7 Tips You Must Know Before Investing in Malaysia

1. Incorporating A Company

Methods of Conducting Business in Malaysia

In Malaysia, a business may be conducted:

  • By an individual operating as a sole proprietor, or
  • By two or more (but not more than 20) persons in partnership, or
  • By two or more partners forming limited liabilities partnership; or
  • By a locally incorporated company or by a foreign company registered under the provisions of the Companies Act, 2016.

All sole proprietorships and partnerships in Malaysia must be registered with the Companies Commission of Malaysia (CCM) under the Registration of Businesses Act, 1956. In the case of partnerships, partners are both jointly and severally liable for the debts and obligations of the partnership should its assets be insufficient. Formal partnership deeds may be drawn up governing the rights and obligations of each partner but this is not obligatory.

Partnership can also register Limited Liability Partnership Act 2012 which provide the partners a limited liabilities but in a form of partnership arrangement.

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2. Company Structure

The Companies Act, 2016 of Malaysia stipulates that a company must be registered with the CCM in order to engage in any business activity. It governs for the following types of companies:

  • Limited by shares

A company limited by shares where the personal liability of its members is limited to the amount and number of shares taken or agreed to be taken by them.

  • Limited by guarantee

A company limited by guarantee where the members guarantee to meet liability up to an amount undertake to guarantee in the constitution in the event of the company being wound up.

  • Unlimited

An unlimited company, where there is no limit to the members’ liability.

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3. Intellectual Property Protection

Intellectual property protection in Malaysia comprises patents, trademarks, industrial designs, copyrights, geographical indications and layout designs of integrated circuits. Malaysia is a member of the World Intellectual Property Organization (WIPO) and a signatory to the Paris Convention and Berne Convention which govern these intellectual property rights.

In addition, Malaysia is also a signatory to the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) signed under the auspices of the World Trade Organization (WTO). Therefore, Malaysia’s intellectual property laws are in conformance with international standards and provide adequate protection to both local and foreign investors.

 4. Passport and Visa Requirements

All persons entering Malaysia must possess valid national passports or other internationally recognized travel documents valid for travel to Malaysia. These documents must be valid for at least six months from the date of entry into Malaysia. Those with passports not recognized by Malaysia must apply for a document in lieu of the passport as well as a visa issued by Malaysian Embassies or Consulate offices abroad. Applications for visas can be made at the nearest Malaysian Embassies or Consulate offices abroad.


5. Visa Requirements by Country

Commonwealth countries that require visa
– Bangladesh
– Cameroon*
– Ghana*
– Pakistan
– Nigeria*
– Mozambique*

Visa Requirements for other countries

Afghanistan (Visa with reference), Equat. Guinea*, Myanmar, Angola*, Eritrea*, Nepal, Bhutan, Ethiopia*, Niger*, Burkina, Faso*, GuineaBissau*, Rwanda*, Burundi*, Hong Kong (C.I/D.I), Serbia Montenegro, Central African Republic*, India Sri Lanka, China, Israel**, United Nation  (Laissez Passer), Colombia*, Ivory Coast (Cote d’ivoire)*, Western Sahara*, Congo Democratic Republic*Liberia*,Yugosalavia, Djibouti*

Note:

  • For the countries marked as ( * ) are allowed to enter Malaysia by air only.
  • Israel citizen** who wish to enter are required Visa and approval from Ministry Of Home Affairs, Malaysia.
  • Visa is not required for a stay of less than one (1) month for ASEAN nationals except Myanmar.
  • Visas are required for duration of stay exceeds (1) month except for Brunei and Singapore nationals.

Yellow Fever certificate is required to be produced upon landing in
Malaysia for countries as listed below:

Angola, Benin, Bolivia, Brazil, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Djibouti, Equador, Guinea, Eritrea, Ethiopia,Gabon,  Gambia, Ghana, Guinea-Bissau, Kenya, Mali, Niger, Nigeria, Panama, Peru, Rwanda, Sao Tome & Principe, Senegal, Sierra Leone, South Africa, Sri Lanka, St Kitts & Nevis, Suriname, Tanzania, Togo, Uganda, Venezuela, Zaire, Zambia

6. Employment of Expatriate Personnel

The Malaysian Government is desirous that Malaysians are eventually trained and employed at all levels of employment. Thus, companies are encouraged to train more Malaysians so that the employment pattern at all levels of the organizations reflects the multi-racial composition of the country.

