Incorporation in Malaysia

Why Set Up a Company in Malaysia?

1. Ease of doing business

One of the key benefits of setting up a company in Malaysia is the ease of doing business there. In the World Bank’s Ease of Doing Business Rankings 2020, Malaysia ranks 12 out of 190 countries for the ease of doing business.  For instance, it is relatively easy to start and operate a local firm there, with foreigners being able to establish 100% foreign-owned businesses.

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2. Favourable tax laws

Additionally, Malaysia has a wide range of tax incentives offered to companies, such as the investment tax allowance given to companies operating in specified sectors, such as in machinery.  Malaysia has also signed tax treaties with many countries to help foreign investors avoid double taxation. There is also no withholding tax on dividends paid outside of Malaysia.

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3. Central business hub

 

Malaysia is a central business hub in Southeast Asia, with close proximity to Singapore. This allows you to tap into consumer demand across different countries and expand your business.

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4. Labour and rental costs

 

Another benefit of setting up a company and doing business in Malaysia is that Malaysia has more manageable labour cost and rental costs. For instance, the average labour cost in Malaysia is RM 1,100 (SGD 358.01) per month.

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Thus, you will enjoy cost savings, especially compared to conducting business in Singapore where average labor costs are about SGD 5,596 per month.

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For Foreigners Outside of Malaysia Intending to Set Up a Company in Malaysia

 

1. Physical presence in Malaysia not required

 

You do not need to be physically present in Malaysia in order to set up a company there. For greater ease, you can even consider engaging a corporate services firm to help you to set up a company in Malaysia while you are in your home country.

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2. Types of companies available to foreigners

Labuan companies

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A Labuan trading company is a company established in Labuan, Malaysia that carries on certain Labuan trading or non-trading activities.  Labuan companies enjoy tax advantages, with a tax rate of 3% on audited net profits for companies that carry out trading activities, and 0% for companies that carry out non-trading activities. This is in comparison to the tax rate of 24% for other types of companies in Malaysia. Moreover, unlike companies such as the Sendirian Berhad, there is no restriction on the sector in which the Labuan company can operate.

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To qualify for the Labuan tax incentives, a Labuan company must have a registered office in Labuan with the requisite number of full-time employees, and an adequate amount of operating expenditure (see below).

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The registered office may be a virtual office, hence no physical presence in Malaysia is required.

To set up a Labuan company, there must be at least 1 director and 1 shareholder. The director and shareholder can be an individual or corporate entity.

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Sendirian Berhad (Sdn Bhd)

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Foreign investors can set up a company, also known as a Sendirian Berhad (Sdn Bhd), with 100% foreign ownership. This is a private company that is limited by shareholding. The Sdn Bhd is a separate legal entity from its owners, and can raise capital through shares.

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You do not have to be physically present in Malaysia as long as the director and shareholder requirements are fulfilled. To set up a Sdn Bhd, the company must have:

• At least 1 director ordinarily resident in Malaysia,

• 1 shareholder; and

• 1 promoter.

A promoter is someone who helps to start the company, such as by raising capital.

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Unlike the Labuan company, the Sdn Bhd can operate only in specific sectors, which include:

1. Maritime

2. Petroleum, oil and gas

3. Education

4. Banking and finance

5. Agriculture

6. Tourism outbound and ticketing

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