Post-Registration Compliances in Malaysia- An Overview
Running a private limited company in Malaysia not only separates the personal liabilities of the promoters from that of the business liabilities but also opens a wide array of opportunities to grow your business further. Nonetheless, running a Malaysian company also requires compliance with the regulations issued by various regulatory authorities to ensure that the business in Malaysia operates in a legal manner. The post-registration compliances in Malaysia are supposed to be done on a one-time basis immediately after the successful incorporation of the company, on a monthly basis and on an annual basis.
Enterslice assists and advises in the preparation of a business calendar that records all the important steps and procedures to be met by your Malaysian company to ensure that your company is always on the right side of the law.
Post-Registration Compliances in Malaysia immediately after incorporation
Following are the major post-registration compliances in Malaysia that are supposed to be met immediately after the incorporation of a private limited company:
- Obtaining necessary Business licenses
Right after the incorporation of a company and before the commencement of business operations, a company is supposed to obtain the necessary business licenses. The business license depends entirely on the nature of your business. In Malaysia, there are generally two types of licenses, viz. federal licenses that are issued by the ministries and government departments for regulated industries and State licenses that are issued by the local governments for the activities that fall within their jurisdiction, such as physical advertising, setting up a business enterprise etc. These regulations vary from state to state. Some of the industries that are highly regulated include the health sector, manufacturing sector, oil and gas sector, financial sector, education sector etc. The necessary business licenses should be obtained as soon as possible.
- Appointment of an Auditor
Unless the company is dormant, has zero revenue or qualifies the threshold, every private limited company in Malaysia has to appoint an auditor. The auditors have to give their consent before they are appointed and start giving their services to a company. They are entrusted with the responsibility of preparing the audited financial statements for the company. Malaysian law permits the appointment of the same auditor every year. The company secretary mentions the information about the auditor in the annual returns. The appointment of an auditor has to be done within 30 days of the financial year-end.
- Decide the Financial Year End (FYE) of the company
A company is also required to decide its financial year end (FYE). An FYE is generally the last date when a company closes its financial accounts. This last date is usually the last day of a particular month the company decides for its business. The board should inform the company secretary about the FYE of the company as soon as possible.
- Registration with the Inland Revenue Board (LHDN)
After the incorporation of a company, it becomes a separate legal entity in the eyes of the law that is liable to pay corporate taxes based on the annual chargeable income. It is similar to the payment of income tax by the company. For the payment of corporate tax, a company is supposed to get itself registered with the Inland Revenue Board of Malaysia in order to get the company’s corporate tax number. In cases where your company does not automatically receive the corporate tax number, then you can register your company at the e-Daftar portal to get the corporate tax number. This registration of the company with LHDN should be done as soon as possible.
- Registration of the company with the Social Security Organisation (SOCSO) and Employee Provident Fund (EPF)
A private limited company is also required to register itself with The SOCSO. SOCSO manages two schemes, viz. Employment Injury Scheme and Invalidity Scheme. The Employment Injury scheme is meant to protect the employee against occupational hazards such as accidents or diseases, and the Invalidity Scheme, on the other hand, provides insurance to the employee who is unable to work or unlikely to be cured or is dead.
Registration with the Employee Provident Fund is a retirement scheme for those employees that contribute to the EPF in Malaysia. The contributions are made both from the end of the employer and the employee.
Before you register your company for SOCSO and your employees under EPF, you need to register your company as an employee first at the EPF counter. Registration for SOCSO can be done online either by the company itself or through a service provider by giving them an authorised letter.
It must be remembered that registration for SOCSO has to be done within 30 days and for EPF within 7 days from the hiring of the first employee.
Annual Post-Registration Compliances in Malaysia for Private Limited Companies
In order to keep the company running without landing into trouble with the regulatory authorities and simultaneously enjoying the benefits of compliances, some compliances need to be carried out by the company on an annual basis. Following are the annual compliances that every company needs to follow:
- Renewal of business licenses
Depending on the industry in which the company is operating in, it becomes necessary to renew the business licenses either annually or in a few years as per the regulations of the government authorities. It is necessary to keep renewing your business license, failure of which may result in penalties from the regulatory authorities.
