Location
Population
Language
The official
language is Bahasa Malaysia
Religion
Islam is the
national religion although the Federal Constitution provides for the freedom of
worship for other religious groups.
Currency
The local
currency is Ringgit Malaysia (RM).
Banking and Finance
Bank Negara
International Investment
Government Incentives
Tax
incentives are provided under the Promotion of Investments Act 1986, Customs
Act 1967, Real Property Gains Tax Act 1976, Service Tax Act 1975, Sales Tax Act
1972, Excise Act 1976, Free Zones Act 1990 and the Income Tax Act 1967. The
main incentives are as follows:
- Pioneer status
- Investment tax allowance
- Reinvestment allowance
- Industrial building allowance
- Deduction for promotion of
exports
- Operational headquarters
- Regional distribution centres
Other
incentives
- Exemption from import duty on
raw materials / components
- Drawback of import duty, sales
tax and excise duty
- Sales tax exemption
The Federal Territory of Labuan comprises seven
small islands of which Pulau Labuan is the largest. Labuan
is some ten kilometers off the coast of the East Malaysian state of Sabah . The Federal Territory of Labuan is part of Malaysia Malaysia Kuala Lumpur
The following statutes apply:
·
Labuan Offshore Financial Services Authority Act 1996
·
Labuan Offshore Business Activity Tax Act 1990
·
Offshore Companies
Act 1990
·
Offshore Banking
Act 1990
·
Offshore Insurance
Act 1990
·
Labuan Trust
Companies Act 1990
·
Labuan Offshore Trusts Act 1996
·
Labuan Offshore Limited Partnerships Act 1997
·
Labuan Offshore Security Industry Act 1998
·
Anti-Money
Laundering Act 2001
In addition,
the Labuan Offshore Financial Services Authority (LOFSA) has been established
as the sole regulatory body to promote and develop Labuan
as an IBFC.
Activities
which are prompted and accorded preferential tax treatment in Labuan
include the following:
·
Offshore banking operations
·
Trust and fund management
·
Offshore insurance and offshore
insurance related business
·
Offshore investment holding
companies
Business in Malaysia
Forms
of Business
·
Sole proprietorship
·
Partnership
·
Locally incorporated company or by a
foreign company (branch office)
Besides the
above-mentioned types of businesses, representative offices are also allowed to
be set up in Malaysia
Sole Proprietorships
and Partnerships
Sole
proprietors and partners are personally liable for the debts of the business.
All sole proprietorships and partnerships must be registered with the Companies
Commission of Malaysia (CCM) under the Registration of Businesses Act 1956.
However, no foreign individuals or companies (whether locally incorporated or
foreign) can be registered as a sole proprietor with the CCM. In addition, CCM
does not permit companies (whether locally incorporated or foreign) or foreign
individuals to be registered as partners in a partnership. The present laws of Malaysia Labuan , under
the Labuan Offshore Limited Partnerships Act 1997.
It is,
however, worthy to note that the CCM has recently issued a consultative
document to introduce the concept of limited liability partnership (LLP) in Malaysia
The proposal
was intended to complement the existing forms of business vehicles by providing
a wider choice for businesses to structure their operations. The proposed LLP
will offer a combination of limited liability for its members and the
flexibility of the partnership arrangement for the internal arrangement of its
business. This means the members of the LLP are allowed to take an active role
in the business of the partnership without exposing the partners to personal
liability for other partners’ acts, except to the extent of their investment in
the LLP.
LLPs are run
like general partnerships and have a similar degree of management flexibility.
Income losses and gains are passed through to the general partners according to
the partnership agreement. If there is no partnership agreement, income, losses
and gains will be allocated in proportion to the partnership interests of each
partner. Partners can agree among themselves as to how income, losses and gains
are divided among the partners. The partners then report the amount allocated
on their income tax returns and pay tax accordingly.
Incorporated Companies
There are
three types of companies that may be formed, namely company limited by shares,
company limited by guarantee and unlimited companies. A company limited by shares
is where the personal liability of its members is limited to the par value of
their shares and the number of shares taken or agreed to be taken by them. A
company limited by guarantee is where members (shareholders) guarantee to meet
liabilities of up to the amount nominated in the company’s Memorandum and
Articles of Association in the event of the company being wound up. An
unlimited company is where there is no limit to the members’ (shareholders’)
liability.
