Holding companies are those which typically manage and control investment policies of other client company. Malaysia holding companies is of no difference. These companies don’t have any self services. They don’t even have any products as such for manufacturing. These companies are simply being hired on contractual basis by other parent or host company to manage other company’s investment policies and keep an account of client company’s assets.
As these types of companies don’t have any sort of products or manufacturing goods for themselves that earns revenue, the main source of income comes from the management and business representation services that they carry out on behalf of their parent businesses. In this article we will gain some knowledge about Malaysia holding companies, their advantages, permitted activities, setup process, tax and more.
Pre-requirements for setting up a Malaysia holding company
Let’s start with the pre-requisitions one need to have to incorporating a holding company in Malaysia. To get the holding company status in Malaysia, a company needs to abide some laws set by the company Act of Malaysia. Without having those legal rights, a holding company cannot fulfill its incorporation completion status here.
Following are the legal rights imposed by the company Act of Malaysia for gaining holding company approval:
- The company Act suggests that to get the holding company approval, it need to have more than half the voting rights in its host or client company.
- The holding company has to have controlling rights over the director boards of the client company to take control of investment policies and company asset management.
- The company owner must own a share capital of more than 50% of the controlled or managed company.
- The holding company keep on monitoring foreign investors, and ownership status, company guidelines, business policies, tax return reports and company Acts of the parent company .
- Such companies are also suggested to observe local rules and tax curriculums to produce yearend report on the client businesses.
Benefits of incorporating a holding company in Malaysia
Malaysia holds a positive reputation for foreign business development and a wide spectrum of business investment opportunities. It is by far one of the attractive corporate destinations in the world.
Many investors from all corners of the world gather here to seek corporate benefits. When considering holding business, Malaysia offers several advantages in this sector too. Let’s have a look on those benefits:
- The holding company sees a flourishing prospective in Malaysia due to the country’s access to rapid economic growth.
- Malaysia has a strategic geo location in South East Asia which gives the nation an upper hand to carry out various businesses
- Holding company here can be a trigger to expand businesses at a domestic as well as international extend.
- The holding company can operate, manage and even can appoint new directors for the benefit of the parent or host company.
- The monitoring process and annual reporting of the holding company can prove out to be resourceful data for further operations of the parent company.
Permitted activities for setting up a holding companies in Malaysia
When a holding company has been set in Malaysia, there are several activities which are permitted for this type of business. Here are the lists of permitted activities a holding company can conduct in Malaysia:
- Carryout management account services for client company
- Perform investment policies for the client company
- Perform investments in stocks and shares
- Keep in account of the securities and company deposits
- These companies are permitted to invest on company assets
- There activities also include investments on loans behalf of the parent company.
Tax requirements for setting up holding company in Malaysia
As mentioned earlier, the company itself doesn’t have any products or investments. Therefore, the income tax will solely depend on the status of the company. That means if the company is enlisted in the Malaysian stock exchange, the company will be considered under the Section 60FA of income tax Act law.
However, if the company is not listed in the stock exchange, it will fall under Section 60F of income tax Act of Malaysia. In both cases the taxation will depend on the fact that whether the holding company is listed on Bursa Malaysia or not.
What is an investment holding company in Malaysia?
If a company derives 80% of the gross investment from other legal investments, it can be considered as the investment holding company. These types of holding company in Malaysia are allowed to develop a particular type of business activities.
These specific businesses include renting of unmovable assets, real estate business, accounting services to the client business, and maintenance and support services to the client business organizations. Such type of holding company is governed and monitored by the Inland Revenue Board of Malaysia, a governmental body of Malaysia.
What need to consider for incorporating a holding company in Malaysia?
Following are the vital startup tips when considering registration of a holding company in Malaysia:
- Focus on a particular business niche that one need to target to set up the holding company.
- Create a stable corporate entity in business environment.
- Plan and strategize the business you want to set in Malaysia
- Develop the business that clearly defines your planned strategy
- Create strong network to source the business opportunities
- Arrange sufficient finance for various investments that one need to consider in a holding company.
- Keep great reputation, company goodwill and business trusts with the parent companies.
- Keep up to date with the annual reports, legal profiles and financial statements.
Simple steps to form a holding company in Malaysia
Below are the simple steps that an investor has to keep in mind when forming a holding company in Malaysia:
- Business structure has to be forecasted and fixed at the beginning
- Determine and analyze the business you want to represent.
- Next a business application has to be filed accordingly, as suggested by the Malaysian company authorities.
- Proper bank account opening on the name of the holding company
- Funding the new holding company accordingly
- Keeping regular records and accounts of the financial status