How to set up a business as an Expat based in Malaysia

Malaysia, known for its strategic location in Southeast Asia, robust economy, and business-friendly policies, is an attractive destination for expatriates looking to establish a business. If you're considering setting up a business in Malaysia, this guide provides detailed information on the available options, legal requirements, and steps to get started.

1. Business Structure Options
‍Expats have several options when choosing the structure of their business in Malaysia:
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‍Sole Proprietorship: This is the simplest form of business entity, ideal for small businesses. However, it is only available to Malaysian citizens or permanent residents.
‍Partnership: Similar to sole proprietorships, partnerships are also limited to Malaysian citizens or permanent residents.
‍Private Limited Company (Sdn Bhd): This is the most common business structure for expats. It is a separate legal entity, offering limited liability to its shareholders. A minimum of one director and one shareholder is required, and the director must have a principal place of residence in Malaysia.
‍Labuan Company: For businesses focusing on international trade, investment holding, and offshore activities, setting up a company in Labuan, a federal territory of Malaysia, is an attractive option due to its tax incentives.
‍Representative Office: This option is suitable for foreign companies wishing to explore the Malaysian market without engaging in commercial activities. It can conduct market research and promote the parent company’s business.

2. Incorporation Process
‍Setting up a Private Limited Company (Sdn Bhd) involves several steps:

‍Name Search and Reservation: Conduct a name search with the Companies Commission of Malaysia (SSM) to ensure your desired company name is available. Once approved, the name will be reserved for 30 days.
‍Prepare Incorporation Documents: Prepare the necessary documents, including the company’s constitution (formerly known as Memorandum and Articles of Association), particulars of directors, shareholders, and the company secretary.
‍Submit Incorporation Documents: Submit the incorporation documents and the relevant fees to SSM through the MyCoID online portal.
‍Certificate of Incorporation: Upon approval, SSM will issue a Certificate of Incorporation, signifying the official formation of your company.

3. Post-Incorporation Requirements
‍After incorporation, there are several key requirements to fulfill:

‍Opening a Bank Account: Open a corporate bank account in the company’s name.
‍Tax Registration: Register your company with the Inland Revenue Board (LHDN) for tax purposes.
‍Goods and Services Tax (GST) Registration: Although GST is currently not applicable, businesses should keep abreast of any changes in tax regulations.
‍Employee Provident Fund (EPF) and Social Security (SOCSO): Register your employees for EPF and SOCSO contributions.
‍Business Licenses and Permits: Depending on your business type, you may need additional licenses and permits from local authorities.

4. Employment Passes and Visas
‍For expats intending to work in their own company, obtaining the appropriate work visa is essential:

‍Employment Pass: Issued to foreign employees in managerial, executive, or technical positions. The company must be operational and have a minimum paid-up capital before applying.
‍Professional Visit Pass: Suitable for foreign experts providing services or undergoing training for a short-term period.
‍Dependent Pass: Available for spouses and dependents of Employment Pass holders.

5. Labuan Company Benefits
‍Labuan, an offshore financial center, offers several benefits for expats:

‍Labuan companies can opt for either a 24% tax on net profits or a flat rate of MYR 60,000, based on the 2024 tax regulations.Additionally, Labuan companies still benefit from fewer regulatory requirements, streamlined incorporation processes, and the flexibility to conduct international business transactions in foreign currencies, offering ease of operation for global businesses.Let me know if you'd like any further refinements!

6. Support Services and Incentives
‍The Malaysian government offers various incentives and support services for foreign investors:

‍Malaysian Investment Development Authority (MIDA): Provides information, advisory services, and assistance in obtaining permits and licenses.
‍MSC Malaysia Status: Offers incentives for tech companies, including tax exemptions and access to grants.
‍Incentives for Manufacturers: Tax incentives and grants are available for companies in manufacturing and related services.

Setting up a business in Malaysia offers expats numerous opportunities, thanks to its strategic location, favorable business environment, and government incentives. By understanding the various business structures, incorporation processes, and regulatory requirements, expats can successfully navigate the process of establishing their ventures in this dynamic country. Whether opting for a Private Limited Company, a Labuan Company, or exploring the market through a Representative Office, Malaysia provides a conducive environment for business growth and success.

If you need putting in touch with a specialist to assist you, please email info@relocatingtomalaysia.com