Background
Malaysia is ranked the 18th friendliest place in the world to conduct a business.
The current process of setting up a business entity in Malaysia is regulated under the Companies Act 2016. All matters in relation to setting up an entity is governed by the registrar of business in Malaysia, the Suruhanjaya Syarikat Malaysia (SSM), or the Companies Commission of Malaysia.
In Malaysia, a foreigner can register an entity with 100% foreign ownership (also known as Sdn Bhd). To obtain full foreign ownership, the company are only allowed to be registered under selected industries, which are subjected to change depending on the economic needs of Malaysia and dictated by the government in order to encourage foreign investment. The relevant industries are:
- Banking and Finance
- Petroleum, Oil and Gas
- Agriculture
- Tourism Outbound and Ticketing
- Education
Why you should consider setting up an entity in Malaysia:
- Liberal government policies;
- Massive Consumer demand in local and foreign Asian markets such as Myanmar, India, China, Vietnam and Singapore;
- Home to multiple special economic zones for import-export businesses;
- Low start-up costs compared to other neighbouring countries such as Singapore;
- World Bank ranked Malaysia the 6th easiest place to conduct business (2014 report);
- Malaysia has 68 double taxation treaties which minimises withholding tax on fund transfers;
- No withholding tax on dividends made abroad;
- Residence visa available should a Malaysia business exceeds a share capital of RM 500,000 (~USD 121,000), or obtain a Malaysia residence permit through the My Second Home program;
- No restrictions on repatriation of profits, capital, royalties and dividends;
- English is a commonly used language in Malaysia.
Incorporation Process and Timeline
| Limited Liability Company (Tax Resident) | Limited Liability Company (Tax Exempt) | Limited Liability Company (Free Zone) | Local Bumiputera Company | Representative Office | |
| Minimum number of directors | 1 | 1 | 1 | 1 | 1 |
| Minimum number of shareholders | 2 | 1 | 5 | 2 | Parent Company |
| Local Presence (director/ shareholder/ officer) | Yes – 1 local director/ partner/ manager | No | Yes – 1 local director/ partner/ manager | Yes – 1 local director/ partner/ manager | No |
| Physical registered office address requirement | No | No | No | No | No |
| Maximum Foreign Shareholding | 100% | 100% | 100% | 63% | 99% |
| Minimum Paid Up Share Capital | USD 2 | USD 1 | USD 2 | USD 2 | – |
| Security Deposit Required by Local Government | – | – | – | – | – |
| Preference Shareholder Option | Yes | Yes | Yes | Yes | No |
| Incorporation Timeline | 1 month | Less than a month | 1 month | Less than a month | 1 – 2 months |
| Public Register of Shareholders and Directors | Yes | No | Yes | Yes | Yes |
| Regulator | The Companies Commission of Malaysia (SSM) | Labuan IBFC | The Companies Commission of Malaysia (SSM) | The Companies Commission of Malaysia (SSM) | Malaysian Investment Development Authority (MIDA) |
Taxation and Accounting
| Limited Liability Company (Tax Resident) | Limited Liability Company (Tax Exempt) | Limited Liability Company (Free Zone) | Local Bumiputera Company | Representative Office | |
| Corporate Tax | 24% | 3% | 24% | 24% | 0% |
| Annual Tax Return filing | Yes | Yes | Yes | Yes | No |
| Entry to double taxation treaties | Yes | No | Yes | Yes | No |
| GST Reporting to Local Government grants | Yes | No | No | Yes | No |
| Auditor Requirement | Yes | No | Yes | Yes | No |
| GST Payable for Local Sales | 6% | 0% | 0% | 6% | 0% |
| Tax Exemption Possibility | No | Yes | No | No | Yes |
| Withholding Tax on Payments to Foreign Partners | 0% | 0% | 0% | 0% | 0% |
| Security Deposits | No | No | No | No | No |
| International currency control on remittance | Yes | Yes | Yes | Yes | Yes |
Others
| Limited Liability Company (Tax Resident) | Limited Liability Company (Tax Exempt) | Limited Liability Company (Free Zone) | Local Bumiputera Company | Representative Office | |
| General Activity | Conventional | International holding/ trading | Logistics/ Manufacturing | Joint Venture | Research and Marketing |
| Access to Residence Visa (for owners) | Yes | Yes | Yes | Yes | Yes |
| Expatriate to Local Staff | None | None | 3 : 1 | None | 1 : 1 |
| Access to Government Grants | Yes | No | No | Yes | No |
| Conversion to a Public Listed Company | Yes | No | Yes | Yes | No |
| Local Citizen Sponsorship Requirement | No | No | No | No | No |
| Maximum Staffs Allowed | No limit | No limit | No limit | No limit | 1 expatriate |
| Option to hire local staff | Yes | Yes | Yes | Yes | Yes |
| Obtain Import and Export License | Yes | No | No | Yes | Yes |
Corporate Bank Account
| Limited Liability Company (Tax Resident) | Limited Liability Company (Tax Exempt) | Limited Liability Company (Free Zone) | Local Bumiputera Company | Representative Office | |
| Corporate Bank Account Available | Yes | ||||
| Multi-currency option | Yes | ||||
| E-banking platform quality | High | ||||
| Corporate Debit Cards | No | ||||
| Bank Account Opening Timeline | 1 – 2 months | ||||
Operational Information
| Limited Liability Company (Tax Resident) | Limited Liability Company (Tax Exempt) | Limited Liability Company (Free Zone) | Local Bumiputera Company | Representative Office | |
| Registered Physical Office Option | Yes | ||||
| Average office rental (USD) | USD $30 / sqm | ||||
| Average monthly salary | USD $700 | ||||
| Minimum statutory annual salary | USD $270 | ||||
Malaysia offers the following benefits:
- Ease of communication.
Malaysia’s second language is English and more than 70% of the population speaks English. Moreover, business documents are all available in English hence no translation downtime and costs.
- Straightforward business registration.
A Limited Liability Company (LLC) in Malaysia can be incorporated as fast as one week with minimal share capital requirement (USD1/ 2). Moreover, to incorporate a company in Malaysia, only one director and two shareholders are required.
- One of the best-performing and largest economies among ASEAN countries.
Malaysia’s economy grew by 4.3% in 2019 and have been all but consistent on a yearly basis. It also has the 3rd highest GDP per capita and located in a strategic location that allows easy access to other Asian markets.
- Incentives for entrepreneurs.
SMEs with paid-up capital below RM500,000 (~USD 121,000) manufacturing innovative products and services are eligible to apply for Pioneer Status and Investment Tax Allowance incentives. Should a company be granted a Pioneer Status, it will be entitled to enjoy a five-year partial exemption from income tax. The government also provides many residential opportunity for foreign owners.
Moreover, the Malaysia government has also developed many free industrial zones and facilities with other statuses that allow companies to enjoy being free from tax for a number of years.
Malaysia Company Registration Guide
The Companies Commission of Malaysia (SSM), is a statutory body formed under an Act of Parliament that regulates corporate and business affairs in Malaysia. The SSM was formed in 2002 under the Companies Commission of Malaysia Act 2001, assuming the functions of the Registrar of Companies and Registry of Business.
Labuan Financial Services Authority (Labuan FSA) was established on 15 February 1996 under the Labuan Financial Services Authority Act 1996. Labuan FSA is the statutory body responsible for the development and administration of the Labuan International Business and Financial Centre (Labuan IBFC).
The Malaysian Investment Development Authority (MIDA), previously known as Malaysian Industrial Development Authority is the government’s principal agency to oversee and drive investment into the manufacturing and services sectors in Malaysia. Starting operations in 1967, MIDA was given the mandate to promote investments in the manufacturing and services sectors; and to advise the Ministry of International Trade and Industry (MITI) on industry matters including the formulation of related policies.
Enigmatig Services in Malaysia
With more than a decade of experience, our team at Enigmatig is here to meet your business needs beyond just company formation. We also provide the following services in Malaysia:
- Company formation
- Obtaining Tax Residency Certificate – on completion of 1 financial year*
- Assistance in Business Management
- Corporate Management advisory
- Real Estate advisory for both residential and commercial properties
- Provision of registered agent and registered address
- Provision of company management, directorship, and shareholding services
- License application assistance
- Onshore/ Offshore bank account introductions and applications
- Virtual office services and other corporate services
- Nominee services
Malaysia offers the following benefits:
With more than a decade of experience, our team at Enigmatig is here to meet your business needs beyond just company formation. We also provide the following services in Malaysia:
- Company formation
- Obtaining Tax Residency Certificate – on completion of 1 financial year*
- Assistance in Business Management
- Corporate Management advisory
- Real Estate advisory for both residential and commercial properties
- Provision of registered agent and registered address
- Provision of company management, directorship, and shareholding services
- License application assistance
- Onshore/ Offshore bank account introductions and applications
- Virtual office services and other corporate services
- Nominee services
Application Process:
- Submit your interest here
- Our Offshore Formation Specialists will reach out to you for an in-depth discussion
- A customised proposal will be sent to you upon uncovering your needs,
- Upon the proposal confirmation, we will require the of the following information for the application
- Proof of Identity
- Proof of Residence (within the last 3 months)
- director(s),
- shareholder(s) and
- beneficial owner(s)
Once the above has been approved, we will send you an invoice for payment.
The incorporation process will commence upon receiving payment
Enigmatig deals directly with the authorities instead of the use intermediaries in your application process. In this way, we are able to ensure our prices remain competitive while you are ensured of utmost privacy and care in your application.