Notwithstanding this, where there is a shortage of trained Malaysians, foreign companies are allowed to bring in expatriate personnel. In addition, foreign companies are also allowed “key posts”, that is, posts that are filled by foreigners in long term through renewable employment pass.

To further improve Malaysia’s investment environment and promote technology transfer and the inflow of foreign skills into Malaysia, the Government has further liberalised the policy on the employment of expatriate personnel.

All applications for expatriate posts from companies in the manufacturing and manufacturing related services sectors have to be submitted to MIDA.

Applications under the following categories will be processed within seven working days:

  • New or additional expatriate posts by existing manufacturing companies, Operational Headquarters (OHQ), International Procurement Centres (IPC) and Regional Distribution Centres (RDC).
  • Change of conditions for the approved expatriate posts such as academic qualifications and years of experience for OHQ, IPC and RDC companies.
  • Extension of the duration of posts.
  • Change of name of posts.
  • Transfer of posts to a related or sister company following the restructuring of the company.
  • Surrender of the posts approved but not filled.

The guidelines on the employment of expatriate personnel

  • Manufacturing companies with foreign paid-up capital of US$2 million and above:
  • Automatic approval for up to 10 expatriate posts, including five key
    posts.
  • Manufacturing companies with foreign paid-up capital of more than
    US$200,000 but less than US$2 million

Automatic approval for up to five expatriate posts, including at least one key post.

  • Manufacturing companies with foreign paid-up capital of less than
    US$200,000:

Key posts can be considered where the foreign paid-up capital is at least RM500,000.

The number of key posts, executive posts and non-executive posts allowed depends on the merits of each case.

Guidelines for the Manufacturing Related Services Sector

  • Regional Establishments

For Operational Headquarters (OHQ), International Procurement Centres (IPC) and Regional Distribution Centres (RDC), the approval for expatriate posts including key posts will be granted according to the company’s requirements subject to the condition that the company has a minimum paid-up capital of RM500,000.

  • Support Services

For Integrated Logistic Services (ILS), Integrated Market Support Services (IMS), Central Utility Facilities (CUF) and Cold Chain Facilities (CCF), key posts can be considered subject to the condition that the company has a minimum paid-up capital of RM500,000.

  • Contract Research & Development (R&D) Company, R&D Company
    and In-House R&D

For foreign-owned companies, the number of expatriate posts considered is based on the ratio of one expatriate to one Malaysian R&D personnel. For Malaysian-owned companies, the number of expatriate posts considered is based on the company’s request.

  • ICT (Software Development Companies)
    • Key posts are considered subject to the ratio of one key post to five Malaysians in the relevant technical field.
    • The company is required to employ at least five fulltime Malaysian staff with technical or degree qualifications in the field of software development.

Academic qualifications and working experience as proposed by the company will be imposed as conditions of approval.

  • Hotel & Tourism Projects, Technical & Vocational Training Institutions & Other Services (Storage, Treatment And Disposal Of Toxic And Hazardous Wastes, Energy Conservation, Renewable Energy Resources And Film Or Video Production & Post Production)

All applications for expatriate posts will be considered by MIDA subject to similar conditions stipulated for the manufacturing sector.

For all executive and non-executive posts, Malaysians must be trained to eventually take over.

All executive and non-executive posts approved will be subject to conditions on qualifications and/ or experience as proposed by the company.

Companies whose applications have been rejected can submit an appeal to the Chairman of MIDA.

Let us know if you need our help on applying the license!

7. Malaysia’s Labor Force and Costs

Labor Force
Malaysia offers the investor a diligent, disciplined, educated and trainable labor force. Malaysian youths who enter the labor market would have undergone at least 11 years of school education i.e. up to secondary school level, and are therefore easy to be trained in new techniques and skills.

To cater to the manufacturing sector’s expanding demand for technically trained workers, the Malaysian Government has taken measures to increase the number of engineers, technicians and other skilled personnel graduating each year from local as well as foreign universities, colleges, and technical and industrial training institutions.

In addition, Malaysia enjoys a free and competitive labor market where employer-employee relationship is cordial and harmonious. Labor costs in Malaysia are relatively low while productivity levels remain high in comparison with industrialized countries.

