Malaysia free zones
Registering a company within a Malaysian free zone offers multiples tax benefits and allows foreign investors to use such entities to export their products across South East Asian markets. Malaysia free zones are notably suitable for foreign companies intending to use Malaysia as a regional manufacturing or distribution base. Malaysia offers several free zones, the most popular being: i) Pasir Gudang free zone ii) Port Klang free zone iii) Kulim Hi-Tech Park iv) Port of Tanjung Pelepas free zone and v) Bayan Lepas free zone.
Port Klang Free Zone
- Located in Port Klang town, the largest gateway by seas into Malaysia, the free zone is a 1000 acre free industrial and commercial zone providing mainly international cargo distribution and consolidation facilities;
- The free zone also permits local and international companies to establish manufacturing facilities to engage in production of goods mainly for export purposes;
- Port Klang is a fully integrated free zone complete with a number of amenities allowing investors and entrepreneurs the option of either leasing the existing facilities or establishing new ones;
- Other facilities within the free zone include light industrial and warehousing units, customs centre, forwarding agents, business complexes, industrial land and trade offices among others;
- Best uses: Being a multifaceted free zone, Port Klang is suitable for investors and entrepreneurs keen to establish either a manufacturing base, warehousing or international cargo distribution.
Port of Tanjung Pelepas free zone
- PTP Free Zone is majorly a container terminal situated in an 810-hectare piece of land located in South-West Johor between the intersection of the East and West International trade routes near Malaysia-Singapore second crossing;
- The free zone has also allocated at least 500 hectares of land for warehousing, distribution and logistics activities as well as light, medium and heavy manufacturing industry;
- PTP also offers modern state of the art facilities for storage of goods and merchandise for redistribution, packing, repackaging, grading or repair;
- Investors established in PTP will enjoy a single layer processing of declarations and submissions as well as easy and simple movement and transhipment of goods between the local free zones;
- Best uses: PTP is recommended for investors looking to establish a manufacturing base for export oriented products. Due to its proximity to Singapore, it is a perfect space to establish a distribution base for products intended for international export.
Free zone company formation considerations
- Tax free environments including tax exemptions, on custom duties, taxable services, and imports/exports on selected equipment and raw materials;
- Free ports in Malaysia are in close proximity to deep sea ports, airports, highways, and railways. Therefore, companies can enjoy an efficient and extensive transport network, as free zones serve as a nodal point for land, air, and sea transport;
- Malaysian government does not impose stringent foreign exchange controls and investors are free to repatriate their earnings abroad without any limitation;
- To establish a presence in a free zone, companies are required to rent a physical office space within the preferred free zone. Most free zones have readymade business complexes;
- Companies within the free zone enjoy simplified and flexible import and export procedures and cost-effective measures for industrial, manufacturing and commercial activities;
- Other benefits of operating within a free zone include the absence of customs duty on products imported into the free zone for re-exportation purposes.
Table comparing different Malaysian industrial free trade zones (FTZs)
Malaysia free zones Pasir Gudang Port Klang Port Tanjung Pelepas Bayan Lepas Kulim Hi-Tech Park Our ranking in order of preference 1 2 3 4 5 Summary at a Glance Total year 1 engagement set up costs? US$14,200 US$14,200 US$14,200 US$14,200 US$14,200 Total subsequent yearly costs (incl. audit and tax)? US$6,370 US$6,370 US$6,370 US$6,370 US$6,370 Minimum paid-up share capital required (USD)? US$125,000 US$125,000 US$125,000 US$125,000 US$125,000 Free zone mostly popular in which industry? Manufacturing Logistics Logistics Manufacturing Hi-Tech Manufacturing Total engagement period? 3 months 3 months 3 months 3 months 3 months Exempt from corporation tax and GST? Depending on activity Depending on activity Depending on activity Depending on activity Depending on activity Exempt from import and export tax duty? Depending on activity Depending on activity Depending on activity Depending on activity Depending on activity 100% foreign owned? Yes Yes Yes Yes Yes Average monthly warehouse rental (per sq. m.)? US$17 US$23 US$24 US$20 US$19 Manufacturing allowed in the free zone? Yes Yes Yes Yes Yes Incorporation requirements Branch office or LLC recommended? LLC LLC LLC LLC LLC How long to secure a corporation number? 5 weeks 5 weeks 5 weeks 5 weeks 5 weeks Special permit or license required? Yes Yes Yes Yes Yes How long to secure the license? 3 months 4 months 3 months 3 months 4 months Foreign investor approval required? Yes Yes Yes Yes Yes Our Client must travel? No No No No No Must maintain an office in the zone? Yes Yes Yes Yes Yes Public register of shareholders & directors? Yes Yes Yes Yes Yes Tax and accounting considerations Global sales exempt from corporate tax? Yes Yes Yes Yes Yes Must register for GST/VAT? No No No No No Global sales exempt from GST/VAT? Yes Yes Yes Yes Yes Social contributions payable to employees? 11% 11% 11% 11% 11% Corporation tax payable on local sales? 24% 24% 24% 24% 24% Annual audited financial statements? Yes Yes Yes Yes Yes Government grants for manufacturing? Yes Yes Yes Yes Yes Access to how many double tax treaties? 74 74 74 74 74 Average customs tax on imports? 7.7% 7.7% 7.7% 7.7% 7.7% Bank account characteristics Healy Consultants’ preferred bank? Standard Chartered HSBC Standard Chartered Citibank Standard Chartered Do I travel to open the bank account? No No No No No Minimum deposit (USD)? US$1,000 US$5,000 US$1,000 US$10,000 US$1,000 Can open US$, €, £ corporate bank account? Yes Yes Yes Yes Yes US$, €, £ corporate visa debit cards? Yes Yes Yes Yes Yes Country currency controls in place? No No No No No Corporate ATM card available? Yes Yes Yes Yes Yes WEF bank rating out of 144 35 35 35 35 35 WEF ease of getting credit out of 144 2 2 2 2 2 Logistics considerations Can rent premises outside free zones? Yes Yes Yes Yes Yes Can make sales to overseas Clients? Yes Yes Yes Yes Yes Allowed to make sales to local Clients? Yes Yes Yes Yes Yes What regulatory licenses required Industry Premise License ZB4 License Operator License LMW Warehouse License Average local monthly salary? US$500 US$500 US$500 US$500 US$500 Can the entity hire expatriate staff? Yes Yes Yes Yes Yes How long to get work permit approved? 3months 3months 3months 3months 3months Monthly office rental (per sq. m.)? US$20 US$17 US$15 US$15 US$17 Average annual Industrial space rent per 1000 sq ft US$60,000 US$84,000 US$82,000 US$72,000 US$67,000 Allowed to import raw materials? Yes Yes Yes Yes Yes Allowed to export goods? Yes Yes Yes Yes Yes Proximity to large port? 1km 1km 1km 19km 44km Proximity to international airport? 41km 20km 22km 1km 42km Proximity to train network? 2km 1km 17km 35km 21km