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Incorporation

Setting up a company in Malaysia

When setting up a company you may want to consider these factors:

  1. Business factors

    • The industry and type of business
    • Nationality of the headquarters/individual(s) and
    • Presence of existing trade agreements or relationships
  2. Cultural factors

    Understanding local culture is always important. Malaysia has a distinct “ multi–ethnic, multicultural, and multilingual society”, in particular with nods towards the “tri-culture” of Malay, Chinese and Indian influences. In addition, there are two distinct geographical regions; Peninsular Malaysia (where Kuala Lumpur is located) and East Malaysia, which retain some cultural differences.

  3. Language

    Languages may be an influence. Malay is the official language, however due to the significant influence of Chinese and Indian groups, various Chinese and Indian languages are likely to be encountered depending on who you are doing business with. English is relatively common in Malaysia, in part due to its colonial history, and historical use of English in schools and government. It is currently listed as a ‘recognized’ language, and it is not uncommon for business to be conducted in English. However, sometimes locals speaking English may actually use “Manglish”, which is a colloquial form of English with heavy Malay, Chinese, and Tamil influences.

  4. MyCoID

    MyCoID is a system portal that provides business services in one place, from business name searches to stamping company documents. It is located at: http://www.ssm-mycoid.com.my/. It offers ‘package’ services which may enable you to submit multiple stages of the registration process in one step, and at a reduced rate. Registration steps and processing times have been recorded as if each was done manually and separately. Effective use of the MyCoID system may be able to reduce time and costs.

Your Options

This article provides a general guideline for foreign businesses on entering Malaysia for business purposes. In particular it looks at common pathways to establishing a business presence in Malaysia, generally through a representative office, branch office or subsidiary company (or local equivalents). In addition various economic, tax and regulatory facts are provided throughout as a source of useful information to assist those who will enter the Malaysian economy. The guide also looks at some immigration requirements such as obtaining the appropriate visa status.

Data is based on research done at the time of writing this article, June 2015, or closest available dates.

Malaysia is a federal constitutional monarchy located in Southeast Asia. While the majority of the population (around 50%) are Malay, there is also a significant Chinese and Indian population in Malaysia.

Population: 30,000,000

Capital: Kuala Lumpur (KL)

Language: Bahasa Malaysia, English (recognized)

Timezone: UTC+8

Calling Code: +60

Currency: Ringgit/RN (International code: MYR) | 1USD = 3.73MYR

Nominal GDP: $375.633 billion ($12,127.20 per capita)

Internet domain: .my

PwC ranks Malaysia as having grown to become a popular regional hub for expansion into the ASEAN (Association of Southeast Asian Nations) region, supported by its central geographic location and multi-lingual mix of Malay, Indian and Chinese populace.

There are three types of business forms available to foreign companies in Malaysia.  Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and capital requirements.  In most cases it will depend on the degree of commitment a company has to Malaysia and the planned business activity.

Company

A.  Requirements/Restrictions

A company with share capital may be incorporated as a private company (‘Sendirian Berhad’ or ‘Sdn. Bhd.’) or a public company (‘Berhad’ or ‘Bhd’).

A company requires a minimum of two shareholders (‘subscribers to the shares of the company’) and a minimum of two directors, and a company secretary. The secretary must be an individual who either is a member of a professional body prescribed by the Minister of Domestic Trade Cooperative and Consumerism or licensed by the Companies Commission of Malaysia (SSM). At least one director and the company secretary must be residents of Malaysia. An article comparing Singapore to Malaysia notes that foreign investors in Malaysia are required to apply for foreign investment committee approval when taking more than 30% shareholding in a Malaysian company.

Every company must have a registered office in Malaysia to which all communications and notices may be addressed. A Company must have the office within 14 days after the date of company registration. It seems that it is acceptable to use a ‘virtual office’, e.g. leasing an office address service from another company that will receive mail for the company, solely for the purpose of meeting this requirement.

B.  Advantages/Disadvantages

Like most private company structures, the shareholders liability is limited to the amount of capital they invested into the business. The company will also be its own legal entity, meaning its debts and liabilities will not directly affect any foreign parent company.