The most
common company structure in Malaysia
A company
having a share capital may be incorporated as a private company if its
Memorandum or Articles of Association:
·
restricts the right to transfer its
shares
·
limits the number of its owners to
50, excluding employees and former employees
·
prohibits any invitation to the
public to subscribe for its shares or debentures
·
prohibits any invitation to the
public to deposit money with the company.
A public
company may be formed or alternatively a private company may be converted into
a public company subject to Section 26 of the Companies Act 1965. Such a
company can offer shares to the public, provided:
·
it has registered a prospectus with
the Securities Commission
·
it has lodged a copy of the
prospectus with the CCM on or before the date of its issue.
A public
company may apply to have its shares quoted on Bursa Malaysia Berhad subject to
its compliance with the requirements laid down by the exchange. Any subsequent
issue of securities (e.g. by way of rights or bonus, or arising from an
acquisition, etc) requires the approval of the Securities Commission.
Procedure
All
companies in Malaysia
To
incorporate a company, a person must apply to CCM using Form 13A together with
a payment of RM30 in order to determine if the proposed name of the intended
company is available.
A person
must then lodge the following documents with CCM within 3 months from date of
approval of the company’s name by CCM to secure the use of the proposed name:
(i)
Memorandum and Articles of Association
(M&A)
(ii) Declaration of Compliance (Form 6)
(iii) Statutory declaration by a person before
appointment as a director, or by a promoter before the incorporation of a
company (Form 48A)
The M&A
documents the company’s name, its objectives, the amount of its authorised
capital (if any) proposed for registration and its division into shares of a
fixed amount.
The Articles
of Association describes the regulations governing the internal management of
the affairs of the company and the conduct of its business.
Capital duty
for the authorised capital must also be paid to the CCM.
Once the
Certificate of Incorporation is issued, the subscribers to the Memorandum,
together with such other persons who may from time to time become members of
the company, shall be a body corporate, capable of exercising the functions of
an incorporated company and of suing and being sued. It has a perpetual
succession under common seal with the power to hold land, but with such
liability on the part of the members to contribute to its assets in the event
of it being wound up, as provided for in the Companies Act 1965.
Foreign Branch Office
Foreign
companies incorporated outside Malaysia Malaysia
|
The change
of a foreign company’s name entails two processes, namely:
(i)
Name
search and application of name – The applicant has to
submit Form 13A to obtain approval to use the name proposed for the company
to be incorporated. If the name is approved, it will be reserved in the name
of the applicant for 3 months from the date of the approval letter.
(ii)
Submission
of documents:
(a)
Original copy of Form 13A
(b)
Copy of the approval letter for
the company’s certificate of change of name from its origin country
(c)
Form 84 – Particulars of change or
alteration relating to foreign company
(d)
Fee
A
Certificate of Registration of change of name of foreign company (Form 83A)
will be issued by CCM upon compliance with the procedures and submission of
duly completed documents.
|
Upon
approval, applicants must lodge the following documents with the CCM:
(i)
a certified copy of its Certificate
of Incorporation (or a document of similar effect) from the country of origin
(ii)
a certified copy of its Charter,
Statute, or M&A, or any other instrument that constitutes or defines its
constitution
(iii)
a list of its directors and certain
statutory particulars regarding them (Form 79)
(iv)
when there are local directors, a
memorandum stating the powers of those directors
(v)
a Memorandum of Appointment or Power
of Attorney, authorising one or more persons resident in Malaysia
(vi)
a statutory declaration in the
prescribed form made by the agent of the company (Form 80)
(vii)
additional documents consisting of
the original Form 13A and a copy of the letter from CCM approving the name of
the foreign company
[Note: If the above documents are not in Malay or
English, translation of such documents is required]
The
appointed agent will agree to undertake all acts that are required to be carried
out by the company under the Companies Act 1965. Any change of agents must be
reported to the CCM.
