Many businesses are looking for expansion to additional emerging market locations in this world economy. For example, Malaysia, an energetic and complex country situated in South East Asia, constitutes one of those markets that have attracted remarkable interest. Undoubtedly, Malaysia has emerged as a preferred home for investments due to its robust economic development, conducive policies, and enviable location.
Particularly, many incorporated companies in Hong Kong have exhibited a strong aspiration of establishing within Malaysia. This can be seen with the increasing rate of Hong Kong based businesses that are establishing in its land. A guide targeting Hong Kong-based companies that intend to expand their operations to Malaysia. This paper discusses the primary elements and measures entailed to company setup Malaysia for the Hong Kong firms.
Why Incorporate in Malaysia?
It would always be important to be aware of why Malaysian becomes the top destination for companies looking into expansion. Here are some of the key reasons:
- Strategic location: Malaysia enjoys a strategic position within the heart of Southeast Asia providing a gateway into the ASEAN market whose combined population exceeds half a billion people.
- Strong economic growth: For many years, the economy of Malaysia has posted stable and strong growth rates which make the country an ideal target for many investors.
- Business-friendly policies: To attract foreign investors, Malaysia has put measures to include tax breaks, simplified business procedures, industrial liberalization among others.
- Diverse and skilled workforce: Given that Malaysia has a well-educated and multilingual manpower makes it the best place for business looking forward to getting a pool of talented workers.
Bearing this into consideration, the above fact is not surprising why a large number of Hong Kong businesses consider Malaysia as their next growth target. Therefore, taking the discussion further on how to form a company in Malaysia.
Step 1: Choosing the Right Business Structure
First, you have to select a preferred business entity that is most appropriate for your company operations in Malaysia. There are options available for setting up a private limited company, branch office, or representative office for the Hong Kong firms.
- Private Limited Company: It is the most preferred and suitable alternative for any prospective international investor intending to establish operations in Malaysia. Shareholders of a private limited company are provided with limited liability shielding, while one hundred percent ownership is granted to foreigners.
- Branch Office: Branches are extensions of the parent company and do not constitute separate legal entities. It is required under the laws and rules of its home jurisdiction, and it must appoint at least one resident agent in Malaysia.
Learn more about Understanding Nominee Directors and Shareholders in Malaysia.
However, a branch office cannot engage in trading or retail activities.
- Representative Office: In Malaysia, a representative office cannot engage in any commercial activity except as an agent for its parent company to interact with its customers and suppliers. Additionally, it has to have at least one appointed resident agent in Malaysia.
Step 2: Meeting the Requirements
After that, you should meet the mandatory conditions provided by the government of Malaysia toward the ideal business model. These include:
- Minimum Share Capital: The minimal share capital for a private limited Company is RM1. Nonetheless, a minimum of RM50,000 recommended to have for initial costs and business operations.
- Local Director: Each company in Malaysia should have one local director, being either Malaysian citizens or permanent residents of this country.
- Registered Address: Malaysian laws require every company to have a registered address that can either be physical or virtual.
- Business Name Approval: The proposed business name must pass evaluation by Malaysia’s Companies Commission (SSM) before incorporation.
Step 3: Registering the Company
Then you should proceed to register your firm at the SSM after meeting all the requirements. A registrant may choose to do so either by visiting a SSM office or through their MyCoID portal which is an internet based procedure.
- Online Registration: You will have to create an account in MyCoID portal before uploading the requested documents and paying for them. It will register a company in one business day.
- In-Person Registration: Should you prefer registration in person, a proof of residence and payment would be required at the SSM offices. It may even take time for a period of two weeks in order to complete the registration process.
Step 4: Obtaining Necessary Licenses and Permits
In Malaysia, some industries demand business firms to register for particular licenses or permits prior to operating. These include:
- Business License: All companies should have a business license from the local authority of the place they are operating in.
- Industry-Specific Licenses: When establishing a business in Kenya, there are many factors that will affect your operations; they include securing an additional license/permit from such bodies as the Department of Environment or National Pharmaceuticals Regulatory Agency depending on your field of specialization.
