Here’s a practical guide from Enterprise Singapore and our knowledge partner RSM on the nuts and bolts of setting up shop in Malaysia. It covers:
To do business in Malaysia, one of the first things to consider is your business structure. Different regulations apply to different business entities and activities.
Here are three business entities to consider depending on the nature of your business:
A private company is a business entity with at least one member and a maximum of 50 members (excluding staff turned members).
When you set up a private company limited by shares, your company is limited to the amount of shares subscribed by the shareholders, who are the owners of the company.
The company:
Choose to set up a limited liability partnership (LLP) in Malaysia, if you want protection for you and your business partners with limited liability. This is similar to the limited liability enjoyed by shareholders of a company.
In addition, you have the flexibility of making internal business regulations through partnership arrangements. Any debts and obligations of the LLP will be borne by the assets of the LLP and not that of its partners.
An LLP:
If you don’t want to incorporate as a local company in Malaysia, you can also do business there by registering as a foreign company.
You can register as a foreign company in Malaysia, so long as you are:
Do note that you will need to appoint a local agent if you are running your business in Malaysia as a foreign company.
It takes up to a month to register, depending on your business structure:
The number is different for private and public companies:
Yes. For a private company, at least one of your directors must be staying in Malaysia or has his principal place of residence in Malaysia.
For a public company, you must have at least two resident directors.
A director in your company must be at least 18 years old and is not disqualified under Section 198 of the Malaysia Companies Act.
Yes, your board can consist of foreigners only. However, at least one director must meet the residence requirement.
Yes, foreigners can have full ownership of a local company.
However, do note that if your company requires approval from a Malaysian authority for your business activities, that authority will usually impose a minimum equity participation by Malaysian shareholders in your company.
It depends on your business structure:
If your business requires a licence to operate, you will need to get approval before starting your business.
Common business activities that need prior government approval include:
You are not allowed to purchase certain properties.
You need a licence to carry out the following business activities:
Please note the above list of activities is not exhaustive. For details, please check in with the relevant Malaysian authorities.
Apply for licences after setting up your company
It depends on the type of licence you hold as they may be valid for different periods.
Yes, under the law, you need to display your business licence in a conspicuous place at your business location.
The minimum is one share (at any issue price) for a private company and two shares (at any issue price) for a public company.
No.
The issued and paid-up capital is RM 1 million (equivalent to (?) S$321,200) if you are a local trading company where the majority of your equity is owned by foreigners.
You can issue your shares at any price.
You can only issue shares in Malaysian Ringgit.
There are no restrictions.
It is not necessary. You can receive capital contribution in any of your company’s bank accounts.
It varies from bank to bank. It’s best to check with the bank you plan to transact with.
No, you don’t need to keep a minimum capital amount in your bank account.
Yes, they can.
The corporate tax rate is 24%. However, if you are an SME, you will enjoy a lower tax rate of 18% for the first RM 500,000 (approximately S$160,600) of chargeable income.
These tax incentives might apply to you:
There are no special grants for foreign-owned companies. However, there are grants for companies in specific industries, for example, assembly or manufacture of hybrid and electric vehicles.
You need to pay corporate tax in monthly instalments. The amount is based on an estimate of the tax payable and the monthly payment is due on or before the 15th of each month.
Any balance of tax payable, or the difference between the final tax liability and the estimated tax payable, must be paid within seven months after the end of each financial year.
No, you will not be taxed on the repatriation of dividends.
It is 15% on interest and 10% on royalties. Dividends are not subject to withholding tax.
The rate of tax also depends on the Double Taxation Agreement (“DTA”) which Malaysia has signed with Singapore.
Malaysia started collecting a Sales and Service Tax on taxable goods and services from 1 September 2018. The sales tax and service tax are 10% and 6% respectively.
Yes, there is a tax treaty between Malaysia and Singapore to avoid double taxation of income.
This depends on the terms of employment you and your employees agreed on.
Yes, you must contribute to the Employees Provident Fund and their social security contribution.
Although personal income tax is borne by the employee, you must deduct the monthly personal income tax payable by your employees on behalf of the Inland Revenue Board of Malaysia.
Yes, your employee must have a valid Employment Pass issued by the Malaysia Immigration Department.
There are two types of passes:
It takes about four to six weeks to process the application.
You need to have a physical office. When applying for a licence, you will be asked to show your tenancy agreement to support your application.
Please note all information is provided in good faith for guidance and reference purposes only, and is correct as of 17 September 2018.