Registration
fees are payable in accordance with a graduated scale set by the CCM based on
the authorised capital of the parent company.
Every
foreign company shall within one month of establishing a place of business or
commencing business within Malaysia Malaysia
A foreign
incorporated company must file a copy of its annual return each year within one
month of its annual general meeting. The company must also file a copy of the
balance sheet of its headquarters, a duly audited statement of assets used, and
liabilities arising out of, its operations in Malaysia
Registration
fees
In order to
determine the registration fees, the nominal share capital of the foreign
company must first be converted into Malaysian currency (Ringgit Malaysia
Certificate
of registration
Upon
fulfilling the above registration procedures, a certificate of registration of
foreign company in Form 83 will be issued by CCM.
Representative Office
A
representative office of a foreign company is an office established in Malaysia Malaysia
A
representative office is not allowed to carry out any business transaction nor
derive income from its operations. An approved representative office is not
allowed to carry out the following activities:
·
lease 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
An approved
representative office is allowed to carry out the following activities:
·
planning or coordination of business
activities
·
gathering and analysis of
information or undertaking feasibility studies on investment and business
opportunities in Malaysia
·
identifying sources of raw
materials, components or other industrial products
·
undertake research and product
development
·
act as a coordination centre for the
corporation’s affiliates, subsidiaries and agents in the region
·
undertake other activities, which
will not result directly in actual commercial transactions.
International Procurement Centres (IPCs)
IPCs are
locally incorporated companies, whether local or foreign owned, which carry on
business in Malaysia Malaysia
The
establishment of an IPC is essential for companies that find it advantageous to
engage in sales and procurement of raw materials, components as well as
finished products with strategic partners here in Malaysia
An IPC has
to be incorporated locally under the Companies Act 1965, with a minimum paid up
capital of RM500,000 and a minimum operating expenditure of RM1.5 million per
year. IPCs are required to have annual turnovers in excess of RM50 million and need
to use Malaysian ports and airports.
IPCs will
enjoy the following incentives:
·
Expatriate posts are approved based
on requirements of the IPC
·
An IPC can open one or more foreign
currency accounts with any licensed commercial bank to retain their export
proceeds without any limit imposed
·
The company can enter into foreign
exchange forward contracts with any licensed commercial bank to sell forward
export proceeds, based on projected sales
·
An IPC is allowed 100% equity
holding by the promoter
·
The company can bring in raw
materials, component or finished products with customs duty exemption into Free
Industrial Zones, Licensed Manufacturing Warehouses, Free Commercial Zones and
Bonded Warehouses for repackaging, cargo consolidation and integration before
distribution to the final consumers.
Foreign Investment Committee (FIC)
If the
proposed investment does not involve petroleum or licensed manufacturing
activities or multimedia technologies, the investor may have to obtain the
approval from the FIC for the following:
·
any proposed acquisition by foreign
interests of any substantial fixed assets in Malaysia
·
any proposed acquisition of assets
or any interests, mergers and take-overs of companies and businesses in Malaysia
·
any proposed acquisition of 15% or
more of the voting power by any one foreign interest or associated group or by
foreign interest in the aggregate of 30% or more of the voting power of a
Malaysian company and business
·
control of Malaysian companies and
businesses through any form of joint-venture agreement, management agreement
and technical assistance or other arrangements
·
any mergers and take-over of any
company and business in Malaysia
·
any other proposed acquisition of
assets or interests exceeding RM10 million in value whether by Malaysian or
foreign interests (the threshold was revised to RM10 million with effect from 21 May 2003 )
·
any acquisition by Malaysian
interests of shares in Malaysian incorporated companies which constitutes more
than 50% of the voting power of the company, i.e. where it gains statutory
control.
Specific
projects approved by the Government are exempted from the requirement of
obtaining FIC’s prior approval.
Business
Premise Licences and Signboard Licences
Business
premise licences and signboard licences are issued by the respective State
Authorities and the licences, which need to be applied for, depend on the
nature of the business activity.
