Business forecast of 2020 suggests that Malaysia is pacing forward in corporate fields. Every day new domestic and international companies are adding up in this nation. This is because Malaysia comes with various opportunities and immense corporate facilities.
So, to enjoy all the opportunities, you have to go through some regulations to run your business. For that, you should have the knowledge of how to form a company in Malaysia. To make things convenient for you, this article describes all about it. So, let’s move further with norms and tips about company incorporation in Malaysia.
Investment opportunities in Malaysia
Let’s talk about investment opportunities in Malaysia. Malaysia is a nation with immense opportunity. The nation has already surpassed many developed countries for its liberal trade options. Nevertheless, for some business sectors, there are more opportunities than the rest. For instance, fashion, e-commerce, etc. forecasted to be the booming trades in 2020. Here are the 10 best business investment opportunities you can think of in Malaysia:
- Electronic machinery manufacturing
- smartphone, home appliance and computer repairing
- Natural resource mining
- Rubber production and rubber products manufacturing
- Chemical goods manufacturing
- Medical equipment production
- Commercial services
- Processed food manufacturing
- Tourism and online hotel booking
Note: Read in detail about how to open an investment company in Malaysia.
Company Incorporation in Malaysia
Here are the standard steps of how to form a company in Malaysia:
- Consult an experienced business advisor deals with local and foreign investors in Malaysia.
- Next, hire a company secretary. It is mandatory according to the corporate Act of Malaysia.
- Company naming is your next task. When registering for company naming, make sure the name is unique. You should propose more than one company name to avoid possible complexities.
- Show a paid-up capital which during the starting of the business.
- Get your incorporation certificate from SSM.
- Open a bank account for carrying out monetary transactions of your company.
- The next step would be fixing your commercial tenancy agreements.
- Get other permission letters and licenses recommended by local authorities for your company. The license and approval required often vary from one state to another in Malaysia.
- Recheck your company requirements with ESD and equip with SOCSO schemes.
- Apply for a proper investor visa and work permit. This helps you hold tight with your company in Malaysia without immigration glitches.
Rules/ law of company formation in Malaysia
Now, as you know the steps of company incorporation in Malaysia, let’s talk about rules during LLC registration process:
- First, hire a company secretary for your newly forming company. This staff will conduct the various important tasks in the company registration process. It is made compulsory by the Malaysian corporate act law.
- The company name and company incorporation form have to be drafted and submitted to the SSM. You need to pay a fee of RM 30 to the SSM for the name registration process.
- Next, you have to show a paid-up capital of minimum RM5000, as you progress with your company. You can increase this amount according to your company’s expansions.
- A company registration fee of RM 1010 has to be paid to the SSM during the whole process.
- you have to collect the incorporation certificate. You need to buy a super form that can be collected from mydata SSM.
- You have to open a corporate bank account to carry our business transactions. The bank will also allow you to pay government fees and payment during incorporation.
- The corporate rules at this phase suggest a board resolution and filing of statutory forms with SSM. the company secretary often manages this.
- Fix a tenancy agreement. The agreement should be valid for at least 12 months after signing up. This has to be settled down, as government- authorities often survey work premises.
- According to Malaysian business Act, the company must get several approvals and licenses. The approval varies from one state to another in Malaysia. Licenses like Halal certification and signboard license is typical for almost all trades.
- The government also added up insurance schemes such as SOCSO for employee welfare.
- Lastly, to do business in Malaysia, a foreign investor must apply for the investor visa. Without a work permit and visa, the owner cannot apply personally for incorporation.
Cost evaluation of company registration in Malaysia
During business formation in Malaysia, as an investor, you have to invest capital in almost all steps of registration procedures. Whether submitting your company name to SSM or arranging various licenses for validating your trade in this land, you simply can’t escape various mandatory charges claimed by the government bodies and your growing company itself. Let’s have a look on major phases of expense during your march forward to form a company in Malaysia.
|Process of company formation in Malaysia||Approximate cost in RM|
|Name registration and approval fees for the company||60|
|Government fees for company incorporation by SSM||1010|
|Company secretary fees per year||1000|
|Paid up capital at initial level||5000|
|LLC company registration fees||4000|
|Signboard, trademark and premises license fees||7000|
|Document preparation for WRT license (For foreign investors)||4000|
|Company seals, documents and other accessories||500|
Read in detail about company registration costs in Malaysia.