Naturally a full company requires a larger investment to register and must needs to engage Company Secretary, Auditors, Tax Agent & Accounting Clerk to meet the yearly submission requirements.

C.  Registration Steps

1.  Application of Name Search

A name search must be conducted to determine whether the proposed name of the company is available. To do so you must submit Form 13A CA (Request For Availability Of Name), according to the SSM. If there are no conflicts or problems, the proposed name shall be reserved for three months.

It may be a good idea to do a preliminary name search online directly first, which can be done at www.ssm-einfo.my.

Time: 1-2 days

Cost: MYR 30.00

2.  Lodge Incorporation Documents

Incorporation Documents must be submitted to the SSM within 3 months from the date of approval of the company’s name. As stated by the SSM, the following documents are required:

  • Memorandum and Article of Association

Listing the directors, secretaries and subscribers to the company’s shares, who must all sign the Memorandum and Articles of Association in front of a witness.

For a private company, the articles of association must also contain the following stipulations:

(i) Restriction on the right to transfer the company’s shares;

(ii) Limitation on the number of members to not exceed fifty;

(iii) Prohibition to any invitation to the public to subscribe the shares/debentures of the company; and

(iv) Prohibition on public invitation to deposit money with the company.

  • Statutory Declaration By Directors and Shareholders (Form 48A)

The director or promoter declares under oath that he/She is not a bankrupt; and has not been convicted and imprisoned for any prescribed offences.

  • Declaration of Compliance (Form 6)

This states that all the requirements of the CA have been complied with. It must be signed by the company secretary who handles the registration and is named in the Memorandum and Articles of Association.

  • Original copy of Form 13A.
  • A copy of the letter from SSM approving the name of the company.
  • A copy of the Malaysian identity card or passport of each director and company secretary.
  • Residential address of all directors & shareholders

The original copies of the Memorandum and Article of association must be stamped at the SSM (note: according to the Doing Business Project, the stamps had to be done at the Inland Revenue Board (IRB) up until April 01, 2010, but since then the SSM has taken over the duty. Some online sources still reference the IRB however).

Although some sources suggest that a registration can be started and completed within a few days, others suggest that companies founded by foreigners can take about one week to process and then on approval the SSM will issue the Certificate of Incorporation (Form 9) within 1 working day.

Time: 8 days

Cost:

  • Stamp costs 200RM (RM100 for Memorandum and RM100 for Articles), a second set can be stamped at RM10 each.
  • The registration fee depends on the share capital:
AUTHORISED SHARE CAPITAL (RM) FEES (RM)
Up to 400,000 1,000
400,001 – 500,000 3,000
500,001 – 1 million 5,000
1,000,001 – 5 million 8,000
5,000,001 – 10 million 10,000
10,000,001 – 25 million 20,000
25,000,001 – 50 million 40,000
50,000,001 – 100 million 50,000
100,000,001 and above 70,000

3.  Register an Office

Every company must have a registered office in Malaysia to which all communications and notices may be addressed. A company must have its registered office situated in Malaysia within 14 days from the date of company registration.

The company secretary’s office can be nominated as a registered office so long as the secretary is present at the registered office during business hours.

It is also possible to use the services of a virtual office as your registered office.

Time: n/a (no registration process)

Cost: n/a

4.  Open Commercial Bank Account

There are a variety of commercial banks in Malaysia as well as foreign banks such as Barclays, HSBC or Deutsche Bank).

Generally the process is said to be relatively straightforward. Both residents and non-residents of Malaysia are able to open bank accounts, and customers will be required to provide proof of identity and some company documentation. The Expat Forums mentioned that a letter of reference from a current bank could also be helpful in the application process (though this may be more the case for individuals).

The exact procedure will depend on the commercial bank. However, an example provided by HSBC provides a guideline, with the following documents required for subsidiary companies incorporated in Malaysia:

  • Form 24 (Allotment of shares);
  • Form 49 (List of directorship);
  • Form 8 or 9 (Certificate of incorporation of public or private company)
  • Memorandum and articles of association;
  • Form 23 (Certificate of commencement of business) – only for public company/trading license for companies in East Malaysia;
  • Board resolution (BR) for account of a limited company
  • Identity documents of the directors and signatories of the company;
  • Identity documents of the principal shareholders/ultimate beneficial owners of the company.

