Overview
Malaysia remains an attractive investment destination among foreign investors, supported by the strong fundamentals that the government is creating today. Foreign investors who are interested to set up a business in Malaysia may take into account of the following factors and considerations before making any decision.
1. Market study & survey
You are advised to conduct market study and survey regarding the latest business trends in Malaysia and the current and near future demand by the local population to safeguard the longevity of your business.
2. Choose a business entity.
There are several types of business entities available in Malaysia and each has its own compliance requirements and tax structure etc.
There are two common business entities available for foreigners to start up businesses in Malaysia: -
A new local incorporated company
Registering the foreign company
(foreign company is defined in the Companies Act 2016 as a company, corporation, society, association or other body incorporated outside Malaysia or an unincorporated society, association or other body which under the law of its place of origin may sue or be sued, or hold property in the name of the secretary or other officer of the body or association duly appointed for that purpose and which does not have its head office or principal place of business in Malaysia.)
Differences between the two: -
A new local incorporated company
A total separate legal entity in Malaysia. Can perform different business activities than its parent company subject to the company’s constitution.
Can involve in business activities that has Bumi shareholding requirement provided such requirement has been or fulfilled.
The parent company may have full or limited ownership over the company depending on the parent company’s shareholding in the company.
Foreign Company
Not a separate legal entity. Dependant on its parent company abroad and should conduct the same business activity.
Unable to involve in business activities that has Bumi shareholding requirement as this requirement cannot be fulfilled.
The parent company has complete ownership over the company.
The process of registering a company in Malaysia is relatively fast and easy. It can be done within a week or two if the required documents are all in order.
Nevertheless, Foreigners may otherwise set up a sole proprietorship or partnerships in Malaysia with the condition that they have permanent residency in Malaysia.
3. Licenses and paid up capital
The company should be aware that relevant licenses will be required for specific type of businesses, for example the wholesale retail and trade (WRT) license for the conduct of wholesale and retail distributive trade business by foreign owned company; CIDB license for construction related business; and the approved permits for certain import and export activities. You are advised to apply for and obtain the required licenses for business to prevent any violation of any laws and regulations.
There may also be conditions imposed on the company’s paid up capital. For example, the WRT license requires the applicant to have at least RM1,000,000.00 paid up capital in the company for license application and the immigration department requires a minimum paid up capital of RM500,000.00 for company wholly owned by foreigners for visa application.
4. Locate and secure your place of business
You may want to locate and secure the right and suitable place as your place of business to fit your needs. If you are required to provide a business address before you could choose the right place, you may seek assistance from your company secretarial firm as some of the firms will allow their clients to use their firm addresses as temporary business address.
You may also engage property agency or agent to source for or recommend to you the right and suitable location or property. The agency and agent will assist you to liaise with the landlord for the leasing of property.
5. Opening bank accounts
Opening of a company bank account is one of the very important things that has to be done for the purpose of capital injection and to effect payments and fees. Different banks impose different requirements on the documentation, conditions and time frame to open a bank account will be prudent, bearing in mind the anti-money laundering compliance checks and the “know your customer” requirements that all banks need to satisfy before approving the new bank account.
6. Employment
The company should be mindful of its obligations toward its employees with regards to statutory deductions and contributions (such as Employees’ Provident Fund (EPF), Social Security Organization, Human Resources Development Fund (SOCSO), Employment Insurance System (EIS) and Monthly Tax Deductions (PCB)).
The company is advised to enter into written employment contract (contract of service) with its employees to regulate the terms of employment and also to handle any termination of employee with high degree of care as the labour office and the industrial courts have taken stringent approaches against employers on unlawful termination and constructive dismissal.
7. Applying working permits
The company may be required to apply for working permits for its foreign director and/or shareholder or if the company is hiring foreign employees. The application should be submitted to the Immigration Department by the company itself or through agent.
8. Tax incentives
Malaysia has a wide variety of incentives covering the major industry sectors especially for companies which are involved in promoted activities or producing promoted products. Tax incentives can be granted through income exemption (Pioneer status) or by way of investment tax allowances (ITA).
Generally, when income is exempted, partial or full statutory income of the company will not be taxable during such period. When incentives are given by way of allowances, relief will be granted on qualifying capital expenditure.
For more details, please consult a Malaysian qualified tax consultant.
Our Services
Our firm provides advices and services to clients pertaining to the incorporation, tenancy, employment and further compliance matters and we have been cooperating with some company secretarial firms, accountants, tax consultants, bankers, property agents and MM2H agents for a long time. We believe that these connections may ease our clients’ concerns in starting up their businesses in Malaysia.
We also provide legal retainer services on monthly basis for corporate clients who do not engage any in house legal counsel. The scope of services will include the provision of legal advices and supports on: -
the operation of the business;
employment and industrial relation matters;
drafting and reviewing the company’s contracts;
contract negotiations; and
other relevant legal compliance
You may submit your inquiry, if any, to darren@cvpartners.com.my