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How to form a company in Malaysia

How to form a company in Malaysia

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:

  1. Electronic machinery manufacturing
  2. smartphone, home appliance and computer repairing
  3. E-commerce
  4. Natural resource mining
  5. Rubber production and rubber products manufacturing
  6. Chemical goods manufacturing
  7. Medical equipment production
  8. Commercial services
  9. Processed food manufacturing
  10. 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:

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:

  1. 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.
  2. 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.
  3. 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.
  4. A company registration fee of RM 1010 has to be paid to the SSM during the whole process.
  5. you have to collect the incorporation certificate. You need to buy a super form that can be collected from mydata SSM.
  6. 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.
  7. The corporate rules at this phase suggest a board resolution and filing of statutory forms with SSM. the company secretary often manages this.
  8. 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.
  9. 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.
  10. The government also added up insurance schemes such as SOCSO for employee welfare.
  11. 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.

See: how to get a virtual space in Malaysia? and what does the virtual office cost?

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:

  1. Company incorporation certificate
  2. TIN certificate
  3. Tenancy agreement license
  4. SOCSO certificate
  5. Signboard license
  6. Halal certificate
  7. License for Alcohol beverage selling
  8. Manufacturing license
  9. Medical license

Etc.

All these approvals are not needed at once for any single company. Requirements of licenses vary with the type of company in Malaysia.

You may read in detail about types of business licenses 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

Below are the procedures of getting a director visa (Employment pass category-1).

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.

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.

  1. Kuala Lumpur
  2. Selangor
  3. Penang
  4. Sabah
  5. Johor
  6. Sarawak
  7. Labuan
  8. Pahang
  9. Malacca
  10. Kedah

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:

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:

International Banks

  1. HSBC Bank
  2. Standard Chartered Bank
  3. UOB Bank
  4. City Bank
  5. JPMorgan Chase bank
  6. OCBC Bank
  7. MUFG Bank
  8. Bank of China
  9. Bank of America
  10. Deutsche Bank

Etc.

National Banks

  1. Maybank Berhad
  2. Public Bank BHD
  3. RHB Bank Berhad
  4. CIMB Bank Berhad
  5. Ambank Malaysia Berhad
  6. Malaysian Bank Berhad
  7. ALLIANCE Bank Malaysia Berhad
  8. Hong Leong Bank Berhad
  9. SME Bank Malaysia Berhad
  10. Affin Bank Berhad

Etc.

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.

FAQ

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:

  1. Company name registration form collected from SSM
  2. Company registrations forms
  3. Company MoA, and AoA documents
  4. Individual directors, managers and stakeholder’s detail information in documents
  5. Bank documents for a company account
  6. Work permit and investment visa
  7. Documents of proving for capital and assets intended for the company usage.
  8. 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.

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