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Employing in Malaysia

At a glance

Employment in Malaysia

Foreign companies that employ workers in Malaysia face several challenges and must adhere to the legal and regulatory framework that is in place. Most notably there are differences depending on the type local entity they have incorporated, and whether foreign nationals are being employed. In some cases, using an outsourced employer will make the process smoother, and it is recommended to use professional legal services as well. Our guide explains Malaysian policies on leave, termination and payment of benefits.

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Payroll & Tax in Malaysia

Complying with local payroll and tax requirements is essential for a company doing business in Malaysia. Issues such as tax rates and withholding and social security are all essential in ensuring a seamless human resources operation. Many companies will consider outsourcing these administrative tasks to a GEO (Global Employment Organization).

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Immigration / Work Permits in Malaysia

Foreign workers are required to have the proper visas and work permits in Malaysia, as established by immigration laws. This often requires incorporation and licensing prior to sponsoring work permits for employees, which can be a problem if your company is trying to enter the country quickly. The most common work permit is called an Employment Pass.

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Incorporation

There are several business structures available for incorporation in Malaysia, and each has advantages and disadvantages. In some cases it will depend upon the type of industry that you are in, and the scope of planned business activity. Our guide has a comparison of the time and cost for incorporating standard company structures including A Company, Representative Office, and Branch Office.

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GEO Solutions or DIY Employment in Malaysia?

Companies entering Malaysia must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Malaysia Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Malaysian entity established to run payroll.

A DIY approach will be delayed until there is a properly incorporated entity ready to run payroll and can be a costly option. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Using Shield GEO Employer of Record Services in Malaysia

Payroll Malaysia
Management Fee for Employer of Record Services / Monthly Payroll Costs

Contact us for a quote

 
Grossed income Tax Rate (%)
RM 0 – 2,500 0
RM 2,501 – 5,000 1
RM 5,001 – 10,000 3
RM 10,001 – 20,000 3
RM 20,001 – 35,000 7
RM 35,001 – 50,000 12
RM 50,001 – 70,000 19
RM 70,001 – 100,000 24
RM 100,001 – 150,000 26
RM 150,001 – 250,000 26
RM 250,000+ 26
Tax Returns Supplied

An employee needs to file a tax return with Malaysian tax authorities and Shield GEO will assist in tax clearance matters.

Employers Social Security and statutory contributions

Total social security rate for companies: 13.78%.

 

The employer contributes 1.78% of an employee’s remuneration to social security. In addition, the employer must contribute 12% to the national social security organization through an employee’s provident fund (EPF) scheme. The EPF provides retirement benefits to Malaysian employees.

Employees Social Security and statutory contributions

Total social security rate for employees: 11.51%

 

The employee contributes 0.51% and an additional 11% payable to the EPF.

Insurance requirements

An assignee needs to have adequate insurance cover which Shield GEO will assist with.

Corporate Income Tax Rate

The standard corporate tax rate is 25%.

 

For companies capitalized at less than MYR 2.5 million the corporate tax rate is 20% on the first MYR 500,000, then subsequently 25%.

 

For petroleum, oil products, banking and insurance industries, different rates apply.

Sales Tax

The Goods and Services Tax is 6%.

 

As of 1 April 2015, the Sales and Services Tax was replaced by a Goods and Services Tax. There are products that are exempt from the GST, including agricultural products, livestock, exported goods and certain services.

Withholding Tax

Dividends: No withholding tax applies to dividends paid to non-residents.

 

Interest: A withholding tax of 15% applies to interest paid to non-residents, which may be reduced under a tax treaty.

 

Royalties: A withholding tax of 10% applies to royalties and technical service fees, which may be reduced under a tax treaty.

 

Rental or installation fee tax: A 10% withholding tax applies to income received by non-residents from rental of movable property or installation fees from services rendered in Malaysia. These may be reduced under a tax treaty.

Other Tax

Capital tax: Capital duty is levied at rates from MYR 1,000 to MYR 70,000.

 

Real estate tax: Varying rates apply to real property taxes depending on state.

 

Stamp duty: Levied between 1% and 3% of the value of property transfers, plus 0.3% on share transaction documents.

 

Customs and excise duties: Most dutiable goods have import duties from 5% to 30%.

 

 

Work Permits
Can Sponsor Work

Yes.

Work Permit cost

A foreign worker can enter Malaysia via Social Pass that  can last between one to three months depending on nationality of the worker. 

 

Work Permit processing time

The work permit processing time is between two to six weeks from when the application is submitted. Shield GEO will need the documents to be submitted and our local immigration expert will check the documents and start the work permit process.

 

Work Permit process

The work permit process begins with the applicant providing the necessary documents which a local expert immigration team will check and then upload to begin the application process.

The DP10 will be submitted to the immigration department.

The approval of an employment pass under the ESD system takes approximately 30 working days from the date of submission.

The DP11 will be submitted for the endorsement process which takes approximately seven working days.

These processing periods are subject to change at the discretion of the immigration department.

Can Work Permit be processed in country

The work permit is processed in Malaysia.

Switch Business Visa to Work Permit?

Yes an assignee can move from a business visa to a work permit.

Business Visas
Can do Business Visa

Yes

Business Visa Cost

Please contact us for a quote

Others
Can supply private health care

Yes, Shield GEO can organise private health insurance in Malaysia.

 

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