Malaysia is one of Southeast Asia’s most business-friendly countries, offering a strategic location, skilled workforce, and cost-effective infrastructure. For foreigners looking to expand into or set up a company in Malaysia, understanding the legal, tax, and compliance landscape is essential. This article outlines the key steps and considerations.
1. How to Register a Business Entity in Malaysia
Available Business Structures for Foreigners:
- Private Limited Company (Sdn. Bhd.) – Most common and preferred structure
- Branch Office – Extension of a foreign company (not a separate legal entity)
- Representative Office – For research, marketing, liaison purposes only (no revenue-generating activity)
- Labuan Company – For offshore or international trading & investment
👉 Most foreign investors choose Sdn. Bhd., which allows 100% foreign ownership in most industries.
Steps to Register a Sdn. Bhd.:
- Name Search & Reservation via SSM MyCoID
- Submit Incorporation Documents (Form Section 14, Constitution, director/shareholder info)
- Pay Incorporation Fees
- Obtain Certificate of Incorporation
- Post-Incorporation Compliance:
- Open a bank account
- Register for tax (LHDN), EPF, SOCSO, and EIS
- Apply for business licenses (if required by your industry)
2. Requirements to Set Up a Company (Sdn. Bhd.)
Minimum Requirements:
- Directors: At least 1 director who is ordinarily resident in Malaysia (can be a nominee)
- Shareholders: Minimum 1 (100% foreign shareholding allowed)
- Company Secretary: Must appoint a licensed Company Secretary within 30 days
- Paid-up Capital: Minimum RM1 (but higher for specific industries or to support visa applications)
- Registered Office: A local address in Malaysia is required
3. Income Tax in Malaysia for Foreign Companies
Company will be subject to a 24% tax rate if a foreigner owns equal or more than 20% shareholding in the company.
4. Common Issues Faced by Foreign Companies
- Compliance Burden: Annual filings, tax returns, audited accounts are mandatory.
- Local Nominee Director Requirement: May require legal trust or agreement to safeguard interests.
- Understanding Licensing Requirements: Especially for regulated industries (e.g., education, oil & gas, F&B).
- Bank Account Opening Delays: Due to enhanced KYC/AML procedures.
- Immigration Issues: Visa and employment pass processes can be complex.
- Cultural & Language Barriers: English is widely used, but Malay is still key in official documents.
5. Essential Corporate Services for Foreign Companies
To stay compliant and operational in Malaysia, foreign-owned companies must engage or outsource the following services:
(i) Company Secretarial Services
- Maintaining statutory registers
- Filing annual returns and updates with SSM
- Preparing board resolutions and minutes
(ii) Accounting & Bookkeeping
- Monthly/quarterly accounting services
- Preparation of management accounts
(iii) Auditing
- All Sdn. Bhd. companies must appoint an auditor and file audited financial statements annually (except certain exempt small companies)
(iv) Taxation Services
- Corporate tax filing and planning
- Withholding tax compliance
- SST advisory (if applicable)
- Transfer pricing documentation (if dealing with related foreign entities)
(v) Human Resource Services
- Payroll and statutory deductions (EPF, SOCSO, EIS)
Additional Tips for Foreign Investors
Industries Open to Foreigners
Most industries are liberalized (e.g., manufacturing, IT, trading, consultancy). However, some sectors have equity conditions or licensing restrictions (e.g., retail, logistics, education, oil & gas).
Incentives for Foreign Investors
- Pioneer Status and Investment Tax Allowance (via MIDA)
- MSC Malaysia / Digital Investment Office incentives for tech companies
- Labuan Tax Regime – flat 3% corporate tax (for qualifying offshore activities)