Labor Costs

Generally, wages in Malaysia are not regulated and it is dependent on the demand and supply of the market forces.

The Minimum Wages Order 2012 had laid down the minimum wages to be paid for all employees who fall within the First Schedule of the Employment Act 1955. Minimum wages is defined as basic wages, excluding any allowances or other payments.

The minimum wages of RM900 was set for Peninsular Malaysia and RM800 for Sabah, Sarawak and Labuan. No employer shall pay below the stipulated amount. All local and foreign employees shall be entitled to receive the minimum wages as per the Order.

Meanwhile, wage rates vary according to location and industrial sector, while supplementary benefits, which may include bonuses, free uniforms, free or subsidized transport, performance incentives and other benefits, vary from company to company.

Salaries and fringe benefits offered to management and executive personnel also vary according to the industry and employment policy of the company. Most companies provide free medical treatment, personal accident and life insurance coverage, free or subsidized transport, an annual bonus, retirement benefits and enhanced contributions to the Employees Provident Fund.

Outsource your Payroll and Staffing Issues to us!

Why Invest In Malaysia

Economic Strength

  • Natural resources – oil, gas, tin, timber, palm oil, rubber
  • GDP growth – 5.5-6% (2018)
  • Unemployment rate – 3.2-3.5%
  • Inflation(CPI) – 2.0-3.0%
  • Net FDI: RM39.2bil in 2017 (2016: RM47.2bil)
  • International reserves: USD103.9 billion (as at 15 March 2018), 7.3 months of retained imports and 1.1 times the short-term external debt.
  • Ringgit: Appreciated by 10.4% against USD in 2017
  • OPR: Unchanged at 3.00% in 2017 (2016: 3.00%)

Supportive Government Policies

  • Pro-business policies
  • Responsive Government
  • Liberal investment policies
  • Attractive tax and other incentives
  • Liberal exchange control regime
  • Intellectual property protection

An Educated Workforce

  • Talented, young, educated and productive workforce
  • Multilingual workforce speaking two or three languages, including English
  • Comprehensive system of vocational and industrial training, including advanced skills training
  • Harmonious industrial relations with minimal trade disputes

Developed Infrastructure

  • Network of well-maintained highways and railways
  • Well-equipped seaports and airports
  • High quality telecommunications network and services
  • Fully developed industrial parks, including free industrial zones, technology parks and Multimedia Super Corridor (MSC)

A Vibrant Business Environment

  • Market-oriented economy
  • Well-developed financial and banking sector, including the Labuan International Offshore Financial Centre
  • Wide use of English, especially in business
  • Legal and accounting practice based on the British system
  • Large local business community with long history in international business
  • Large foreign business community in all business sectors

Quality of Life

  • Friendly and hospitable Malaysians
  • Safe and comfortable living environment
  • Excellent housing, modern amenities, good healthcare and medical facilities
  • Excellent educational institutions including international schools for expatriate children
  • World-class recreational and sports facilities
  • Excellent shopping with goods from all over the world

Interested to invest in Malaysia, talk to our professional team today!

Malaysian Taxation in Brief

In Malaysia, income is taxable on modified territorial basis. Generally, any income accruing in or derived from Malaysia is taxable locally notwithstanding the fact that the income may not have been received in Malaysia. However, a foreign source income received is exempted from income tax with the exception of resident companies carrying on business of sea/ air transport, banking or insurance which are assessable on a world income scope.

Revenue income receipts are chargeable to income tax whereas capital receipts are not.

A resident individual is subject to income tax at scale rates of 0% to 28% with effect from year of assessment (YA) 2016 on his chargeable income. Resident individual is entitled to personal reliefs. An individual is regarded as tax resident based on his number of days stayed in Malaysia. Basically, he has to be in Malaysia for at least 182 days in a calendar year to be considered as resident for tax purposes.

The self-assessment system (SAS) for individuals (include salaried individuals and sole proprietors) and for partnerships was implemented with effect from YA 2014. Under the SAS taxes are collected from employees through monthly deductions from salary under the Scheduler Tax Deduction (STD) system. Individuals having business income are required to pay their income tax liability through bi-monthly instalments.

Individuals are required to file their completed income tax return forms to the Inland Revenue Board (IRB) together with the payment of the balance of tax payable, if any. The tax filing deadline is 30 April of the following year for individuals with no business income; and 30 June of the following year for individuals carrying on business.

