Why Malaysia?
Malaysia offers a strategic location, a well-developed infrastructure, and a pro-business environment, making it an attractive destination for foreign investors. The government provides various incentives to encourage investment in key sectors such as manufacturing, technology, and
services. Here’s a detailed guide on setting up a company in Malaysia.
1. Choose the Right Business Structure
Selecting the appropriate legal structure is crucial:
- Private Limited Company (Sdn Bhd): This is the most common business structure, offering limited liability protection. It requires at least one director and one shareholder, who can be foreign individuals or entities.
- Public Limited Company (Berhad): Suitable for larger companies planning to raise capital by offering shares to the public. Requires at least two directors and a minimum paid-up capital.
- Representative Office: For foreign companies conducting market research or promotional activities without engaging in commercial transactions.
- Branch Office: A foreign entity can operate in Malaysia as a branch, but the parent company is fully liable for the branch’s operations.
2. Understand Foreign Ownership Regulations
Malaysia allows 100% foreign ownership in most sectors, but some industries have restrictions:
- Restricted Sectors: Industries such as banking, telecommunications, and oil and gas may have foreign ownership limits or require joint ventures with local partners.
- Encouraged Sectors: The Malaysian Investment Development Authority (MIDA) offers incentives for sectors such as manufacturing, biotechnology, and Islamic finance. Check the latest guidelines for specific incentives and requirements.
3. Register the Company Name
Choose a unique name and ensure it complies with naming guidelines. Conduct a name search with the Companies Commission of Malaysia (SSM) to check availability and reserve the name.
4. Prepare the Basic Documents
- Company Constitution: Similar to Articles of Association, it outlines the company's internal governance and operational rules.
- Form 9 (Certificate of Incorporation): Issued by SSM upon successful registration.
- Form 48A (Statutory Declaration): Declaration by directors stating compliance with the Companies Act.
- Company Secretary Appointment: Appoint a qualified company secretary within 30 days of incorporation.
5. Capital Requirements
- Minimum Paid-Up Capital: While there is no statutory minimum, a nominal amount (e.g., MYR 1) is often used for registration. However, practical requirements depend on the nature of the business and industry standards.
6. Tax Registration and Compliance
- Corporate Income Tax: The standard rate is 24%, with a lower rate of 17% for most of the first MYR 600,000 of chargeable income for small and medium-sized enterprises (SMEs).
- Goods and Services Tax (GST): Malaysia replaced GST with the Sales and Service Tax (SST), with rates varying depending on the goods or services.
- Withholding Taxes: Applicable to payments such as royalties, interest, and technical fees paid to non-residents.
7. Labor and Employment Regulations
- Work Permits for Foreign Employees: Foreign nationals must obtain an Employment Pass for managerial, executive, or technical positions.
- Employment Contracts: Contracts should specify terms, including salary, benefits, working hours, and termination conditions.
- Employee Provident Fund (EPF): Employers must contribute to the EPF, a mandatory retirement savings scheme for Malaysian employees.
Conclusion
Setting up a company in Malaysia requires careful planning, understanding of local regulations, and strategic decision-making. By choosing the right business structure, complying with foreign ownership rules, and engaging local expertise, foreign investors can successfully establish and grow their businesses in Malaysia.