Time: 1 day/instant

Cost: 1000-5000 (initial deposit requirement)

5.  Register for Goods and Service Tax (GST) with the tax department

GST registration (formerly the sales tax, until April 2015) is mandatory if the annual company turnover exceeds MYR500,000  (approximately U.S. $173,000). NBC reports that GST generally stands at 6%. Foreign businesses that make a taxable supply over the threshold in Malaysia are required to register for the GST. However, exports of goods and services are not subject to GST, according to international tax site, GST.com.

To register you have to complete registration form GST-01. The application can be lodged electronically at www.gst.customs.gov.my and then click “Register for GST”, or in person at a Customs office registration kiosk, or by post to:

  • GST Processing Center
  • Royal Malaysian Customs Department
  • 22, Jalan SS 6/3
  • Kelana Jaya
  • 47301 Petaling Jaya
  • Selangor

According to the Malaysian customs website, documents required include:

  • identification number (usually business registration number as provided by SSM)
  • industry code according to the Malaysia Standard Industrial Classifications (MSIC) 2008 code
  • bank account number (for refunds) and a copy of bank statement
  • percentage on the value of all your supply according to Taxable supply, Local zero rated supply, Export, and Exempt supply.
  • date when company has or will exceed the threshold

Foreign businesses that register for the GST must also nominate who their a local agent is that will deal with all tax related matters

Other company documents are only required upon specific request by Customs.

Upon successful application, you will receive an approval letter which includes a GST registration number and official date of registration.

Strangely, official and many other sources do not mention any processing time. It is implied that the process is either instant or very fast.

Time: 1-3 days (estimation)

Cost: No charges

6.  Register for Payroll Tax

An employer is required to notify the Malaysian Inland Revenue Board (IRB) to register for payroll tax. According to a Malaysian Business guide by KMPG via Form CP22 of the commencement of employment of its employees in Malaysia within one month of the date of commencement of employment, and declare the total remuneration paid to employees for employment performed in Malaysia.

The registration can be completed in person or online at: http://ekl.hasil.gov.my

Generally a copy of the Incorporation Certificate, Register of Directors, Managers and Secretaries, Memorandum and Articles of Association will be required.

Time: 4-5 days

Cost: no charge

7.  Register with Social Security Office (SOCSO)

Employers must be registered with the social security office (SOCSO). Registration of the employer requires submission of Form 1 which can be done online using the MyCoID system (http://www.ssm-mycoid.com.my/web2/), or done in person at SOCSO directly. Whenever they employ an employee who is eligible for social security, they must register the employee with SOCSO each time.

Form 1 (Employers’ Registration Form) may be downloaded at the following link: http://www.perkeso.gov.my

Form 2 (Registration Form for Employees) may be downloaded at http://www.perkeso.gov.my

Registration in person can be done by the employer or employer’s representative – an authorization letter (Surat Akuan Majikan) from the employer is needed if registration is done by the employer’s representative. A sample of an authorization letter can be found at: http://www.perkeso.gov.my/images/dokumen/contoh_surat_akuan_majikan.pdf

Time: 1 day (estimate – no official processing/registration time is reported by SOCSO)

Cost: No known charges

 

Branch Office

A foreign company may establish a branch office in Malaysia by registering with the SSM. A branch office requires a resident agent. The process for establishing a branch office is similar to a subsidiary company.

A.  Requirements/Restrictions

Upon registration of a branch, evidence has to be provided of the legal existence of the parent. The branch must have the same name as the parent company.

While the government generally allows branch offices, PwC’s Malaysian business guide says that apparently wholesale and retail trade branch offices are not allowed.

B.  Advantages/Disadvantages

PwC’s business guide also reports that the repatriation of capital and profits is generally more freely transferred back to the home country, and the winding up of a branch office is more straightforward than a subsidiary company.

