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Malaysia Company Registration

Healy Consultants Group PLC
18 September, 2014

There are numerous advantages to forming a business in Malaysia which assist in the country's continuous economic growth.  Average monthly office rental space is a considerably low US$17 per square meter, significantly lower than Singapore's average of US$68 per square meter.  Malaysia's economy is made up of a significant number of skilled worker, and employing an employee in Malaysia is also considerably cheaper than if you were to in Singapore.  The average monthly salary in Malaysia is US$2,310, as opposed to US$3,245.  A foreign entrepreneur who has formed a company in Malaysia will not held back by a language barrier.  Although English is a second language, over 70% of the population communicate using the language, and Malaysia business documents are widely available in English.  Therefore a foreign investor will have no problem communicating with employees, customers, and clients.  There are four major ports in Malaysia: Pasir Gudang, Port Klang, Port Tanjung Pelepas, and Bayan Lepas, which make it a strategic location for trade by sea, along with the fact that the country is located on the straits of Malacca.  Malaysia is located in the center of South East Asia, closely positioned to leading Asian markets such as Singapore, China, Vietnam, Thailand, and India, making it an ideal location for a company’s regional headquarters.  Malaysia is a member of the Association of South East Asian Nations (ASEAN).  One of the advantages is membership is that all companies in Malaysia benefit from the free trade agreements that are existent amongst the member states.  These states include: Brunei, Cambodia, Indonesia, Laos, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. 

One method the Malaysian government has used to attract foreign investors is through the development of industrial parks, free industrial zones, technology parks, and Multimedia Super Corridor (MSC).  With this development are several investment incentives available such as Pioneer status, BioNexus status, and MSC status.  These statuses allow companies to benefit from no tax for several years.  There are five free zones in Malaysia which exempt custom duties for foreign companies, and offer flexible trading laws.  These five zones include: Pasir Gudang, Port Klang, Port Tanjung Pelepas, Kulim Hi-Tech Park, and Bayan Lepas.  These zones are appropriate for foreign companies who wish to use Malaysia as a regional manufacturing or distribution base, with the purpose of conduction a large amount of their business outside of Malaysia.

Two of Malaysia’s largest industries are tourism and manufacturing.  The country's tourism industry is continuously growing with new attractions constantly being built, including: museums, theme parks, shopping malls, art galleries, and hotels.  Tourism is an industry which is widely accessible to foreign investors through business in Malaysia.  Manufacturing is a large industry which is popular throughout Malaysia due to the large quantity of cheap raw materials and skilled labor.  The country is known to possess several prevalent natural resources such as palm oil, oil, rubber, timber, and tin.

There are several business entities present in Malaysia including: Limited Liability Company (LLC), Bumiputera Companies, Branch Office, and Representative Office.  An LLC is typically used by business entrepreneurs to engage themselves in the business in world in Malaysia.  Liability of the shareholders is restricted in regards to their capital investment, while stock transfer needs the judgment of the majority members.  Bumiputera companies can either be Malay or foreign, and must have 30% of Malay ownership.  Along with this, the organization can benefit from grants, discounts, and incentives.  Such incentives include cheaper business licenses, special bank agreements, and native reservation of land.  A branch office must conduct all business interactions within the presence of the parent company; however, this entity made engage in business activities such as trade, invoicing, and the signing of contracts.  A representative office is restricted to only engaging in business activities such as market research and promoting the business of the parent company.  Therefore, this type of entity cannot by law sign contracts or conduct business in Malaysia.

Any foreign company can invest in every business sector in Malaysia without receiving constraints.  Investing in Malaysia is a great idea due to the numerous incentives in which the government offers to those considering business formation in the country.  There are five types of incentives in which the government offers for foreign investment.  Firstly, a small manufacturing organization with shareholders' funds which do not exceed RM500, 000 and are holding a minimum of 60% in equity are eligible for the Pioneer Status and Investment Allowance incentives.  Secondly, entrepreneurs who form a company in Malaysia which is involved in the promotion or in the production of promoted products in areas of new and emerging technologies, qualify also for Pioneer Status and Investment Tax Allowance incentives.  Thirdly, those who are granted Pioneer Status benefit from a five year partial exemption from income tax.  Applications which are received from businesses located in the Eastern Corridor of the Peninsular Malaysia will additional enjoy 100% tax exclusion on statutory income during their five year exemption period.  Lastly, Income which is derived from outside of Malaria and is remitted to Malaysia by resident companies, non-resident companies and non-resident individuals are all exempted from tax.

There are certain legal considerations which need to be taken into account when incorporating a company in Malaysia.  The Malaysia Company Act on Malaysia corporate formation states that a Malaysian company must have at least two directors who are either a Malaysian citizen, Malaysian permanent resident, or a person who is holding an employment pass, and must be above 18 years of age.  Along with this, each company must appoint a Malaysian company secretary.  In order to conduct business the company must have a registered office in Malaysia.  If the company is in need of hiring foreigners for on a short-term basis for projects, then it is required of the company to apply for visit passes.  All changes which may occur within the company must be lodged with the Malaysian companies' registry.  It is required in Malaysia that all businesses keep accounting and other financial documents in order to explain the transactions and the financial position of the company. 

There are certain requirements in regards to recruitment in Malaysia which you need to consider before forming a company.  There is a minimum age of 21 years for an IT position, and 27 years for management posts.  There is a certain criteria for the employment of foreign labor by non-export companies oriented industries, which include: a total sales of RM2 million and above, and a minimum paid-up capital of RM100, 000 and above.  Manufacturing, service, plantation and construction sectors may employee citizens from countries, include: Indonesia, Thailand, Nepal, Cambodia, Myanmar, Laos, Vietnam, and the Philippines.

Before incorporating a company in Malaysia it is important to understand the disadvantages of formation and how this may affect your business idea.  The Malaysian government is known to play an important role in daily business, and therefore the country has numerous bureaucratic, and legal barriers for new businesses.  Malaysia is currently ranked 53rd least corrupt country on the global corruption index due to the government red tape, bureaucracy and corruption. There is currently a standard value added tax rate of 18%, making quarterly reporting to the government mandatory.  The government is quite racially bias, tending to favor Malaysian nationals, and companies with Malaysian nationals.  Not all business sectors in Malaysia allow 100% foreign ownership.  It may be a difficult task to bring on board two directors who must be either a Malaysian citizen, Malaysian permanent residents, or an employment pass holder. 


Tags: Business


About the Author


Healy Consultants Group PLC

Since 2003, Healy Consultants assists international Clients with company incorporation services worldwide. Our services include: company registration, opening of corporate bank account, accounting and tax services, legal services, jurisdiction comparisons...more.

To inquire more information about global business set up; call us on +65 6735 0120 or email us at email@healyconsultants.com

 

 

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