Malaysia company registration

DOING BUSINESS IN MALAYSIA IN 2024

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Since 2003, Healy Consultants Group assists our multi-national Clients’ with registering their business in Malaysia including i) Malaysia company registration ii) securing regulatory licenses iii) nominee services for Malaysian resident directors iv) multi-currency corporate bank account opening in Malaysia v) accounting and tax support and vi) office rental solutions.

Compare different Malaysia entities Tax resident LLC Tax exempt LLC Free zone LLC Bumiputera company Representative office
Best use of company? All purposes International trading/ holding Manuf/ Logistics Joint venture with Malaysian national Marketing/
research
How soon to invoice Clients? 1 month 2 weeks 1 month 2 weeks 5 weeks
How soon can you hire staff? 1 month 2 weeks 1 month 2 weeks 5 weeks
How soon can you sign a lease agreement? 1 month 2 weeks 1 month 2 weeks 5 weeks
How long to supply corporate bank a/c? 2 months 2 months 2 months 2 months 3 months
How long to supply co. reg / tax numbers? 1 month 2 weeks 1 month 2 weeks 5 weeks
Corporate tax rate on annual net profits? 24% 3% 24% 24% 0%
Limited liability entity? Yes Yes Yes Yes No
Government grants available? Yes No No Yes No
Govt approval required for foreign owners? No No Yes No No
Res. director/partner/ manager required? Yes, 1 No Yes, 1 Yes, 1 No
Min. paid up share capital? US$2 US$1 US$125,000 US$2 None
Can bid for Government contracts? Yes No Yes Yes No
Corporate bank account location? OCBC KL Public Bank Labuan SCB KL Maybank OCBC KL
Can secure trade finance? Yes No Yes Yes No
GST payable on sales to local customers? 6% 0% 0% 6% 0%
Average total business set up costs? US$ 16,130 US$12,000 US$20,050 US$12,680 US$13,465
Average total engagement period? 4 months 3 months 4 months 4 months 4 months

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Accounting and tax considerations Tax resident LLC Tax exempt LLC Free zone LLC Bumiputera company Representative office
Statutory corporate tax payable? 24% 3% 24% 24% 0%
Legally tax exempt if properly structured? No Yes No No Yes
Group HQ tax incentives? Yes No Yes Yes No
Must file an annual tax return? Yes Yes Yes Yes No
Must file annual financial statements? Yes Yes Yes Yes No
Must appoint an auditor? Yes Yes Yes Yes No
Access to double taxation treaties? Yes No Yes Yes No
WH tax on payments to foreign s/holders? 0% 0% 0% 0% 0%
Company Registration Tax resident LLC Tax exempt LLC Free zone LLC Bumiputera company Representative office
Res. director/partner/manager required? Yes, 1 No Yes, 1 Yes, 1 No
Min. number of shareholders/partners? 2 1 5 2 Parent company
Maximum shareholding for foreigners? 100% 100% 100% 63% 100%
Min. statutory paid up share capital? US$2 US$1 US$2 US$2 None
Security deposit kept with government? No No No No No
Shelf companies available? Yes Yes Yes Yes No
Time to incorporate a new entity? 1 week 1 week 1 week 1 week 1 week
Can easily convert to a PLC? Yes No Yes Yes No
Public register of s/holders and directors? Yes No Yes Yes Yes
Can have preference shareholders? Yes Yes Yes Yes No
Business Considerations Tax resident LLC Tax exempt LLC Free zone LLC Bumiputera company Representative office
Good entity for trademark registration? Yes Yes Yes Yes No
Can secure an import and export license? Yes No Yes Yes No
Can be wholly foreign owned? Yes Yes Yes No Yes
The entity will likely be regulated by? SSM Labuan IBFC SSM SSM MIDA
Monthly GST reporting to the Government? Yes No No Yes No
Maximum number of staff allowed? No limit No limit No limit No limit 1 expatriate
Expatriate to local staff ratio? None None 3 to 1 None 1 to 1
Residence visa for business owner? Yes Yes Yes Yes Yes

