Malaysia: Tax-Efficient Sectors
Operational Headquarter Companies (OHC)
In order to qualify for the favorable fiscal incentives that apply to OHC the following criteria must be met:
- The OHC must be wholly owned by foreigners;
- The OHC must have a minimum capital of 0.5m Malaysian Ringitts (USD130,000) or a minimum expenditure of 1.5m Ringitts (USD395,000) per annum;
- The OHC must both offer to and carry out for its offices or related companies outside Malaysia 3 of the following "specified services": general management and administration, business planning, procurement of raw materials and components, technical support, treasury and fund management services, corporate financial advisory services, marketing, control and sales promotion, training and personnel management, research and development work & assistance in the obtaining of credit facilities.
An OHC which meets the qualifying preconditions is entitled to the following fiscal benefits:
- Profits are taxed at a 10% corporate income tax rate (instead of the national rate) provided the income is derived from the provision of "specified services" to companies located outside Malaysia.
- Irrespective of any change in the current law, foreign source dividends received by an OHC from a foreign subsidiary are exempt from corporate income tax in the hands of the OHC for a period of 10 years.
- Irrespective of any change in the current law, dividends which are distributed by the OHC are exempt from withholding tax for a period of 5 years irrespective of whether those dividends represent profits remitted to the OHC or profits earned by the OHC.