Malaysia free zones in 2023

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$20,050	US$20,050	US$20,050	US$20,050	US$20,050
  Total subsequent yearly costs (incl. audit and tax)?	US$6,470	US$6,470	US$6,470	US$6,470	US$6,470
  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