Business and Company Entities Permitted in Malaysia
To start a business in Malaysia as a foreigner, one should understand the entities foreigners are allowed to operate. The Malaysian government rarely allows investors from other countries to set up corporations in the textile, food industries, medical and pharmaceuticals, minerals, and wood industries. However, the government encourages foreigners to invest in the services and manufacturing industries. In its 2016-2020 plan, it cited the service sector as the primary economic driver in the country. To register a business entity in Malaysia depends on the things the investor considers significant for the business. They include; cash for licenses, office space, initial bank deposits, compliance and maintenance procedures, and tax regulations.
Below are the business entities foreign investors should look into for investment in Malaysia.
- Private Limited Company
Malaysian government encourages knowledge transfer, export, growth, and job creation in the manufacturing and service sectors owned by foreign investors.
A foreign investor can register a Sendirian Barhan (sdn bhd) with 100% foreign ownership equivalent to a Malaysian Private Limited Company (LLC). For a corporation to be 100% foreign, doing consultancy and advisory business, the investor should have a minimum of RM500 000. For a restaurant, import, export, and trading business, they should have at least RM1 million.
To get a business license with 100% foreign-owned corporation structure, one should prove how the business will provide employment and improve the country’s economy. If it’s a joint venture with a Malaysian national as a partner with a minimum control of 50%, one needs to have a minimum capital of RM 350 000 and an authorized capital of RM 500 000.
Foreign investors can request for exceptions in employing Malaysian nationals for the positions of directors and shareholders though not guaranteed.
- A Labuan Company
Labuan companies in Malaysia rent properties but are not allowed to make sales in the country. They have emerged as the regional offshore center due to the low tax jurisdiction. Entrepreneurs setting up financial services, international trading business, and distribution can start a Labuan company. It’s useful for regional distribution enterprises as imports and exports to, and from Labuan are exempted from duty.
Incorporation for a Labuan company in Malaysia is easy and affordable. Foreigners can have 100% company ownership. As soon as the company is incorporated, expatriates can apply for a two-year entry employment pass.
Labuan company’s registration happens at the Labuan Labuan International and Financial Centre (IBFC). It offers a platform for banks and financial intermediaries looking to establish their operations and opportunities in the country. Leasing companies in the Labuan IBFC enjoy an ideal balance of fiscal certainty and neutrality. Leasing transactions, structured in the jurisdiction with a tax framework, allow proper management of operations cost.
Malaysia allows Labuan companies to enjoy a long-lasting relationship with the country’s companies through the Malaysian International Ship registry. Besides, the Labuan’ IBFC ‘s legal framework has eight Acts that empower Labuan FSA. Also, it sets up all the Labuan entities participating in the International Business and Financial Centre.
- A Representative/Regional Office
A representative office is an appropriate way to explore the Malaysian market. It cannot generate revenue, but it’s subject to corporate tax. It’s not involved in trading, commercial activities, or any other business. It represents the head office with supportive activities like product development, market research, brand building, planning, coordination, and after-sales report.
Foreign investors under this entity are allowed to operate in Malaysia for two to five years. They explore and analyze opportunities, do feasibility studies, and decide whether to invest in the country. A representative / regional office can employ expatriates, but the number depends on the activities and functions of the office. Besides, it does not require incorporation under the Malaysian companies Act 1965. However, its proposed expenditure should be at least RM 300 000 per annum.
- Free Zone Company Entity
Foreign companies who wish to invest in the export-oriented business can register and operate a free zone company entity in Malaysia. Free zone company entity uses the countries free zones for trade.
Foreign companies who wish to use Malaysia as their regional distribution or manufacturing base for services such as SEO, online marketing, digital marketing, e-commerce, website design can benefit from free zones if they conduct business outside the country.
All foreign companies investing in Malaysia should register with the companies’ commission of Malaysia (SSM). First, one should conduct a name search through the SSM online tools. The name should be the same as the one registered in the company’s country of origin. Investors should complete form 13A of the CA (Request of the availability of name) to SSM, and pay RM 30 for each name applied.
After SSM approves the name, the investor should submit the following documents within three months.
a. Form 80 (Statutory declaration by the agent of the foreign company).
b. Memorandum of appointment or power of attorney authorizing persons residing in Malaysia to accept, on behalf of the company, any notices required to be reserved.
c. Original copy of form 13A and a copy of the letter from SSM for the approved name of the foreign company.
d. A certified copy of the company’s statutory charter, memorandum, and articles of association defining its construction.
e. A certified copy of the certificate of incorporation for the foreign company.
f. Form 79 (Return by the company giving particulars of directors and change).
Investors who complete these documents and meet the SSM standards get a certificate from SSM approving the company’s incorporation.