Office rental cost
When you have a clear concept about how to form a company in Malaysia, you will soon think about office rental cost. Because to run a company a particular office space is vital. Arranging convenient office space with preferable requirements is not very easy in Malaysia. The office rent, on the other hand, differs on the basis of location, size of premises and available facilities.
For a company owner who wants to start small are advised to go for a virtual office option, which is way cheaper than typical office spaces. This scheme is getting more popular among small to mid-size company owners in Malaysia. Here you will get a ready furnished office and various office facilities. You just have to a convenient payment for each facility you need and use, unlike big amount for the empty conventional commercial space.
At an average conventional office, the cost starts from as low as minimum RM 3000 to as much as mammoth RM 7,000,000. However, the virtual office, on the other hand, can go as low as RM 2000-3500 for 500 sft. However, big companies often prefer normal commercial premises, as they have to fixed warehouses and other facilities and doesn’t give much concern about cost factor in this field.
Timeline for incorporation procedures in Malaysia
To form a company in Malaysia, you must undergo several government procedures. This is time-consuming. Each approval and legal government procedures allocate a certain timeline. However, the whole company registration process takes a minimum of 8 and a maximum of 11 working days, excluding the period of bank account opening. Below is a table that evaluated a timeline for each company formation procedures.
|Company Registration process||Time required (Approx.)|
|Company name search, registration and approval from SSM||1 day|
|Collecting and preparing all company registration documents||2-3 days|
|Documents signup by directors, shareholders and Filing the Statutory form with SSM||1 day|
|Lodging incorporation documents to SSM||3-5 days|
|Incorporation certificate issued from SSM||1 day|
|Bank account opening||7-14 days|
This cost and expenses vastly vary in separate states in Malaysia. It depends on the local government authority and their prior company formation rules and regulation.
Common permission/ licenses required for a company incorporation
By now you might have already realized that you need to have a couple of certifications, permission/License to form a company in Malaysia. This is not unique for Malaysia only. In every country, you try to start trades ask for certain approvals, that validate and legalize that trade. Process. Through arranging those licenses or permissions, you are abided by the law of the nation. This, therefore, allows you to conduct business smoothly under the Malaysian governmental rules and regulations.
Here are some common approvals or license you will need to have in common business scenario:
- Company incorporation certificate
- TIN certificate
- Tenancy agreement license
- SOCSO certificate
- Signboard license
- Halal certificate
- License for Alcohol beverage selling
- Manufacturing license
- Medical license
All these approvals are not needed at once for any single company. Requirements of licenses vary with the type of company in Malaysia.
How to get a director visa?
By now you must have a good grip on company incorporation in Malaysia. Now let’s concentrate on what are the processes of getting a director visa in Malaysia.
As a foreign individual, you need to meet some criteria to get the director visa. The visa itself comes in three employee pass categories. Employee pass category-1,2 and 3. The director visa falls under the employment pass category-1.
To apply for the employment pass category-1 you must meet following qualification
- A monthly salary of minimum RM 10,000
- Minimum of five years of work contract
- Appropriate academic qualifications needed for the company
- At least three years of work experience.
- No history of conducting a task which is restricted by the company.
Below are the procedures of getting a director visa (Employment pass category-1).
- In order to get a director visa, you must first register with SSM or professional firms in Malaysia.
- Next, the capital of RM 500,000 has to be shown for 100% foreign equity
- Produce a detailed company profile
- Come up with tenancy agreement certificates and other approval letters.
- Open company bank account with sufficient capital available to show to the authority
- Lastly, apply for an investor visa or director visa from immigration authority.
Note: Read in detail about Malaysian business visa requirements & fees.
Living cost for foreign investors in Malaysia
Living cost for foreigners varies from state to state in Malaysia. Living cost in Malaysia is rapidly going up in the graph. Whether it is buying a house or regular petrol prices for your vehicle, prices are constantly increasing. However, this has an impact on social curriculums in Malaysia.
You have to count extra cash to buy or rent property in Malaysia. The increasing price is due to the extra addition of security modules for each accommodation facility. Whether it is the rental house or condominium, there is an added security measure to ensure the safety of the consumer.
