Business entities in Malaysia
Healy 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) two directors. While there are no restrictions on the nationality of the directors, at least two of them must be ordinarily residing the country. If needed, Healy Consultants can provide our Clients with nominee services for resident directors 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 two resident directors 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
|LLC||Free Zone Company||Bumiputera Company||Legally tax exempt company||LLP||Branch||RO|
|Also known as:||SDN BHD||SEZ company||Malay Company||Labuan company||LLP||Branch||RO|
|Operations and logistics||LLC||Free Zone Company||Bumiputera Company||Legally tax exempt company||LLP||Branch||RO|
|Doing business in Malaysia permitted?||Yes||Yes||Yes||Only Labuan, KL and JB||Yes||Yes||No|
|Allowed to sign contracts with local Clients?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Allowed to invoice in MYR local Clients?||Yes||Yes||Yes||No||Yes||Yes||No|
|Must rent local office premises?||No||Yes||No||Yes||Yes||Yes||No|
|Allowed to import raw materials?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Allowed to export goods?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Accounting and tax||LLC||Free Zone Company||Bumiputera Company||Legally tax exempt company||LLP||Branch||RO|
|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?||SCB||SCB||Maybank||HSBC||Maybank||HSBC||SCB|
|Statutory audit required?||Yes||Yes||Yes||Yes||No||Yes||Yes|
|Annual tax return to be submitted?||Yes||Yes||Yes||Yes||No||Yes||Yes|
|Access to DTAAs?||Yes||Yes||Yes||Depends on the DTAA||Yes||Yes||No|
|Company law||LLC||Free Zone Company||Bumiputera Company||Legally tax exempt company||LLP||Branch||RO|
|Issued share capital required?||US$2||US$125,000||US$2||US$2||US$2||None||None|
|Resident director required?||Yes, 2||Yes, 2||Yes, 2||No||Yes||Yes||Yes|
|Malay shareholder required?||No||No||Yes||No||No||No||No|
|Minimum number of directors?||2||2||2||1||1||1||1|
|Minimum number of shareholders?||2||2||2||1||2||Parent company||Parent company|
|Individual shareholders allowed?||Yes||Yes||Yes||Yes||Yes||Parent company||Parent company|
|Corporate shareholders allowed?||Yes||Yes||Yes||Yes||Yes||Parent company||Parent company|
|Public register of shareholders and directors||Yes||Yes||Yes||No||Yes||Yes||Yes|
|Immigration||LLC||Free Zone Company||Bumiputera Company||Legally tax exempt company||LLP||Branch||RO|
|Can the entity hire expatriate staff in Malaysia?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|How long to get work permit approved||3 months||3 months||3 months||3 months||3 months||3 months||3 months|
|Fees||LLC||Free Zone Company||Bumiputera Company||Legally tax exempt company||LLP||Branch||RO|
|Estimate of engagement costs||US$10,580||US$14,200||US$10,580||US$10,250||US$10,980||US$15,450||US$10,965|