There are
147 local authorities in Malaysia
(i)
a photocopy of the applicant’s
identity card
(ii)
a passport-sized photograph of the
applicant
(iii)
a copy of the company’s M&A and
Forms 9, 24 and 49
(iv)
a copy of either the rental
agreement or the sale and purchase agreement of the company’s business premise
(v)
a copy of the Certificate of Fitness
of the company’s business premise
(vi)
a copy of the Fire Department’s
support letter
(vii)
a copy of the location plan of the
company’s business premise
(viii)
photographs of the business premise
(ix)
photographs showing the location of
the company’s signboard
(x)
samples of the signboard indicating
its design and colours
Employment
The main
legislation that govern employment in Malaysia
- Employment Act 1955
- Industrial Relations Act 1967
- Trade Unions Act 1959
Employers
are, however, advised to bear in mind the following legislation:
- Employees Provident Fund Act
1991 (which repealed the Employees Provident Fund Act 1951)
- Employees’ Social Security Act
1969
- Workmen’s Compensation Act 1952
- Workers’ Minimum Standards of
Housing and Amenities Act 1990
- Wages Councils Act 1947
- Children and Young Persons
(Employment) Act 1966
- Occupational Safety and Health
Act 1994
- Pembangunan Sumber Manusia
Berhad Act 2001 (which repealed the Human Resources Development Act 1992)
Taxation
Incomes of
individuals and companies, accruing in or derived from Malaysia Malaysia Malaysia
However, income received
in Malaysia Malaysia
The
principal statute on taxation is the Income Tax Act 1967. The following sources
of income are liable to tax:
- gains and profits from trade,
profession and business
- gains and profits from an
employment (salaries, remunerations, etc)
- dividends, interests or
discounts
- rents, royalties or premiums
- pensions, annuities or other
periodic payments
- other gains or profits of an
income nature
Company Tax
All
companies whether resident or not resident in Malaysia Malaysia Malaysia Malaysia
Personal
Income Tax
The rate of
tax depends on the individual's resident status, which is determined by the
duration of his stay in the country as stipulated under Section 7 of the Income
Tax Act 1967. Generally, an individual who is in Malaysia
A resident
individual is taxed on his chargeable income after deducting personal reliefs
at a graduated rate from 0% to 28%.
A
non-resident individual is liable to tax at the rate of 28% without any
personal relief. However, he can claim rebates in respect of fees paid to the
government for the issuance of an employment work permit.
Withholding
Tax
Withholding
tax is required to be withheld and remitted to the Inland Revenue within 30
days after payment crediting payment to a non-resident person. Withholding tax
is limited to 10% on special classes of income such as:
(i)
in consideration of services
rendered by the person or his employee in connection with the use of property
or rights, installation of or operation of any plant, machinery or other
apparatus;
(ii)
in consideration of technical
advice, assistance or services rendered in connection with technical management
or administration; or
(iii)
rent or other payments made under
any agreement or arrangement for the use of any moveable property.
With effect
from 21 September 2002 ,
no withholding tax should be applicable for income received in respect of the
services (i) and (ii) rendered or performed outside Malaysia
Real
Property Gains Tax
Capital
gains are generally not subject to tax in Malaysia Malaysia
Malaysians
and permanent residents are subject to a 30% tax if they sell the property
within two years, with a reducing rate until 5% in the sixth year and
thereafter. Non-citizens and non-permanent residents, on the other hand, pay a
flat rate of 30% if they sell within five years, and thereafter at the rate of
5%.
However,
with effect from 1st
April 2007 , all persons are exempted from the provisions of
the Real Property Gains Tax Act 1967, in respect of any disposal of chargeable
assets after 31 March 2007 .
Double
Taxation Agreements
Accounting and Reporting
Accounts of
companies incorporated under the Companies Act 1965 are required to be kept in
a manner that will sufficiently explain its transactions and facilitate audit.
The provisions relating thereto include:
- the maintenance and retention
of accounting records
- the maintenance of registers
and minutes relating to directors and shareholders and their meetings
- the form and content of annual
accounts
- the publication to shareholders
and the public filing of annual accounts
- the requirements for annual
accounts to be audited
- the penal provisions for
incorrect or unsatisfactory annual account.