However, the parent company is fully liable for the liabilities of the branch, and representatives may be held jointly and severally liable for tax debts. The financial statements of the parent must be lodged at the Companies Registry. The branches obligations are the same as the parent, including filing VAT returns, employee returns and corporation tax returns, so there are few savings in administering a branch. Another disadvantage of setting up a branch office is the higher cost of registration – because the fees are based on the full share capital of the foreign parent company overseas, in foreign currency converted to MYR.

Banks and clients may also prefer dealing with a Malaysian subsidiary company rather than a foreign branch.

A branch may therefore be adequate for low cost projects, but not beneficial for substantial projects.

C.  Registration steps

1. Appoint Resident Agent

A branch of a non-resident company must appoint a resident individual or a company to represent it in its dealings with the tax authorities. The representatives may be held jointly and severally liable for the tax debts of the permanent establishments of non-resident entities, which they represent.

Time: n/a

Cost: n/a

2.  Register Branch at the SSM

According to a report on branch formation by Euro-Firma, evidence has to be provided of the existence of the parent, certified copies of the Articles, the names of the directors, the share capital, the registered office, and the names of the representatives who will act for the company.

Documents will need to be translated to Malay.  The following documents are required:

  • Memorandum and Article of Association

Listing the directors, secretaries and subscribers to the company’s shares, who must all sign the Memorandum and Articles of Association in front of a witness.

For a private company, the articles of association must also contain the following stipulations:

(i) Restriction on the right  to transfer the company’s shares;

(ii) Limitation on the number of members to not exceed fifty;

(iii) Prohibition to any invitation to the public to subscribe the shares/debentures of the company; and

(iv) Prohibition on public invitation to deposit money with the company.

  • Statutory Declaration By Directors and Shareholders (Form 48A)

The director or promoter declares under oath that he/She is not a bankrupt; and has not been convicted and imprisoned for any prescribed offences.

  • Declaration of Compliance (Form 6)

This states that all the requirements of the CA have been complied with. It must be signed by the company secretary who handles the registration and is named in the Memorandum and Articles of Association.

  • Original copy of Form 13A.
  • A copy of the letter from SSM approving the name of the company.
  • A copy of the Malaysian identity card or passport of each director and company secretary.
  • Residential address of all directors & shareholders

The original copy of the Memorandum and Article of association must be stamped at the SSM (note: the stamps had to be done at the Inland Revenue Board (IRB) up until April 01, 2010, but since then the SSM has taken over the duty. Some online sources still reference the IRB however).

Although some sources suggest that a registration can be started and completed within a few days, others suggest that companies founded by foreigners can take about one week to process and then on approval the SSM will issue the Certificate of Incorporation (Form 9) within 1 working day.

Time: 8 days

Cost:

  • Stamp costs 200RM (RM100 for Memorandum and RM100 for Articles), a second set can be stamped at RM10 each.
  • The registration fee depends on the share capital:
AUTHORISED SHARE CAPITAL (RM) FEES (RM)
Up to 400,000 1,000
400,001 – 500,000 3,000
500,001 – 1 million 5,000
1,000,001 – 5 million 8,000
5,000,001 – 10 million 10,000
10,000,001 – 25 million 20,000
25,000,001 – 50 million 40,000
50,000,001 – 100 million 50,000
100,000,001 and above 70,000

 

3.  Register an Office

Every company must have a registered office in Malaysia to which all communications and notices may be addressed. A company must have its registered office situated in Malaysia within 14 days from the date of company registration.

The company secretary’s office can be nominated as a registered office so long as the secretary is present at the registered office during business hours.

It is also possible to use the services of a virtual office as your registered office.

Time: n/a (no registration process)

Cost: n/a

4.  Open Commercial Bank Account

There are a variety of commercial banks in Malaysia as well as foreign banks such as Barclays or Deutsche Bank).

Generally the process is said to be relatively straightforward. Both residents and non-residents of Malaysia are able to open bank accounts, and customers will be required to provide proof of identity and some company documentation. The Expat Forums mentioned that a letter of reference from a current bank could also be helpful in the application process (though this may be more the case for individuals).