Sponsorship by a local citizen required? No
Our Client must travel to Malaysia? No
Our Client must travel to Malaysia or Singapore branch for corporate bank account opening? Yes
Temp. physical office solutions available? Yes
You need local resident as bank signatory? No
Min. number of directors/managers? 1
Must sign an office lease agreement? No
S/holder/director docs attested/translated? No
Foreign director needs personal tax no.? No
Foreign director needs a residence visa? Yes
Other useful information
What will be included in my customer sales invoice? (click link)
Malaysia has signed free trade agreements? Yes
Malaysia is a member of WIPO/TRIPS? Yes
Malaysia is a member of the ICSID? Yes
Average customs duties suffered? 8%
Govt foreign investment approval required? No
Average monthly office rent? (US$/sq m) 30
Minimum statutory monthly salary? MYR1,200 (~USD297)
Average US$ salary for local skilled staff? US$700
US$ deposit interest rate (year average)? 3.43%
Overseas remittance currency controls? Yes
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

Benefits and problems with doing business in Malaysia

  • Our multi-national Clients’ are attracted to Malaysia for manufacturing because of:
    • The country is a cost-competitive location within Southeast Asia, with an abundance of natural resources, including oil and rubber, timber and minerals and palm oil; and
    • Through free ports Malaysian firms can trade duty-free including Pasir Gudang, Port Klang, Kulim Hi-Tech Park, Port of Tanjung Pelepas, and Bayan Lepas. Furthermore, Malaysia has over 500 industrial parks and 18 Free Industrial Zones (FIZs), offering exemption from customs to foreign enterprises. It’s interesting to note that more than 90% of the country’s trade is via Malaysia’s seven international ports. Almost 40% of Malaysian jobs are linked to export activities, making Malaysia one of the most open economies in Asia; and
    • The Approved Major Exporter Scheme allows traders and manufacturers full sales tax exemption on their importation or purchase of goods. To qualify, annual sales must exceed RM10 million and at least 80% of their output must be exported; and
    • Malaysia is a member of the World Intellectual Property Organisation (WIPO) and a signatory to the Paris and Berne Convention which govern intellectual property rights; and
    • Pioneer Status incentive is an exemption from income tax on 70% of statutory income for a period of 5 years. Smaller manufacturing companies with paid-up capital below RM500,000 manufacturing high-tech products and other promoted goods, are eligible for Pioneer Status and Investment Tax Allowance incentives; and
    • The Domestic Investment Strategic Fund is a matching grant designed to offer incentives to established companies within the manufacturing and services sectors, boasting a minimum of 60% Malaysian equity ownership. This fund supports and encourages reinvestments, encompassing activities such as expansion, modernisation, and diversification including initiatives like training, R&D, outsourcing, international standards, and technology licensing or acquisition. The fund is accessible to businesses in priority sectors such as aerospace, food security, machinery and equipment, and services. For example, if you are investing in smart-manufacturing, RM245 million is available under the Domestic Investment Strategic Fund (DISF) to upscale facilities.; and
    • A company awarded the Malaysian Investment Tax Allowance (ITA) receives a 60% allowance on qualifying capital expenditure, including approved factory, plant, and machinery expenses incurred within five years from the initial qualifying expenditure date. This allowance can be offset against 70% of the company’s statutory income for each assessment year. Any unused allowance can be carried forward to subsequent years until fully utilized. The remaining 30% of the statutory income is subject to taxation at 24. This incentive aims to encourage investment in capital assets and boost economic growth by providing tax relief on qualifying expenditure for eligible companies; and
  • Because of its strategic, central location and multilingual mix of Malay, Chinese populace, Malaysia is also emerging as a springboard for regional expansion within the Association of Southeast Asian Nations (ASEAN) because:
    • Labour productivity in Malaysia is significantly higher than in neighbouring Thailand, Indonesia, the Philippines or Vietnam; and
    • The country has a network of trade deals with India, China, Asia-Pacific and East Asia to help you further expand your market. Malaysia has already established multiple bilateral and Free Trade Agreements (FTAs) with countries such as Australia, Chile, Japan and New Zealand; and
    • The geographical position of Malaysia allows businesses quick access to Asian markets including Singapore, Thailand, Indonesia and Brunei. There are five international airports in Malaysia, with air cargo facilities and well-maintained highways. Next to one of the world’s busiest shipping lanes (Straits of Malacca), providing access to the global supply chain via two key Malaysian ports, Klang and Tanjung Pelepas; and