Step 5: Application of work visa – Employment Pass
The Malaysian Development Investment Authority in Malaysia has outlined various types of work visas depending on the case. The most commonly issued one is the Malaysian Employment Pass.
The MM2H programme will be of assistance if you plan to spend some time in Malaysia. The Malaysian government allows these people to live and invest in Malaysia on a permanent basis. Nevertheless, they do not have permission to carry out any employment practices in Malaysia apart from those with special working allowances.
There are different forms of working passes depending on what kind of job and skills you have.
Employment Pass: This pass caters for employees who possess special skills and usually, they work in managerial or technical positions. Usually, the minimum duration is 2 years.
Temporary Employment Pass: Short-term issued for employment not exceeding 2 years and monthly salary below MYR 5,000.
Professional Visit Pass: Documents issued to foreign nationals staying with the employer’s firm at the home-country and required to perform specific functions for a maximum period of six months.
Read A Comprehensive Guide to Obtaining an Employment Pass in Malaysia to learn more about the Employment Pass.
What to do after setting up a company in Malaysia as a foreigner?
Running a business smoothly as a foreign begins by observing the laws of Malaysia and becoming accustomed to it. Therefore, if you understand the required stages which involve having the necessary permits, license and complying with regulatory requirements, then you will comfortably maneuver through the Malaysian environment and place your business in a good competitive position amid the dynamism it offers.
Opening a Corporate bank account
The basic requirements for opening a business account in Malaysia include:
- The filled-in application and the bank
- Introduction letter and reference from one of the bank’s current customers (some banks do not require this)
- Copies of the identifications of company directors and authorized signatures
- Certified true copies of the Certificate of Incorporation
- List of authorized signatories and resolution by the Board on opening the account
- Section 78 – Return of allotment of shares
- List of directors (section 58)
- Registered office address (section 46)
- Company’s Constitution
- Certificate of incorporation (section 17)
We advise you to engage FastLane services to facilitate the process of application with a bank and opening an account for your foreign entity.
Registration of EPF and SOCSO
Following the incorporation of a company in Malaysia as a foreigner; this is where you will be looking to employ local workers. Learn more about Recruiting in Malaysia: A Comprehensive Guide here. The Company MUST register the Employees Provident Fund (EPF) profile with a company within 7 days upon hiring of the first employee.
Employers are mandated to register the EPF in order to pay retirement benefits according to the employee’s monthly salary.
Another thing that ought to be included in the profile of job description is the SOCSO profile because it is an organization established to offer social security cover to individuals in the private sector under the provisions of the Employees’ Social Security Act, 1969.
Learn more about Payroll Processing and Administration Guide in Malaysia. For hassle free HR administrative tasks and payroll services, contact FastLane.
Registration with Inland Revenue Board (LHDN)
Thereafter you have to provide a registration of your Company profile towards the Inland Revenue Board (LHDN). A Company needs to ensure that the tax returns are filed on an annual basis while there is also the mandatory MTD process for the employee monthly salaries.
The provision for a MTD reduces compensation of the present remuneration package. The purpose of these deductions is to reduce the financial burden for employees who have to make a one-off payment at the end of the year in order for the authorities to determine the true value of tax that they should pay.
Annual Business Reporting
Submissions that are required for companies in Malaysia include the Annual Report and Financial Statements pursuant to the Companies Act 2016. Mandatory filings through MBRS involving reporting of business specifics, directors and shareholders data as well financial statements on summary basis.
For Malaysian Sdn Bhd, compliance takes place annually and it incorporates tasks such as financial reporting, estimate, and filing of taxes, preparing of audited financial statements, and filing of returns not later than the stipulated times and submission deadline. It is important to abide by these commitments, certified by auditors and the registrant to ensure possible fines of and daily penalty charges for delays. Hiring third party auditors and company secretary enables firms to grow without disregarding legislative statutes.
With its strategic location, fast economic development, good policies, and educated labor force, Malaysia is one of the best places in the world for conducting business activities. So, why wait? Begin an enterprise growth path in Malaysia now! Contact FastLane Group.