- Submission of annual Financial Statements along with Directors’ Report
The annual financial statements of a company are prepared by the accountants before being audited by the appointed auditor of the company. Apart from this, the auditor prepares an auditor’s report, and the directors of the company prepare their respective director’s report wherein the report states the information about the directors, the main activities undertaken by the company such as shares, business reviews, dividends etc. All these documents are compiled and signed by the Commissioner of Oaths before such documents are sent to the Company Secretary for circulation of such documents to the shareholders and the auditor. The circulation of the documents to the shareholders should be done within 6 months after the FYE.
Once these reports are approved by the board, the Company Secretary submits these reports to the Companies Commission of Malaysia. These reports are required to be submitted within a period of 30 days after their circulation.
- Submission of the Annual Returns of the company
The annual returns of a company are a summary of the company giving out the details about the company such as the business of the company, its registered address, directors and shareholders etc. This information has to be submitted to confirm that no changes have been made in the company. It must be noted that these annual returns have to be submitted even if no changes have been made in the company. The annual returns of the company have to be prepared by the company secretary of the company and submit them to the Companies Commission of Malaysia within a period of 30 days from the anniversary of the company incorporation date.
- Submission of Employees Payroll Tax (PCB)
A company as an employer is also supposed to submit a Form E, the statement of remuneration paid to its employees, along with the Employees Payroll Tax (PCB) deducted during the year to the Inland Revenue Board of Malaysia. Besides the given form, a statement of remuneration paid to its employees during the year must be issued to the employees for them to prepare their tax returns. The submission of the statements regarding the PCB has to be done by 31st March of the following year.
- Submission of the tax estimates
A company is also supposed to submit its tax estimates. These estimates are prepared by the company on the basis of its estimated annual income. The company is supposed to make monthly instalments based on this estimated tax payable. These tax estimates can be submitted by the company on their own, or they can engage a tax agent services offered by Enterslice. These tax estimates can be revised if the need arises. The submission of these estimates has to be done within a period of 3 months of operation and 30 days before the start of each assessment year.
- Filing of Annual Tax Returns
It must be noted that the estimated tax payable and the actual tax payable can be different. After the assessment year end, there is a possibility that the actual tax liability is more than the taxes paid based on estimation, then in such a case, the balance tax payable has to be deposited. Vice versa, the company can claim a refund if the estimated tax paid is more than the actual tax liability. The filing of annual tax returns is made through the e-filing portal.
The tax returns are supposed to be submitted within a period of seven months after the end of the assessment year.
Monthly Post-Registration Compliances in Malaysia for Private Limited Companies
Apart from annual compliances, there are certain compliances that need to be followed on a monthly basis. Following are the monthly compliances that every company needs to meet:
- Payment of Corporate Taxes
On the basis of the estimated tax, the company is supposed to pay corporate tax on a monthly basis through monthly instalments. This can be done by the company on its own or avail the services offered by Enterslice. The taxes can be paid starting from the sixth month of the assessment year by the 15th of every month.
- Employees’ Payroll Tax (PCB) Payment
The Employees’ Payroll Tax is commonly known as PCB which your company as an employer needs to retain as a percentage of the employees’ salary, bonus, incentives and commission etc. to be paid as Monthly Tax Deductions to the Malaysian Inland Revenue Board on behalf of the employees who are taxable as part of the employer’s responsibility. The calculation of PCB can be done either through the Computerised Calculation Method on the e-CP39 portal or based on the MTD schedule. This payment can be either be made by the company on its own or the company can avail the accountancy or tax agent’s services offered by consultants at Enterslice.
- EPF, EIS and SOCSO payments
Apart from registering and regularly updating information about the employees related to EPF and SOCSO, a company is also obligated to furnish the information on the EPF, EIS and SOCSO contributions from both the employer’s and employees’ shares and make the payments to the EPF and SOCSO accounts on a monthly basis. Again, a company can do this on its own through various online channels and offline channels of EPF and SOCSO or avail the payroll services offered by Enterslice. The contributions have to be made by the 15th of every month for the salary that is issued in the previous month.