24 July 2017
Establishing a Presence in Malaysia
Hong Kong companies are allowed to freely invest in Malaysia and there are no restrictions on the repatriation of capital and profits. The Companies Commission of Malaysia (CCM), an agency under the Ministry of Domestic Trade, Co-operatives and Consumerism, is responsible for incorporating companies and registering businesses as well as providing company and business information. Two routes are available to a Hong Kong company seeking to establish a presence in Malaysia:
1. Start a business; or
2. Open a branch or Representative Office (RO)
Starting a Business
Companies are governed by the Companies Act 2016, which provides for three types of companies:
Company limited by shares; company limited by guarantee; or unlimited company.
One founder shareholder and one resident director as a minimum are required, who need not be Malaysian. The resident director however, must have valid work permits and a principal residential address in Malaysia.
|Incorporation must be submitted to the CCM through an online portal. The registration fee payable is dependent on the type of company incorporated.|
|Limited liability partnership (LLP)|
Regulated under the Limited Liability Partnerships Act 2012.
A minimum of two partners is required, and partners can be individuals or corporate bodies. Partners do not need to be resident in Malaysia; however, there is requirement for the Compliance Officer to ordinarily reside in Malaysia.
|The partnership agreement and other relevant documents must be submitted to the CCM along with payment of the required fees.|
|Partnership or sole proprietor|
All sole proprietorships and partnerships (excluding LLPs) are unincorporated and consequently have unlimited liability.
Foreign nationals are generally not permitted to set up partnership businesses or sole-proprietorships, except for carrying out government or other approved projects.
|Registration as a business with the CCM and partnership agreement must be submitted.|
All companies incorporated under the Companies Act 2016 are required to keep accounting and other records and prepare financial statements in accordance with the Malaysian Financial Reporting Standards (MFRS) Framework, which is identical to the International Financial Reporting Standards (IFRS) with the exception of Transitioning Entities.
The most popular route for foreign companies in Malaysia is to set up an incorporated company. The World Bank’s Doing Business 2017 report indicates that this can take about 18 days, and the following eight procedures must be completed prior to starting operation:
1. Search and reserve company name online via MyCoID portal on the CCM website. Cost is MYR30 (US$7) per name search application.
2. Prepare the incorporation documents and provide a statutory declaration of compliance, through MyCoID portal at a cost of MYR1,000 (US$230).
3. File necessary documents with the CCM and obtain company incorporation within three months of name reservation. The applicable registration fee and chargeable amount are dependent on the size of share capital, ranging from MYR1,000 (US$230) and MYR 70,000 (US$16,300).
4. Open a bank account.
5. Register for Goods and Services Tax (GST) with the Royal Malaysian Customs and Excise Department.
6. Register for income tax and PAYE through the Inland Revenue Board of Malaysia.
7. Register with the Employees Provident Fund within seven days an employee is hired.
8. Register for social security with the Social Security Organisation.
Setting up a Branch or Representative Office
Business activities are limited to the activities of the foreign company, which is ultimately responsible for any liabilities arising from the business operations of the Malaysian branch office. A resident agent and registered office in Malaysia is required.
In general, the CCM will not allow the registration of foreign branches involved in the wholesale and retail trade.
|Non-refundable registration fee is |
payable based on the share capital of the foreign corporation, ranging from MYR1,000 (US$230) to MYR70,000 (US$16,300).
|RO||An RO does not undertake any commercial activities and only represents its head office to undertake designated functions.|
There is no incorporation requirement for ROs, but setting up an RO requires the approval of the Malaysian government.
The required approval route depends on the sector in which the RO resides. Further information is available on the Ministry of International Trade and Industry website.
Tax-resident companies established in Malaysia may be entitled to tax incentives, which typically include tax holidays, investment tax allowance and deductions on different types of expenditures. There are also incentives for pioneer projects/companies and the Islamic financial services sector. As the provision of incentives can be complex, professional advice should be sought.
- Regulatory Environment
- Establishing a Presence
- Intellectual Property Protection
- Staff Recruitment
- Tax Considerations
- Import/Export Procedures
- Further Information