Accounting and tax
- Both Malaysia resident company and Malaysia non-resident company are subject to income tax of 25% on taxable income;
- Under Malaysian tax law, companies are liable to pay withholding tax on the following types of payment made to a non-resident: interest, royalties, contract and other service fees, lease rentals (for movable property) and technical fees. The rates of withholding tax are 10%, 15% or 20% of the gross payment;
- Malaysia started implementing GST in in April 2015 and the standard rate is 6%. All Malaysian companies with annual turnover above RM500,000 (approx. US$121,000) must register for GST with the Malaysian Customs Department (RMCD). Refer to the complete detailed GST guide by the Royal Malaysian Customs Department (RMCD).
- There are Double Tax Treaties Malaysia signed with 68 countries around the world. Under the ‘tax sparing’ provision, a dividend which is distributed from tax exempt profits under the Malaysian tax incentive regime is deemed to be have been paid out of taxed profits. This enables a non-resident to claim a tax credit on the exempt dividend in his home country. Likewise, interest on an approved loan or approved royalty, which is exempted from Malaysia tax, is deemed to have paid taxes;
- To avoid double taxation by doing business in Malaysia, Healy Consultants will assist secure the Certificate of Residence (COR) for our Client’s Malaysian company to benefit from the signed DTA Agreements worldwide. For companies with e-residence access Healy Consultants will file a COR application online. Otherwise we will complete and file Form STM1 manually to the Kuala Lumpur branch of the Inland Revenue Board of Malaysia (IRBM) together with signed Form 49 and relevant company documents included the IRBM checklist;
- Offshore Trusts and Foundations is another effective tool for tax planning in Malaysia. Offshore Trusts and Foundations are ideal for entrepreneurs and high net worth investors interested in Malaysia business who need to legally minimize their international tax exposure and optimize asset protection;
- If Malaysia company is properly structured, the profits of a Malaysia offshore company (see Labuan) are legally tax-exempt.
- A Malaysian company’s taxable income is calculated on the audited accounting profit, as adjusted for tax purposes, for the accounting year ending in the preceding calendar year;
- GST registered companies must file reports with the Malaysian customs every quarter;
- It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
Malaysia tax exemptions, rebates and tax planning structures
Tax reporting, accounting and audit considerations
Legal and compliance
- According to the Malaysia Company Act, a resident company must have at least two directors who are “ordinarily resident in Malaysia” i.e. either citizens, permanent residents, or employment pass holders. Each Malaysian company must also appoint a resident company secretary and a registered office in the country;
- Malaysia business requires accounting and other records to be kept that are necessary to explain the transactions and financial position of the company and to allow a profit and loss account and a balance sheet to be prepared;;
- As a director of the company, one shall disclose to the company: any material personal interest they have in a matter which relates to the affairs of the company, and any other interest which the director believes is appropriate to disclose in order to avoid an actual conflict of interest or the perception of a conflict of interest;
- After establishing a company in Malaysia, it is mandatory to file annual return with Company Registrar and annual tax return with Revenue Authority. Each time a change occurs in the particulars of the company or to its officers, the change must be lodged with the Malaysian companies registry;
- It is necessary to apply for a Malaysian manufacturing license if i) the share capital exceeds of RM2.5 million or ii) the Malaysian business entity hires more than 75 employees. Healy Consultants fees approximate US$ for this service is US$11,750 including third party costs and it takes three months to obtain approval.
Recruitment in Malaysia
- For investors planning to incorporate a company in Malaysia and hire staff, the minimum age for an IT position is 21 years, and for management posts is 27 years;
- The criteria for the employment of foreign labour by non-export orientated industries are: i) Total sales of RM2 million (US$511,000) and above; ii) The company’s minimum paid-up capital is RM100,000 (US$25,500);
- Citizens of Indonesia, Thailand, Cambodia, Nepal, Myanmar, Laos, Vietnam, and the Philippines may be hired by a Malaysian company engaged in the manufacturing, service, plantation, and construction sectors;
- If you incorporate a Malaysia company which is active in the manufacturing, service or construction sectors, it is possible to hire citizens from Turkmenistan, Uzbekistan, and Kazakhstan;
Licensing in Malaysia
When incorporating in Malaysia, a license is required for the following business activities:
- Manufacturing – any manufacturer incorporating in Malaysia and which employs at least 75 full-time employees;
- Banking – under the Malaysia Banking and Financial Institutions Act, 1989, the Malaysian Central Bank licenses and regulates businesses such as banking, money brokering, discount houses, provision of credit and finance, merchant banking, deposit taking and certain other financial businesses. This includes all foreign banks which are required to operate in Malaysia through incorporated local companies;
- Building and Construction – all companies in this field must obtain a license from the Construction Industry Development Board (CIDB) prior to incorporating in Malaysia and before undertaking any construction and related activities in the country;
- Oil and gas industry – companies which wish to explore and develop upstream oil and gas reserves are required to sign a production sharing agreement with Malaysian state oil company PETRONAS.
- Wholesale and Retail Trade – note that all proposals for foreign involvement in wholesale and retail trade must obtain the approval of the Committee on Wholesale and Retail Trade (CWRT).