The price range for apartments or condominium goes from RM600,000 to up to RM1 million, depend on the property location, size and facilities. The property cost also depends on authority permission. Not everyone can simply visit into this country and buy property, you must come under some criteria, for instance expatriate visa or MM2H program.
Once you have secured one of these criteria, you need to connect with an experienced property lawyer who is specialized in real estate and properties. Next, a reliable real estate agent will further help you out in finding the right property for you in Malaysia.
Popular business locations in Malaysia
There are several places and territories which are popular for company formation in Mlaysia. The popularity is due to convenient communication and transportation, social facilities, and increased concentration of potential clients. Keeping that in mind following are the top places in Malaysia, which are popular for carrying out commercial activities.
- Kuala Lumpur
There are 22 more states and territories that are progressing in the economy in their own ways. These 10 states and territories, however, are at the top rank as far as locating a business is concerned. These locations mentioned here are preferred by foreign business entrepreneurs to setup their corporate structures.
Benefits of opening a business in Malaysia
Following are the main benefits of incorporating a company in Malaysia:
- Malaysia has a comparatively lower corporate income tax rate. This tax is relatively minimum when compared with other nearby
- Well developed infrastructures of the nation are another key facility a business owner in Malaysia will enjoy
- The nation has a multicultural environment. This country is also liberal when it is about religious practices. Most importantly Malaysia offers skilled and educated workforce that benefits business in Malaysia.
- Liberal governmental policies towards commerce
- Better social atmosphere
- Flexible banking opportunities for commercial establishments.
International and local banks in Malaysia for foreign investors/ companies
Here are the popular domestic and international bank which are running their operation and constantly facilitating foreign investors and companies during company incorporation in Malaysia:
- HSBC Bank
- Standard Chartered Bank
- UOB Bank
- City Bank
- JPMorgan Chase bank
- OCBC Bank
- MUFG Bank
- Bank of China
- Bank of America
- Deutsche Bank
- Maybank Berhad
- Public Bank BHD
- RHB Bank Berhad
- CIMB Bank Berhad
- Ambank Malaysia Berhad
- Malaysian Bank Berhad
- ALLIANCE Bank Malaysia Berhad
- Hong Leong Bank Berhad
- SME Bank Malaysia Berhad
- Affin Bank Berhad
If you are a foreigner, you may see another article about how to open a bank account as a foreigner.
Taxation in Malaysia
several taxes have been implemented on the expatriate and foreign investors working in Malaysia. However, the tax implemented are comparatively low here. When compared with other nations nearby, the taxation system is quite flexible and low in this country. For instance, income tax here is at 26%, whereas Corporate income tax is kept at 25%. Sales and services tax is kept at 5% and 10% respectively.
An individual with a yearly earning of above RM250,000 is bound to pay a 26% income tax, whereas in case of an individual who has an earning less RM 5,000 are exempted from any income tax. As soon as the earning reaches RM 5,000, that person has to pay a 1% income tax for the earning.
Incase of corporate income tax, corporates are bound to pay a 25% corporate income tax. This is again flexible if you are corporate of an insurance, banking, air or shipping sectors. This tax implies on any income or earnings derived from Malaysia.
Although there are many stages that changes the percentages of individual tax charges, there are many relaxations and incentives from the government as well to encourage to formation of a company in Malaysia for foreign expats. Many local and foreign SME companies enjoy those incentives under some simple terms and conditions.
Is it possible to open a 100% foreign ownership company in Malaysia?
Yes, you can apply for a 100% foreign owned company in Malaysia
What are the documents needed to open a foreign investment company in Malaysia?
These are the initial documents you need to come up with to apply for a foreign investment company registration:
- Company name registration form collected from SSM
- Company registrations forms
- Company MoA, and AoA documents
- Individual directors, managers and stakeholder’s detail information in documents
- Bank documents for a company account
- Work permit and investment visa
- Documents of proving for capital and assets intended for the company usage.
- Other papers if any, may be recommended by the individual state authority you are setting up your company in.
How percentage of corporate income tax I have to pay in Malaysia?
25% corporate income tax is implemented in Malaysia for a foreign individual at corporate level.
Is there any other alternative for costly office rents in Malaysia?
Yes, you can always go for virtual office schemes. There is way more convenient and takes minimum time to setup. Moreover, you only pay for the service you take so no high advanced rent at a time of relocating your business.