Submitting Withholding Tax (WHT) for Foreign AI Tools in Malaysia
Generative Artificial Intelligence has quickly transformed corporate workflows across Malaysia. From content generation and voice synthesis to automated coding and visual media, businesses pay monthly SaaS subscriptions or API token charges to overseas AI providers.
However, paying these foreign AI software invoices via credit card introduces a critical local tax requirement: Under Lembaga Hasil Dalam Negeri (LHDN) rules, cross-border payments for AI software platforms are treated as non-resident royalties, making them subject to Malaysian Withholding Tax (WHT).
Ignoring this requirement exposes your company to financial penalties and rejected tax deductions during LHDN audits. Here is a guide explaining why AI software incurs WHT, vendor tax profiles for popular AI platforms, and how to file your taxes correctly.
1. Why Overseas AI Subscriptions Trigger Withholding Tax
Under Section 109 of the Income Tax Act 1967 and LHDN guidelines (including Practice Note No. 3/2023), cloud software applications, API usage, and digital licensing fees paid to foreign companies are classified as software royalties.
Because foreign AI vendors charge international payment gateways without deducting Malaysian tax, your company must calculate and pay the required 10% Withholding Tax directly out of pocket to LHDN.
The Risks of Non-Compliance:
- Non-Deductible Corporate Expenses: If WHT is not remitted to LHDN, tax officers can disallow your entire AI subscription or API expense during a corporate audit.
- Mandatory Late Penalties: Late or missing WHT payments incur an automatic 10% penalty on the unpaid tax balance.
2. Key Foreign AI Vendors & Their Corporate Tax Profiles
When entering vendor profiles into your accounting software (such as SQL Account, AutoCount, Xero, or QuickBooks) or preparing LHDN tax statements, accurate vendor entity details and foreign Tax Identification Numbers (TINs) are required:
A. Large Language Models (LLMs) & Reasoning Engines
- Anthropic, PBC (USA): Provider of the Claude AI assistant and API platform. Registered as a US Public Benefit Corporation under US EIN details.
- Hangzhou DeepSeek Artificial Intelligence Basic Technology Research Co., Ltd. (China): Developers of the DeepSeek AI model ecosystem, billed under Chinese corporate registration details.
- Groq, Inc. (USA): Provider of ultra-fast AI inference chips and API cloud execution platforms.
B. AI Content, Voice & Creative Platforms
- Jasper AI, Inc. (USA): AI-powered copywriting and marketing workspace for enterprise teams.
- HeyGen Technology Inc. (USA): Generative video avatar and video translation platform.
- Kreativsam Solutions SRL / Revoicer (Romania): AI text-to-speech and voiceover generation software, operating under EU / Romanian corporate VAT registration.
C. Developer AI & Automated Coding Assistants
- Cursor OY (Finland): AI-native code editor platform operating under Finnish corporate registration.
- Lovable Labs Incorporated (USA): AI-powered web development and full-stack web application builder.
3. Consolidated AI Vendor Reference Table
Use the official legal entity profiles compiled below when preparing your company’s tax statements for LHDN:
| AI Tool Category | Foreign Legal Entity Name | Country of Incorporation | Tax Profile / Registration Identifier |
|---|---|---|---|
| LLM / AI Assistant | Anthropic, PBC | USA | US EIN 86-1696045 |
| LLM / AI Search | Hangzhou DeepSeek AI Research Co., Ltd. | China | Chinese Unified Social Credit Code |
| AI Compute / API | Groq, Inc. | USA | US EIN (Federal Tax ID) |
| AI Copywriting | Jasper AI, Inc. | USA | US EIN (Federal Tax ID) |
| AI Video Generation | HeyGen Technology Inc. | USA | US EIN (Federal Tax ID) |
| AI Voice Generator | Kreativsam Solutions SRL (Revoicer) | Romania | EU VAT / Romanian Corporate ID |
| AI Code Editor | Cursor OY | Finland | Finnish Business ID (Y-tunnus) |
| AI App Builder | Lovable Labs Incorporated | USA | US EIN (Federal Tax ID) |
4. How to Submit AI Tool Withholding Tax via LHDN e-WHT
Remitting Withholding Tax on foreign software platforms is managed online via LHDN’s MyTax Portal (mytax.hasil.gov.my) through the e-WHT menu:
Step 1: Calculate Total Tax Payable
Convert your foreign AI software invoice into Ringgit Malaysia (MYR) based on the exchange rate on the transaction date. Calculate the standard 10% Withholding Tax liability:
Withholding Tax Due = AI Subscription Cost (MYR) × 10%
Step 2: Choose Your Submission Timeline
- Standard CP37 Monthly Filing: Submit payment within 30 days of making the payment to the foreign AI vendor.
- CP37S Bi-Annual Small-Value Filing: If the total WHT liability on an individual subscription or API invoice is RM500 or less (which covers most individual user tiers like Claude Pro or low API usage), LHDN permits companies to batch and submit these payments twice a year—by June 30 and December 31.
Step 3: Complete Online Filing on MyTax
- Log into your company account on LHDN MyTax.
- Open the e-WHT system and select Form CP37 (Section 109 Royalties).
- Fill in the foreign vendor’s official entity details and foreign tax registration ID.
- Generate the payment slip and remit the tax through online corporate FPX banking.
- Store the LHDN payment receipt alongside the vendor invoice for 7 years to safeguard your corporate tax deductions during audits.