate under a bilateral tax treaty.

Without an applicable DTA, the domestic WHT rate of 10% applies in full to all royalty payments made to FIGMA, INC.

However, businesses should be aware of the following considerations:

• Vendor entity structure matters: If FIGMA, INC operates through or bills from a subsidiary in a DTA-partner jurisdiction, the applicable treaty rate may differ. Always verify which legal entity is issuing your invoice.
• Certificate of Residence (COR): For any DTA relief to apply, the foreign vendor must provide a valid COR issued by their home country’s tax authority. Without this document, LHDN will not accept any reduced rate claim.
• Treaty shopping risks: LHDN actively scrutinises COR documents to ensure the entity claiming treaty benefits is the genuine beneficial owner of the royalty income.

Given the absence of a Malaysia-US DTA, Malaysian businesses paying FIGMA, INC should budget for the full 10% WHT rate and apply the gross-up accordingly.

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Section 5: Filing Guide — Form CP37 vs CP37S for Figma Payments

LHDN provides two filing mechanisms for WHT remittance, and choosing the correct form matters for compliance and cash flow management.

Form CP37 — Standard Monthly Filing

Form CP37 is used for individual WHT remittances and must be submitted within one month of the date the royalty payment is paid or credited to the non-resident. For large or irregular Figma payments, this is the appropriate filing vehicle.

Form CP37S — Bi-Annual Filing for Recurring Small Payments

For businesses making frequent, small, recurring royalty payments to the same non-resident — precisely the scenario that describes monthly or annual Figma subscriptions — LHDN permits the use of Form CP37S. This allows businesses to aggregate all qualifying payments within a six-month period and file once per period:

• First period: January to June — due by 31 July
• Second period: July to December — due by 31 January

CP37S significantly reduces the administrative burden of monthly filings and is ideal for SaaS subscriptions like Figma where the payment amount and frequency are predictable.

Filing via e-WHT Portal

Both CP37 and CP37S can be filed electronically through LHDN’s e-WHT portal at MyTax (mytax.hasil.gov.my). To complete the filing correctly, you will need:

1. The foreign vendor’s Tax Identification Number (TIN) as registered in their home country
2. The vendor’s registered business address and country of tax residence
3. A valid Certificate of Residence (COR) if claiming DTA-reduced rates
4. Accurate payment dates, amounts in both foreign currency and MYR, and the exchange rate applied

The TIN field in the e-WHT system is mandatory and must be accurate. Incorrect or missing TIN data will result in rejected submissions or queries from LHDN. Do not guess or use unverified TIN information.

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Section 6: Get Verified TIN Data & COR Documents — Act Now Before Your Next Figma Billing Cycle

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Disclaimer: This article is intended for general informational purposes only and does not constitute professional tax advice. Malaysian businesses are encouraged to consult a licensed tax agent or chartered accountant for advice specific to their circumstances. Tax regulations are subject to change — always refer to the latest LHDN guidelines and Practice Notes.