The exact procedure will depend on the commercial bank. However, an example provided by HSBC provides a guideline, with the following documents required for subsidiary companies incorporated in Malaysia:

  • Form 24 (Allotment of shares);
  • Form 49 (List of directorship);
  • Form 8 or 9 (Certificate of incorporation of public or private company)
  • Memorandum and articles of association;
  • Board resolution (BR) for account of a limited company

Generally all the documents must be notarized by a notary public and thereafter confirmed by the Malaysian Consulate.

Time: instant/1 day

Cost: 1000-5000MYR (initial deposit requirement), plus notarization fees

5.  Register for Sales and Service Tax with the tax department

GST registration (formerly the sales tax, until April 2015) is mandatory if the annual company turnover exceeds MYR500,000  (approximately U.S. $173,000). GST generally stands at 6%. Foreign businesses that make a taxable supply over the threshold in Malaysia are required to register for the GST. However, exports of goods and services are not subject to GST.

To register you have to complete registration form GST-01. The application can be lodged electronically at www.gst.customs.gov.my and then click “Register for GST”, or in person at a Customs office registration kiosk, or by post to:

GST Processing Center, Royal Malaysian Customs Department, No. 22, Jalan SS 6/3, Kelana Jaya, 47301 Petaling Jaya, Selangor.

Documents required include:

  • identification number (usually business registration number as provided by SSM)
  • industry code according to the Malaysia Standard Industrial Classifications (MSIC) 2008 code
  • bank account number (for refunds) and a copy of bank statement
  • percentage on the value of all your supply according to Taxable supply, Local zero rated supply, Export, and Exempt supply.
  • date when company has or will exceed the threshold
  • Foreign businesses that register for the GST must also nominate who their a local agent is that will deal with all tax related matters

Other company documents are only required upon specific request by Customs.

Upon successful application, you will receive an approval letter, which includes a GST registration number and official date of registration.

Strangely, official and many other sources do not mention any processing time. It is implied that the process is either instant or very fast.

Time: Instant (online)

Cost: no charges

An employer is required to notify the Malaysian Inland Revenue Board (IRB) to register for payroll tax. According to a Malaysian Business guide by KMPG via Form CP22 of the commencement of employment of its employees in Malaysia within one month of the date of commencement of employment, and declare the total remuneration paid to employees for employment performed in Malaysia.

The registration can be completed in person, or online at: http://ekl.hasil.gov.my

Generally a copy of the Incorporation Certificate, Register of Directors, Managers and Secretaries, Memorandum and Articles of Association will be required. If it is certificates from a foreign parent company, then it will also need to be notarized copies.

Time: n/a

Cost: no charges

6.  Register with Social Security Office (SOCSO)

Employers must be registered with the social security office (SOCSO). Registration of the employer requires submission of Form 1 which can be done online using the MyCoID system (http://www.ssm-mycoid.com.my/web2/), or done in person at SOCSO directly.

Whenever they employ an employee who is eligible for social security, they must register the employee with SOCSO each time.

Registration in person can be done by the employer or employer’s representative but an authorization letter (Surat Akuan Majikan) from the employer is needed if registration is done by the employer’s representative. A sample of an authorization letter can be found at: http://www.perkeso.gov.my/images/dokumen/contoh_surat_akuan_majikan.pdf

Time: 1 day (estimate – no official processing/registration time is reported by SOCSO)

Cost: No known charges

 

Representative/Regional Office

A foreign company that only wishes to represent its head office, usually by authorizing a local principal agent to undertake certain activities, but not engage in any commercial activities may opt to register as a representative or regional office.

A representative office is an office approved to collected information on investment opportunities, trade relations, promote Malaysian exports or perform research and development in Malaysia. Meanwhile, a regional office is authorized as the parent company’s coordinator of any of its agents in the Southeast Asia and Asia-Pacific area, under the direction of its parent.

A.  Requirements / Restrictions

The representative office may not engage in commercial activities, and any Malaysian operations shall be completely funded by the parent company.

While a representative/regional office doesn’t not need to be incorporated, it does need approval from a relevant authority body. It is also required to appoint a Chief Representative to manage the representative office on a full time basis. Staffing is possible but should be kept to a minimum. In particular, each representative office is allowed to employ only one expatriate staff at any point of time, although this number may vary depending upon the type of office and industry.