    • Malaysia is successful in becoming a major and cheaper alternative to its neighbour, Singapore. Office rental costs are also significantly higher in Singapore at US$71.43/sq m per month. In Kuala Lumpur, the average rental cost is only around US$19.50/sq m per month; and
    • As a former British colony, English is widely spoken, especially in business. With nearly 70% of the population speaking English, all business and taxation related documents are available in English. The country’s political structure and legal framework are largely based on British systems. The country’s legal system provides protection and enforcement of contractual rights that create certainty for businesses; and
    • Malaysia has two mega free-trade agreements, namely the Comprehensive and Progressive Agreement for Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) agreement; and
    • After India and China, Malaysia is the third best destination in the world for outsourcing and offshoring, according to the Global Services Location Index from A.T. Kearney. To date the country has attracted more than 5,000 overseas companies from more than 40 countries to establish their operations in Malaysia; and
  • Digitalisation remains a top priority for the Malaysian Government. In the coming decade, Digital technology is expected to be the new driver for the country’s economy, and its contribution is projected to reach 22.6% of GDP by 2025. Its five-year plan is targeting RM 50 billion of investments in the digital economy and attracting 50 Fortune 500 tech companies to land and expand in Malaysia by 2025. Specifically, the Malaysian Government introduced:
    • The Malaysia Digital Economy Blueprint (Blueprint) and established MyDIGITAL, demonstrating the government aspirations to successfully transform Malaysia into a digitally-driven, high income nation and a regional leader in the digital economy. Several global IT businesses have outsourced their production processes to Malaysia because of its advantageous location. Examples of international businesses operating in Malaysia are IBM, Intel, Google, and others; and
    • Through the Malaysia Digital Economy Corporation (MDEC), the government is focusing on initiatives to develop capabilities around emerging technologies such as i) Big Data Analytics (BDA) and ii) Artificial Intelligence and iii) financial technology and iv) data centres and cloud services v) and robotics. Two digital initiatives introduced by MDEC include MyDigitalWorkForce Work In Tech (MYWiT) – RM100 million training and hiring incentive programme to upskill and subsidise talents and businesses and the Digital Investment Office (DIO) – a fully-digital collaborative platform to coordinate and facilitate all digital investments; and
    • The Cradle Investment Programme 300 (CIP300) targets aspiring entrepreneurs in sectors such as ICT and other technology fields. This program offers up to RM 300,000 to these startups looking to develop and promote their innovative services. Since 2003, the program assisted more than 900 startup businesses; and
    • The Technology Acquisition Fund (TAF) is a hybrid grant and loan scheme that assists eligible Malaysian companies procure foreign technologies and integrating them into their existing business and manufacturing activities. This applies to businesses in the priority technology clusters identified by MOSTI, such as aerospace, medical devices, pharmaceuticals, advanced electronics, and renewable energy.
  • Specific incentives are introduced to attract investment into food projects, both at farm level as well as at production/processing level. These will enhance the supply of raw material for the food processing sector, thus reducing reliance on imports of such raw materials. A company which invests in its subsidiary company engaged in food production activities, can be considered for tax deduction equivalent to the amount of investment made in that subsidiary for that year of assessment. The subsidiary company undertaking food production activities can be considered for full tax exemption on its statutory income for 10 years of assessment for new project or 5 years of assessment for expansion projects; and
  • To attract Biotechnology companies, the Malaysian Government offers:
    • An exemption of 100% statutory income derived from a new business or an expansion project that is equivalent to an allowance of 100% qualifying capital expenditure incurred for 5 years; and
    • A concessionary tax rate of 20% on statutory income from qualifying activities for 10 years upon expiry of tax exemption period; and
    • Exemption from import duty and sales tax on raw materials/components/machineries/equipment; and
    • Double deduction on expenditure incurred for i) R&D and ii) and promotion of exports;
    • Problems with Malaysia company registration