A non-resident individual is liable to income tax at a flat rate of 28% with effect from YA2016. Non-resident individual is not eligible for personal reliefs. However, non-resident individual is exempt from tax on employment of 60 days or less.

For YA 2017 and YA 2018, a resident company is subject to corporate tax rate of 20% to 24%. Small and medium enterprise (SME), i.e. a resident company with paid up capital of RM2.5 million and below at the beginning of basic period is subject to corporate tax rate of 18% on first RM500,000 chargeable income and 20% to 24% on subsequent chargeable income. A company is tax resident in Malaysia if its management and control is exercised in Malaysia. Management and control is generally considered exercised in the place where board of directors meeting is held.

A non-resident company is subject to corporate tax rate of 24%, with effect from YA 2016.

The SAS for companies came into effect from YA2001.
Under the SAS, every company is required to determine and submit in a prescribed Form CP204 an estimate of its tax payable for a YA, 30 days before the beginning of the basis period. When the estimate of tax payable has been submitted to the IRB, the company is required to remit this amount to the IRB in 12 equal monthly instalments. Each monthly instalment is due and payable to the IRB by the 15th day of the following month. Under SAS, all companies must file the tax returns within 7 months from the end of the accounting period.

Non-resident individuals and companies are subject to the following withholding tax:

Type of Income Rate %
Royalty 10
Rental of moveable properties 10
Technical or management service fees 10
Interest 15
Public entertainer 15
Contract Payment on:-
– contractor
– employee
10
3
Other income such as commission, guarantee fee,
agency fees and etc
10

Where the recipient is a resident of a country which has a double tax treaty with Malaysia, the above withholding tax rates may be reduced.

Wish to know more about Malaysian taxation, contact us today….

Government Grants

A grant is a sum of money given to an individual or business for a specific project or purpose. A grant usually covers only part of the total project costs involved.

Grant applicants normally are not required to provide collateral or give up equity in their company in order to obtain the grant. In addition, there is no need for repayment of the grant amount nor are there interest payments on the grant principal.

Government offers various grants to encourage Malaysian companies especially Small and Medium Enterprise (“SMEs”) for product, process and quality improvement, market and business development, skill upgrading and acquisition of strategic technology, among others.

Government grants are almost always awarded for a specific purpose or project and are usually for proposed projects only and not for those that have already started.

However, getting financial support can be tough. There will be strong competition and the criteria for awards are stringent. The application for grants is complex as it is a constantly changing legislation. It is an area that requires grant specialist input.

Some major grants offered are for:

  • Product and Process Improvement
  • Certification And Quality Management System
  • Development and Promotion of Halal Products
  • Market Development
  • Brand Promotion
  • Research And Development

K-Konsult is a grant specialist to assist clients obtain the maximum effect from government grant while minimizing the time and effort involved for clients. We constantly update the knowledge of every detail of this wide-ranging subject.

Familiarity with legislations and requirement means application are precisely formulated and targeted. The chances of success are high. This is grounded in a professional approach to the subject and intensive contacts with authorities.

K-Konsult helps clients to assess their eligibility requirements and the chances of obtaining grants and other important criteria related to the grant application.

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Why Outsourcing?

There are countless reasons why an organization should consider outsourcing. Here are some of the most popular ones:

  • Cost Saving

One of the most compelling tactical reasons for outsourcing is access to outside providers’ lower cost structure, which may be the result of greater economies of scale. Savings indirectly occur via lowered benefits, training and education costs associated with full-time in-house positions. Reducing an organization’s operating cost increases its competitive advantage.

  • Flexibility

Every organization has limits on the resources available to it. Outsourcing non-core functions sets up a framework for an outside expert to assume responsibility for operational details. This permits an organization to redirect its resources, most often people resources, from non-core activities to ones that have the greatest impact on the business.

  • Strategic Focus

Outsourcing removes the burden of hiring and supervising employees, and eliminates the day-to-day responsibilities which accompany managing a full-time staff. With better allocation of time, attention and resources, organizations focus more on growing the core business and less on managing employees.

  • Gain Access to Expert

Outsourcing providers bring extensive world-class capabilities. Because of the nature of their specialization and their own core activities, outsourcing providers bring extensive ingenuity and talent, which gives organizations a competitive advantage.

Need to know more how can we assist you on Business Process Outsourcing?

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