Generally, an approved representative/regional office is allowed to:

  • Planning or coordination of business activities
  • Gathering and analysis of information or undertaking feasibility studies on investment and business opportunities in Malaysia and the region
  • Identifying sources of raw materials, components or other industrial products
  • Undertake research and product development
  • Act as a coordination center for the corporation’s affiliates, subsidiaries and agents in the region
  • Undertake other activities which will not result directly in actual commercial transactions

Activities not allowed include:

  • Be engaged in any trading (including import and export), business or any form of commercial activity
  • Leasing warehousing facilities; any shipment / transshipment or storage of goods shall be handled by a local agent or distributor
  • Sign business contracts on behalf of the foreign corporation or provide services for a fee
  • Participate in the daily management of any of its subsidiaries, affiliates or branches in Malaysia

B.  Advantages/Disadvantages

Generally, this kind of structure is used as an easier method to explore business opportunities in Malaysia.

Naturally, due to the inherent restrictions, it is not useful for any other options and any business wishing to take the next step will still need to proceed with a branch office or subsidiary at some point.

C.  Registration Steps

1.  Appoint a Chief Representative

A representative office is required to appoint a Chief Representative to manage the representative office on a full time basis. This doesn’t need to be formally registered but should be decided upon before registering the representative/regional office.

Time: n/a

Cost: n/a

2.  Application to Trade Authority

A foreign institution applying to set up a representative/regional office in Malaysia is required to complete and submit an application to the appropriate authority based on its industry. For example, for manufacturing, it is the Malaysian Industrial Development Authority (Manufacturing Services Division)

(http://www.mida.gov.my/), banking and financial services, Bank Negara Malaysia (http://www.bnm.gov.my/) and for tourism services, contact the Ministry of Tourism, Malaysia (http://www.tourism.gov.my/de-de/de). This must generally be done together with the following documents:

  • A copy of the memorandum and articles of association or other constituent documents under which the applicant is established, duly verified by a statutory declaration made by a director of the applicant;
  • A copy of the latest audited balance sheet of the applicant;
  • A letter of approval from the home supervisory authority of the applicant on its proposed establishment of a representative office in Malaysia

The authority may require additional documents or information as deemed necessary to facilitate the application.

Time: 60 days

Cost: 5000MYR

3.  Register an Office

Every company must have a registered office in Malaysia to which all communications and notices may be addressed. Generally, the registered office must be reported within 14 days from the date of company registration. For a representative office, a letter must be sent to the appropriate trade authority confirming the address of the office.  It should also be possible to use the services of a virtual office as your registered office.

Time: 3 days – 1 week (estimate)

Cost: no charges

4.  Open Commercial Bank Account

There are a variety of commercial banks in Malaysia as well as foreign banks such as Barclays, HSBC or Deutsche Bank).

Generally the process is said to be relatively straightforward. Both residents and non-residents of Malaysia are able to open bank accounts, and customers will be required to provide proof of identity and some company documentation. The Expat Forums mentioned that a letter of reference from a current bank could also be helpful in the application process (though this may be more the case for individuals).

The exact procedure will depend on the commercial bank. However, an example provided by HSBC provides a guideline, with the following documents required for subsidiary companies incorporated in Malaysia:

  • Form 24 (Allotment of shares);
  • Form 49 (List of directorship);
  • Form 8 or 9 (Certificate of incorporation of public or private company)
  • Memorandum and articles of association;
  • Form 23 (Certificate of commencement of business) – only for public company/trading license for companies in East Malaysia.

Generally all of these documents must be notarised by a notary public and thereafter confirmed by the Malaysian Consulate.

In addition:

  • Original copy of the approval letter from the trade authority (e.g. Malaysia’s Ministry of Trade & Industry;
  • copy of the letter from the company addressed to the trade office confirming the registered address of the representative office.

Time: 1 day/instant

Cost: 1000-5000MYR (minimum deposit requirement)

5.  Register for Payroll Tax

If employing people, it is required to then notify the Inland Revenue Board (MIRB) via Form CP22 of the commencement of employment of its employees in Malaysia within one month of the date of commencement of employment, and declare the total remuneration paid to employees for employment performed in Malaysia.

