Business entities in Malaysia

Business entities in Malaysia

Malaysia business entity setup requirementsHealy Consultants will be pleased to assist our Clients with Malaysia company setup. There are several ways of doing business in Malaysia, the most common being the setting up of a limited liability company. Foreign companies can also register a branch in Malaysia, or a representative office if they plan to run only marketing operations in this country.

  • The Malaysia Limited liability company (SDN BHD)

    • The Malaysia limited liability company (locally known as a Sendirian Berhad or SDN BHD) is the type of business entity most commonly formed by foreign entrepreneurs starting a business in Malaysia. Malaysian business setup requires: i) two shareholders ii) a minimum investment of USD2 (MYR2) iii) one resident company secretary and iv) one director. While there is no restriction on the nationality of the director, he/she must be ordinarily residing the country. If needed, Healy Consultants can provide our Clients with nominee services for resident director in Malaysia;
    • After incorporation of the company, Healy Consultants will assist our Clients to register the company with the Inland Revenue Department for corporate tax and employer registration. If needed, we can also register the company for GST. All Malaysian companies must submit audited financial statements every year;
    • Our Clients may also wish to apply for various licenses in Malaysia, the most common being the Wholesale Retail Trade license (WRT). This license requires a paid up capital of US$1,000,000 and the approval process takes up to 2 months. Once secured, our Clients will be able to engage in various operations including i) retail and wholesale trade; and ii) restaurant and franchise business;
    • Best uses: a Malaysian company is an adequate business vehicle to trade with Malaysian customers and to hire staff in the mainland.
  • The Malaysia free zone company (EPZ company)

    • Foreigners willing to start export-oriented manufacturing and service businesses can register their entity in an export processing zone. While there is no official minimum paid-up capital requirement, the free zone authority w take such amount as a criterion to assess the application so we usually recommend our Clients to invest a minimum of US$125,000. We can also provide nominee services for our Clients unable to appoint the one resident director required for all newly registered Malaysian company;
    • For further information on the different export processing zones available in Malaysia and their tax benefits and requirements, please visit our Malaysia free zone page;
    • Best uses: thanks to the tax incentives provided by the Malaysian Government, a Malaysian EPZ company is an attractive vehicle to manufacture products re-exported overseas.
  • The Malaysia international trading company (Labuan company)

    • For entrepreneurs only planning to trade with overseas customers, the Malaysia regulations provide an attractive legally tax exempt business vehicle: the Labuan company, registered with the Labuan International Business and Financial Center. Unlike mainland Malaysia companies, such entity does not require the appointment of resident director;
    • For our readers interested to read more about this tax exempt strategy, Healy Consultants has prepared a specific section on such business entity;
    • Best uses: a Labuan company is a legally tax exempt way to trade with overseas customers. Under some conditions, it can also be a good entity to open a marketing office in Labuan, Kuala Lumpur or Johor Bahru.
  • The Bumiputera company

    • Entrepreneurs establishing a limited liability company in Malaysia can apply for Bumiputera status if at least 30% of the shares are held by native Malay individuals or other Bumiputera corporations. If this requirement is met, the company is then eligible for special grants, discounts, and incentives such as cheaper business licenses, special bank agreements, native reservation of land, and discounts when purchasing or renting land.
    • Best uses: a Bumiputera company is usually formed when our Clients have Malay joint venture partners. Healy Consultants will then clarify with them to tax benefits available thanks to the presence of such Malay shareholder(s).
  • The Malaysia Limited Liability Partnership

    • A limited liability partnership can be registered in Malaysia by a minimum of i) two partners, who both can be foreigners and are not required to be living in Malaysia and ii) one resident compliance officer. There is no minimum contribution to form such entity in Malaysia and all partners can benefit from limited liability, in accordance with the Malaysia Limited Liability Partnership Act of 2012;
    • While the limited liability partnership can sign contracts and issue invoices in its own names, such entity is tax transparent and is henceforth not required to submit financial statements to the Companies Commission of Malaysia: only an annual return must be filed annually. However, the partners are required to declare the earnings channeled through the partnership in their personal income tax statements
    • Best uses: a Malaysian limited liability partnership is a good vehicle for specific projects to be completed by our Client in cooperation with a Malaysian or foreign company. The partners can be indeed individuals, but also corporates.
  • The Malaysia branch office