      1. During Malaysian company registration, multi-national Clients’ experience some challenges including:
        • Opening a multi-currency corporate bank account is difficult and slow, requiring the bank signatory to travel to Malaysia; and
        • The Malaysian corporate income tax rate is 24%, one of Asia’s highest tax rates; and
        • The Foreign Exchange Administration Rules place some restrictions on the repatriation of a foreign currencies including capital, profits, dividends and interest; and
        • It is likely our Client will need a high paid-up share capital is required. For example, a locally owned company venturing into wholesale business can obtain a Wholesale, Retail, and Trade (WRT) license with a paid-up capital of MYR 250,000. By contrast, a 100% foreign-owned company seeking the same license must have a MYR 1,000,000 paid-up capital. To employ expatriate Staff, the minimum paid-up share capital is US$ 210,000; and
        • Before legally operating your business in Malaysia, it is important to secure multiple Government business license including i) general licenses and ii) industry/sector-specific licenses and iii) activity-specific licenses. Check out the MalaysiaBiz portal for suggestions re the specific business licences needed. As a condition of license approval, it is often necessary to appoint a Malaysian resident director or a Bumiputera shareholder; and
      2. Depending on the industry and the entity, there are limits on the foreign investment in certain sectors including the need for minimum ownership by certain indigenous ethnic groups in Malaysia, known as Bumiputera ownership. These limits on equity ownership limits may be imposed as a condition to obtaining licences in the relevant sectors. For example, a 50% Malaysian ownership is required of companies operating in specific sectors including i) agriculture and ii) education and iii) telecommunications and iv) financial services and v) and oil and gas and vi) architectural and engineering services and vii) employment agencies and viii) security services and ix) freight forwarding and logistics services and x) Power and electrical producers; and
      3. Despite efforts by the Malaysian government to tackle it, bribery and unethical practices persist. Corruption in the Malaysian judiciary carries a medium risk for our multi-national Clients’. Bribes and irregular payments are sometimes exchanged in return for obtaining favourable court decisions. Corruption is a problem in Malaysia, and it can be a barrier to doing business in the country; and
      4. Our multi-national Clients’ face challenges managing their Malaysian workforce because:
        • Compared to other OECD countries, employee productivity is low because of i) the shortage of skilled and talented manpower and ii) low adoption of technologies and iii) the professional mindset of employees and iv) lack managerial and technical expertise. For example, only 27% of the labor force has tertiary education; and
        • Securing employment visas for expatriate Staff is difficult. The visa application process is long, taking between six months and one year. Companies that intend to hire expatriates are required to advertise job vacancies via the JobsMalaysia Portal for one month. Only companies that are unable to find suitable local candidates after the 30-day period may proceed with their application to hire expatriates. Malaysia’s new government plans to reduce the country’s dependency on foreign workers; and
        • It can be difficult to dismiss employees in Malaysia. It is common for employees to approach the Industrial Courts claiming unfair dismissal. The burden is on the employer to prove that the dismissal was with just cause. If an employee is dismissed without just cause, he can seek either i) reinstatement and back wages and ii) back wages plus compensation in lieu of reinstatement of one month’s salary for each year of service; and
        • Because of full employment in Malaysia, employee retention among SME’s is the biggest challenge for small businesses.

Contact us

For additional information on our business registration services in Malaysia, please contact our in-house country expert, Mr. Simon Guidecoq, directly:
client relationship officer - Simon
MY Intl. chamber of commerce and industrymicpaMY accountantsmitimfapkfzMY Customsmaicsa