The registration can be completed in person or online at: http://ekl.hasil.gov.my

Generally a copy of the Incorporation Certificate, Register of Directors, Managers and Secretaries, Memorandum and Articles of Association will be required.

Time: n/a

Cost: no charge

6.  Application for Expatriate Post

If sending/employing an expatriate for the purposes of the representative/regional office, you must submit an application and documents to the appropriate authority based on its industry. For example, for manufacturing, it is the Malaysian Industrial Development Authority (Manufacturing Services Division) (http://www.mida.gov.my/), banking and financial services, Bank Negara Malaysia (http://www.bnm.gov.my/) and for tourism services, contact the Ministry of Tourism, Malaysia (http://www.tourism.gov.my/de-de/de).

As a general guide, the following documents should be submitted together with the application:

  • Certified true copy of passport containing particulars of the expatriate;
  • Curriculum Vitae of the expatriate to be employed; and
  • Certified Academic Qualification of the expatriate.

The authority may require additional documents or information as deemed necessary to facilitate the application.

Official sites (such as Malaysian Industrial Development Authority) provide guidelines for registering an expatriate post, but do not mention any fees or timeframes. At this point in time it is inferred there is no charge, and the processing time varies.

Time: 1-2 weeks (estimate)

Cost: no known charge

7.  Register with Social Security Office (SOCSO)

Employers must be registered with the social security office (SOCSO). Registration of the employer requires submission of Form 1, which can be done online using the MyCoID system (http://www.ssm-mycoid.com.my/web2/), or done in person at SOCSO direclty.

Whenever they employ an employee who is eligible for social security, they must register the employee with SOCSO each time.

Registration in person can be done by the employer or employer’s representative but an authorization letter (Surat Akuan Majikan) from the employer is needed if registration is done by the employer’s representative. A sample of an authorization letter can be found at: http://www.perkeso.gov.my/images/dokumen/contoh_surat_akuan_majikan.pdf

Time: 1 day (estimate – no officail processing/registration time is reported by SOCSO)

Cost: No known charges

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Malaysia, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Malaysia they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities.  A GEO Employer of Record solution is an attractive alternative where

  • the company is looking to setup an office quickly
  • the company wants to work within a defined budget
  • the company wants to limit its initial commitment in Malaysia the company needs help with tax, employment, immigration and payroll compliance in Malaysia

The complexity of employment regulations in Malaysia makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Malaysia allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf Malaysia.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Malaysia. Read more about outsourced employment through Shield GEO.

Summary of Set Up Steps

Rep/Reg. Office Branch Office Subsidiary Company Time Cost (MYR)
Reserve a Name No No Yes 1-2 days 0
Appoint a representative Yes Yes No N/A N/A
Lodge Incorporation Documents No Yes Yes 8 days 1200-70200
Apply at Trade Authority Yes No No 60 days 5000
Register for Goods & Services Tax (GST) No Yes Yes 1-3 days 0
Establish Office No Yes Yes N/A N/A
Open Corporate Bank Account No Yes Yes Instant 0
Register for Payroll Tax No Yes Yes 1-2 weeks 0
Register for Social Security No Yes Yes 1-2 days 0
Apply for Expatriate Post Yes No No 1-2 weeks 0
TOTALS:

*applications and processing times, not including internal document preparation, etc

Rep/Reg.

67-74 days

MYR 5000

Branch

17-27 days

 

MYR 1200-70200

Subsidiary

18-29 days

 

MYR

1200-70200

Conclusion

According to the PwC Doing Business in Malaysia guide, most foreign businesses incorporate a subsidiary company, with most being public or private companies limited by shares.

Branch offices are relatively flexible and easy to set up for less substantial products, and do not restrict repatriation of profits, however companies that are entering Malaysia solely for construction projects tend to enter joint ventures.

Representative/regional offices can be a good way to observe the market and determine future strategies, but overall are the least preferred option due to the restrictions on activities to be carried out. Despite not requiring incorporation, they still require approval from the Malaysian government, which can be a lengthy process.

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