    • Another option available foreign corporations is the registration of a branch office in Malaysia. Company law dictates that all branch offices must conduct business within the scope set by the parent company. However, this office can engage in business activities, which involve trade, invoicing, and signing contracts. The foreign company will also have to appoint two resident representatives in Malaysia;
    • Best uses: a Malaysian branch is usually not recommended, unless the industry of operations of the business is regulated and subject to license(s) and/or higher paid-up capital requirements.
  • The Malaysia representative office

    • This Malaysia business setup is only allowed to engage in business activities including market research and promoting the business of the parent company. Consequently, a representative office cannot sign contracts or conduct business in Malaysia;
    • Best uses: a Malaysian representative office is recommended only if our Client plans to have only marketing operations in Malaysia, and no trading or productive operations.
  • Table of comparison between Malaysia business entities

     LLCFree Zone CompanyBumiputera CompanyLegally tax exempt companyLPBranchRO
    Also known as:SDN BHDSEZ companyMalay CompanyLabuan companyLPBranchRO
    Operations and logisticsLLCFree Zone CompanyBumiputera CompanyLegally tax exempt companyLPBranchRO
    Doing business in Malaysia permitted?YesYesYesOnly Labuan, KL and JBYesYesNo
    Allowed to sign contracts with local Clients?YesYesYesYesYesYesNo
    Allowed to invoice in MYR local Clients?YesYesYesNoYesYesNo
    Must rent local office premises?NoYesNoYesYesYesNo
    Allowed to import raw materials?YesYesYesYesYesYesNo
    Allowed to export goods?YesYesYesYesYesYesNo
    Accounting and taxLLCFree Zone CompanyBumiputera CompanyLegally tax exempt companyLPBranchRO
    Corporate tax on local income?25%25%25%25%0%25%Cannot
    Corporate tax on foreign income?25%Up to 0%25%3%0%25%Cannot
    Corporate bank account?SCBSCBMaybankHSBCMaybankHSBCSCB
    Statutory audit required?YesYesYesYesYesYesYes
    Annual tax return to be submitted?YesYesYesYesNoYesYes
    Access to DTAAs?YesYesYesDepends on the DTAAYesYesNo
    Company lawLLCFree Zone CompanyBumiputera CompanyLegally tax exempt companyLPBranchRO
    Issued share capital required?US$2US$125,000US$2US$2US$2NoneNone
    Resident director required?YesYesYesNoYesYesYes
    Malay shareholder required?NoNoYesNoNoNoNo
    Minimum number of directors?1121111
    Minimum number of shareholders?22212Parent companyParent company
    Individual shareholders allowed?YesYesYesYesYesParent companyParent company
    Corporate shareholders allowed?YesYesYesYesYesParent companyParent company
    Public register of shareholders and directorsYesYesYesNoYesYesYes
    ImmigrationLLCFree Zone CompanyBumiputera CompanyLegally tax exempt companyLPBranchRO
    Can the entity hire expatriate staff in Malaysia?YesYesYesYesYesYesYes
    How long to get work permit approved3 months3 months3 months3 months3 months3 months3 months
    FeesLLCFree Zone CompanyBumiputera CompanyLegally tax exempt companyLPBranchRO
    Estimate of engagement costsUS$11,580US$14,200US$10,580US$10,250US$10,980US$15,450US$10,965
    Draft invoiceMalaysia LLC invoiceMalaysia free zone invoiceMalaysia Bumiputera invoiceMalaysia tax exempt LLCMalaysia LLP invoiceMalaysia branch office invoiceMalaysia rep office invoice

Contact us

For additional information on our business setup services in Malaysia, please email us at email@healyconsultants.com. Alternatively please contact our in-house country expert, Ms. Chrissi Zamora, directly:
client relationship officer - Chrissi
MY Intl. chamber of commerce and industrymicpaMY accountantsmitimfapkfzMY Customsmaicsa