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Incorporating of Local Company / Registration of Foreign Company in Malaysia

For those foreigners that wish to carry a business in Malaysia, they have to incorporate a local company or register the company in Malaysia. Foreign company means a company, corporation, society, association or other body incorporated outside Malaysia which under the law of its place of origin may sue or be sued. Foreign company may hold up to 100% equity depending on the types of business industry involved.

 

GUIDELINES

  1. Application for Name Search in Form 13A (to search the name availability)
  2. Foreign Company’s Consent Letter (set up branch office in Malaysia)
  3. Certified true copy of the Foreign Company’s certificate incorporation by the Registrar of Companies of its place of origin
  4. Form 13A
  5. RM30 (per name) for approval to use the foreign company’s name for registration to be submitted with the Companies Commission of Malaysia (CCM).
  6. Reservation name for 3 months after the name search being approved.
  7. After the CCM approved the name search, the following documents have to be submitted within 3 months of the date on which the documents are certified:
  • Certified copy of the certificate of its incorporation or registration in its place of incorporation or origin by the registrar of companies of the place of origin.
  • Certified copy of its charter, statue of its Memorandum and Articles or other instruments constituting or defining its constitution.

CERTIFIED COPY

  • Notary Public; or
  • The registrar of companies of the place of its origin; or
  • A director, a manager or secretary of foreign company by affidavit. (If certification is to be done in a Commonwealth country, the certification by a statutory declaration).
  • If the above documents are not written in English or Bahasa Melayu, translation must be done:
  • Certified by Notary of Public; or
  • A translator Public accordingly admitted and confirmed in accordance with the law of the place in which the company is formed or incorporated
  • Registrar of companies of the place of origin
  • A Malaysian consular office in the place of origin of the foreign company
  • Statutory Declaration verifying Memorandum and Articles of Association;
  • Memorandum of Appointment of Agent or Power of Attorney, accordingly stamped;
  • Affidavit or Statutory Declaration verifying item (d) above;
  • Statutory Declaration by Agent of Foreign Company;
  • Confirmation Letter and Authorized Capital of the Company; and
  • Form 49 – Return by Foreign Company Giving Particulars of Directors and changes of particulars.

The registration fees payable to CCM for the registration of a foreign company are based on authorized capital of the foreign company are scheduled as follows:

Authorized Share Capital (RM) Fees Payable (RM)
Up to RM100,000 1,000
100,001-500,000 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

Nominal share capital of the foreign company should be converted to Malaysian currency (RM) at the prevailing exchange rate.

  • If the foreign company does not prescribe any share capital, a flat rate of RM1,000 shall be paid to CCM.

Further information required on Foreign Company, duly certified by the Director/Secretary of Foreign Company:-

  1. List of Directors and their particulars (personal & business background)
  2. The registered office of the Company
  3. The amount of authorized and paid up capital of the Company
  4. Place and date of incorporation of the Company. CCM shall issue a certificate within 1 to 2 weeks from the date of submission of documents in the prescribed form (Form 83).

Please subscribe to view the “Obligation of Foreign Company in Malaysia”.
OBLIGATION OF FOREIGN COMPANY IN MALAYSIA

  1. Agent of the branch of company
    • must have an agent who is person named in the Memorandum of Appointment or Power of Attorney lodged by CCM.
    • agent is a person residing in Malaysia for the purpose of accepting service of process or any notices required to serve on the company. They can be a natural person or a corporation but must not be a foreign company.
    • local agent is answerable for the doing of all such acts, matters and things and will be personally liable to all penalties imposed on the foreign company for any breach of the Companies Act 1965.
  2. Annual General Meeting (AGM)
    • in accordance to the law of the place of origin of the foreign company’ incorporation or origin.
  3. Annual Return
    • required to be submitted to the CCM once in a calendar year within one month of its AGM.
  4. Audited Financial Reports
    • within 2 months of its AGM, to be submitted to CCM:
    • a copy of company’s balance sheet together with a Statutory Declaration in prescribed from verifying that the copies are true copies of the documents.
    • audited reports by an approved auditor showing its assets used in and liabilities arising out of the branch office in Malaysia
  5. Registered Office
    • submit to CCM for registration (Form 44) within 1 month after the establishment of a place of business in Malaysia.
  6. Accounting Records
    • required to keep proper accounting record within 60 days prior completion of the transactions and the records and books shall be retained for 7 years.
  7. Charges in Particulars
    • charter, statue, memorandum or articles of the foreign company or the other instrument constituting or defining its organization (company’s name, authorized capital and etc).
    • directors of the foreign company or in the name or address of any director
    • the agent or agents of the foreign company or the name or address of any agent
    • situation of the branch office in Malaysia or days and hours of operations
    • location or address of the foreign company in Malaysia

    Note: All changes are required to be filed with the CCM within 1 month from the date of change and if applicable, administrative charges will be incurred.

