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

    SummaryFast solution LLC Limited Liability PartnershipBranch officeTrust
    Best use of company?Close a customer
    deal now
    Professional
    services
    Consolidate
    losses
    Public listing/ holding company
    How soon can you invoice Clients/sign sales contracts?2 weeks5 weeks6 weeks1 month
    How soon can you hire staff?2 weeks5 weeks6 weeks1 month
    How soon can you sign a lease agreement?2 weeks5 weeks6 weeks1 month
    How long to supply corporate bank account numbers?1 month3 months3 months2 months
    How long to supply company registration/tax numbers?2 weeks5 weeks6 weeks1 month
    Corporate tax rate on annual net profits?24%19%25%0%
    Limited liability entity?YesYesNoYes
    Government grants available?YesYesYesNo
    Government approval required for foreign owners?NoNoNoNo
    Resident director/partner/manager/ required?Yes, 1NoYes, 1No
    Minimum paid up share capital?US$2US$2NoneUS$34,000
    Can bid for Government contracts?YesNoYesNo
    Corporate bank account location?SCB KLCIMB KLOCBC KLMaybank
    Can secure trade finance?YesYesYesNo
    GST payable on sales to local customers?6%6%6%0%
    Average total business set up engagement costs?US$26,030US$10,980US$15,450US$15,650
    Average total engagement period?3 months4 months4 months4 months

    See full table

    Accounting and tax considerationsFast solution LLC Limited Liability PartnershipBranch officeTrust
    Statutory corporate tax payable?24%19%25%0%
    Legally tax exempt if properly structured?NoNoNoYes
    Group HQ tax incentives?YesNoNoNo
    Must file an annual tax return?YesYesYesNo
    Must file annual financial statements?YesYesYesYes
    Must appoint an auditor?YesYesYesYes
    Access to double taxation treaties?YesYesYesNo
    Withholding tax on payments to foreign shareholders?0%0%0%0%
    Company RegistrationFast solution LLC Limited Liability PartnershipBranch officeTrust
    Resident director/partner/manager/ required?Yes, 1NoYes, 1No
    Minimum number of shareholders/partners?22Parent company1
    Maximum shareholding for foreigners?100%100%100%None
    Minimum statutory paid up share capital?US$2US$2NoneNone
    Security deposit to be kept with Government?NoNoNoYes, US$22,700
    Shelf companies available?YesNoNoNo
    Time to incorporate a new entity?2 weeks5 weeks6 weeks1 month
    Can easily convert to a PLC?YesNoNoNo
    Public register of shareholders and directors?YesYesYesNo
    Can have preference shareholders?YesYesNoNo
    Business ConsiderationsFast solution LLC Limited Liability PartnershipBranch officeTrust
    Good entity for trademark registration?YesNoNoNo
    Can secure an import and export license?YesYesYesNo
    Can be wholly foreign owned?YesYesYesYes
    The entity will likely be regulated by?SSMSSMSSMSSM
    Monthly GST reporting to the Government?YesYesYesNo
    Maximum number of staff allowed?No limitNo limitNo limitNo limit
    Expatriate to local staff ratio?NoneNoneNoneNone
    Can secure residence visa for business owner?YesYesYesNo

    Sponsorship by a local citizen required?No
    Our Client needs to travel to Malaysia for business set up?No
    Temporary physical office solutions available?Yes
    You need a local resident as bank signatory?No
    Minimum number of directors/managers?1
    Must sign an office lease agreement?No
    Shareholders & directors documents to be attested/translated?No
    Each foreign director needs a personal income tax number?No
    Foreign director needs a residence visa?Yes
    Other useful information
    What will be included in my customer sales invoice?(click link)
    This country has signed free trade agreements?Yes
    This country is a member of WIPO/TRIPS?Yes
    This country is a member of the ICSID?Yes
    Average customs duties suffered?8%
    Government foreign investment approval required?No
    Average monthly office rental? (US$ per sq m)30
    Minimum statutory monthly salary?US$226
    Average monthly US$ salary for local skilled employees?US$700
    US$ deposit interest rate? (1 year average)3.43%
    Overseas remittance currency controls?None
    Banking considerations
    Multi-currency bank accounts available?Yes
    Corporate visa debit cards available?Yes
    Quality of e-banking platform?Excellent
    Crowd funding available in this country?Yes

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