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Doing Business in Malaysia for Foreign Enterprises
Ranked 12th out of 190 countries in World Bank’s Ease of Doing Business Report 2020, Malaysia is an ideal choice for foreign investors seeking low startup costs, attractive tax incentives, and business-friendly regulations.
In close geographical proximity to Singapore, Malaysia also boasts comparatively lower labor and rental costs. Foreign investors can enjoy cost savings of US$4,095.35 on average labor costs per month. Office rental costs are also significantly higher in Singapore at US$71.43/sq m per month. In Kuala Lumpur, the average rental cost is only around US$19.50/sq m per month.
Company Incorporation in Malaysia
Foreign investors seeking to do business in Malaysia can choose between two types of legal entities:
- Private Limited Company (Malaysian: Sendirian Berhad or Sdn Bhd)
- Foreign Company
Those who want to incorporate a local business entity in Malaysia can set up a Private Limited Company (Sdn Bhd). This type of entity requires a minimum of one shareholder and at least one resident director. It is allowed to have 100% foreign ownership and a maximum of 50 shareholders. Stockholders have limited liability, and can only be held liable to the extent of their contribution to the capital.
Those who have existing companies abroad and want to expand their business in Malaysia can establish a Foreign Company. This type of entity doesn’t require a resident director.
Requirements for Establishing a Company in Malaysia
To successfully set up a company in Malaysia, foreign investors must fulfill the following setup requirements:
- Reserve company name with the corporate registry, the Companies Commission of Malaysia
- Have at least one shareholder (for Sdn Bhd)
- Have at least one resident director (for Sdn Bhd)
- Appoint a Corporate Secretary (for Sdn Bhd; must be licensed by the SSM and be a Malaysian resident)
- Minimum paid-up capital of RM1.00
- Have a registered office address in Malaysia
Corporate Taxation in Malaysia
The standard corporate tax rate for resident companies in Malaysia is 18-24%. The tax rate starts at 18% for the first RM500,000 and increases to 24% for companies with a paid-up capital of RM2.5 million or less.
Tax Benefits in Malaysia
Unlike other jurisdictions, there is no withholding tax levied on dividends made abroad by Malaysia businesses. Resident companies can also benefit from the country’s 68 double taxation treaties which generally minimize withholding tax on fund transfer abroad. Malaysian businesses also face no restrictions on repatriation of capital, profits, dividends, and royalties.
Malaysia offers a Multimedia Super Corridor (MSC) status to qualified tech startup companies. Tech startups can enjoy 5+5 years of tax breaks.
Work Visas and Immigration in Malaysia
Foreign individuals seeking to work or do business in Malaysia must apply for a visa/pass to be allowed entry into the country. Those seeking to work in Malaysia can apply for an Employment Pass, Temporary Employment Pass, or Professional Visit Pass. Those seeking to come to Malaysia for business can apply for a Multiple Entry Visa.
The most common visa for foreign nationals seeking employment is the Employment Pass (EP). Issued to those holding managerial positions and classified as skilled workers, the EP requires a minimum monthly salary that is generally equivalent to the level of experience of the candidate.
Foreign individuals seeking to apply for a Multiple Entry Visa must meet the following conditions:
- Show proof of sufficient funds for staying in Malaysia
- Possess a valid and confirmed return ticket
- Must not belong to a tour group
- If an Indian citizen, the visa will cost RM100; if a Chinese citizen, the visa will cost RM30