  8. Court Order
    • if there is any order made by the court under any law enforced in the country, it must be submitted to CCM within 1 month
  9. Cessation/Termination of Business
    • submit Form 90 to CCM within 7 days prior termination of the foreign company
    • after submission and upon expiration of the 12 months period, the name of the foreign company will be removed by CCM

Setting Up a Representative Office or Regional Office in Malaysia

Representative Office

 

An approved representative office collects relevant information regarding investment and business opportunities to develop bilateral trade relations and promote the export of Malaysian goods and products.

 

Regional Office

 

An approved regional office serves as the coordination centre for its affiliates, subsidiaries and agents within the Asia Pacific region and it is responsible to conduct designated activities within the region it operates.

 

Both the Representative Office/Regional Office do not have issued capital in Malaysia, thus they are not subject to any equity condition and should be totally funded from sources outside Malaysia. They are not required to be registered under Companies Commission of Malaysia. Instead, they can be established by submitting applications to Malaysian Investment Development Authority (MIDA). Any applications for expatriate posts should be forwarded to the Immigration Department.
Activities Allowed

  • Plan or coordinate business activities
  • Gather and analyse information or undertake feasibility studies on investment and business opportunities in Malaysia and the region
  • Identify sources of raw materials, components or other industrial products
  • Undertake research and product development
  • Act as a coodination centre for the corporation’s affiliates, subsidiaries and agents in the region

Activities Not Allowed

  • Engage in any trading (including import and export), business or any form of commercial activity.
  • Lease warehouse facilities; any shipment/transhipment or storage of goods must be carried out through 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
  • Conduct any business transaction or derive income from its operations

Protection of Foreign Investment

Equity Ownership

A company whose equity participation has been approved will not be required to restructure at any time as long as the company continues to comply with the original conditions of approval and retain the original features of the project.

Investment Guarantee Agreements (IGA)

  • Protect against nationalisation and expropriation
  • Ensure prompt and adequate compensation in the event of nationalisation or expropriation
  • Provide free transfer of profits, capital or other fees
  • Ensure settlement of investment disputes under the Convention on the Settlement of Investment Disputes of which Malaysia has been a member since 1966.

Malaysia Expatriate Post

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 organisation reflects the multi-racial composition of the country.
Notwithstanding this, where there is shortage of trained Malaysians, companies are allowed to bring in expatriate personnel as to whether in “key port” or “time post”. Key posts are posts that are permanently filled by foreigners whereby time posts are positions filled on specified duration.

1. Key Post

  • These are high level managerial ports in foreign-owned private companies and firms operating in Malaysia. Key posts are essential for companies to safeguard their interest and investments. The expatriates are responsible in determining the company’s policies in achieving its goal and objectives.

2. Time Post
(a) Executive Post

  • These are intermediate level of managerial and professional posts. The post requires professional qualifications, practical experience, skills and expertise related to the respective jobs. The expatriates are responsible in implementing the company’s policies and supervision of staff.

(b) Non-Executive Post

  • These are posts for the performance of technical jobs that require specific technical or practical skills and experience.

Employment Pass

This is issued to foreigners who enter the country to take up employment for a minimum of 2 years, after the applicant has obtained the approval for expatriate post from the relevant authorised agencies.

Employment of Foreign Workers

Foreign workers can be employed in the manufacturing, construction, plantation, agricultural, services and domestic help sectors. Services sector consists of restaurant, cleaning services, cargo handling, launderette, caddy in golf club, barber, wholesale/retail, textile, metal/scraps/recycle activities, welfare homes and hotels. Only nationals from the specified countries below are allowed to work in the selected sectors:

Approved Sectors Nationality
  • Manufacturing
  • Plantation
  • Agriculture
  • Construction
  • