Malaysia’s strategic location in Southeast Asia makes it a top investment option for foreign investors who want to establish their presence in the region. Moreover, the country has a high ease of doing business score, as reported by the World Bank. Also, the Government encourages investments in a number of ways.
Entrepreneurs who consider investing in Malaysia should be informed of the main requirements on how to open a company in this country. Those who are in need of specialized assistance can request the help of a local company formation expert in Malaysia.
Types of companies in Malaysia
Investors who are looking towards setting up a business in Malaysia can choose between several available business forms. The private and public limited companies, the partnership and limited liability partnership, the sole proprietorship and the foreign company branch are the main types of companies in Malaysia.
The private limited company is the preferred business type among foreign investors who do not wish to sell shares in their company. Public limited companies can transfer and sell their stocks to the public. Investors also have the option to start with a private company and later convert it into a public one (or vice versa).
There are no residency requirements for company founders in Malaysia, however, the public and private companies may be incorporated by a least two shareholders. Private companies may have a maximum of 50 shareholders. The company directors in Malaysia must have their main or only place of residence in the country, but it is not mandatory for them to be Malaysian citizens. This condition applies both to private and to public companies.
The steps for company formation in Malaysia are the following:
– choosing an appropriate business form and an original, available company name;
– drafting the company’s documents and paying the required registration fees;
– submitting the documents, together with the nominal fee payment proof to the Companies Commission.
A fast, one-day company incorporation procedure is available for domestic companies in Malaysia if all of the company’s documents are in order.
Branches of foreign companies in Malaysia are also registered with the Companies Commission, following a submission through which the applicant company verifies if its proposed name is available. Registration fees are also applicable for branches. An exemption from the mandatory registration with the Companies Commission exists in the case of foreign representative offices. These types of foreign establishments are not subject to Malaysian taxes.
Corporate taxation in Malaysia
Companies in Malaysia are required to comply with the tax requirements for paying the corporate income tax, the real property tax and the goods and services tax (the equivalent of the VAT).
The corporate income tax rate in Malaysia is 24% and a lower 18% rate applies to resident small and medium sized companies, under certain conditions. Capital duty, payroll tax, real estate tax, social security, and the stamp duty are other taxes levied on companies in Malaysia. The goods and services tax has a standard rate of 6%.
There is no withholding tax on dividends, however, a 15% withholding tax applies to interest paid to a non-resident company and a 10% withholding tax applies to royalties paid to a non-resident company. These two withholding tax rates can be reduced if a double tax treaty applies between Malaysia and the country in which the company is a resident. Malaysia has signed more than seventy such double tax treaties.
Investment regime for foreign investors
The Malaysian Government continues to encourage foreign investors in the country. However, some business fields are still highly regulated or restricted and it is recommended that investors verify their options before proceeding to establish a company. The National Committee for Approval of Investments in the Services Sector has an important role in facilitating foreign investments. It is expected that more sub-sectors will be liberalized for investment in the near future.
Special investment incentives are in place for high-tech companies and benefits also exist in fields like biotechnology, services, tourism, agriculture, petroleum, car parts and specialized machinery manufacturing, environmental protection or energy conservation. These incentives include investment tax allowance, double deductions or reinvestment allowances.
Investors who want to further explore the business options available in Malaysia or who want to know more about the laws for foreign investments can contact a local company formation agent.