Procedure of Company Incorporation in Malaysia

Narendra Kumar

29 Jun, 2019

A foreign-owned company can invest in any sector or field in Malaysia without any restrictions. It is an ideal location for regional headquarters. In this article, Learn about the procedure for company incorporation in Malaysia.

How to Company Incorporation in Malaysia?

Setting up a business in Malaysia is easy, time bound & cheaper. Company Registration in Malaysia is cheaper than in Singapore. It is also a viable location for Islamic Community who wish to invest in South East Asia. Also, various investment incentives are available for entrepreneurs looking to launch operations in Malaysia.

*Smaller manufacturing companies with paid-up capital below RM 500,000 & manufacturing high tech products are eligible for Pioneer Status & Investment Tax Allowance incentives.

Those who are granted such a status enjoy a five-year partial exemption from the payment of income tax. Also, Companies located in ‘Eastern Corridor’ of peninsular Malaysia will get 100% tax exemption on their income during 5-year exemption tenure.

A foreign-owned company can invest in any sector or field in Malaysia without any restrictions. It is an ideal location for regional headquarters.

 Types of Company in Malaysia?

Two types of Companies that can be incorporated under the Companies Act, 1965:

• Company Limited by Shares- Company having a share capital can be incorporated as a Private Limited Company also called Sendirian Berhad or Public Company is popularly known as ‘Berhad’. (Most commonly chosen by foreign investors)

It requires the following to set up:

1. Two shareholders
2. Minimum Investment of USD2 (MYR2)
3. One resident Company Secretary
4. One resident director
5. Getting the business registrations done from Inland Revenue Department i.e. corporate tax, GST & employer registration.

• Unlimited Company- The procedure for incorporation of such a Company is the same as of Private Company just the liability of members must be stated in MOA as unlimited.
• Malaysian Free Zone Company- Foreigners willing to start export-oriented manufacturing & service business can register an entity in the export processing zone. No Minimum paid-up capital requirement. It is an attractive vehicle for the overseas company to trade manufacturing items.
• The Malaysia International Trading Company (Labuan Company) – It is registered with Labuan International Business & Finance Centre. It provides an attractive legally tax-exempt business vehicle which ushers a lot of Companies to establish trading links with overseas customers.
• The Bumiputera Company – An LLC can apply for Bumiputera Status if at least 30% of the shares are held by native Malay individuals. It’s the same then the entity is eligible for special grant discounts, cheap business license, special bank agreements, rebates when purchasing land or property.
• The Malaysian Limited Liability Partnership- It can be registered by 2 partners who can be non-residents as well but there should be one resident compliance person. It is regulated by the Malaysia Limited Liability Partnership Act, 2012. Such an entity is tax transparent & therefore not required to submit financial statements to the Companies Commission of Malaysia.

What is the Procedure of company incorporation in Malaysia?

A non-resident doesn’t need to travel provided that a Power of Attorney is issued to a Malaysian Incorporation Agent, who shall complete the procedure.

• A name search has to be done with the Companies Commission of Malaysia (SSM). It generally involves completion of Form PNA 42 & filing the same. The proposed name shall be available for 3 months from the date of application.
• Completion of Form A in order to file for the incorporation process. All the necessary documents should be attached which should be authenticated & thereby notarized by the public notary.

MOA, AOA, Form 6(Deceleration for Compliance), Form 48A, Form 13A original copy.

• Maintenance of all the registers, files & minutes related to the company.
• Secure an office space in Malaysia in the company’s name.
• Registration of the company for the filing of Corporate Tax with Inland Revenue Board of India by filing Form CP 600C.
• The opening of Bank Account with world-class multi-currency internet banking facilities.
• License to be obtained for specific business activities i.e. Petroleum, Oil & Gas, Education, Insurance, Banking, Finance & Agriculture.

Henceforth, the successful generation of Incorporation Certificate in Form 9.

Benefits of Company Incorporation in Malaysia:

It is an excellent jurisdiction for setting up of manufacturing & Distribution Company. Laws related to foreign ownership have been liberal & relaxed. In order to encourage & attract foreign business, Gov. has developed industrial & technology parks, Multimedia super corridor, and free industrial zones.

Malaysia is a member country of ASEAN & has signed over 12 FTA’s which allows them to have export rebates & concessions. In order to avoid Double Taxation, many DTAA’S & Treaties have been signed. It also boasts of cheap raw material & labour. It also does have immense growth options in the country’s tourism industry.

Many impetus & incentives are allowed for Finance & Investment Companies provided they are regulated by Security Exchange Commissions.

Malaysia has 5 Tax-Free Zones as well:

E.g.: Pasir Gudang, Port Klang, Kulim Hi-Tech Park, Port of Tanjung Pelepas, Bayan Lepas.

There are many key benefits of Company Registration in Malaysia including the relatively low operating costs compared to Singapore, access to excellent transport infrastructure, and availability of free zones. It is also attempting to achieve high-income status by 2020.

It is also one of the least corrupt nations in the world.

Tax Considerations:

• Both resident & non-residents companies are subject to income tax of 25% on taxable income.
• Under Malaysian Tax Law, entities are entitled to pay withholding tax on interest, contract, service agreements, technical fees & lease rentals. Rates being, 10%, 15% & 20%.
• A standard rate of 6% GST is applicable in Malaysia. All Companies with an annual turnover of RM 500,000 must register itself with the Malaysian Customs Department.
• Offshore income remitted by companies resident in Malaysia is typically tax-free.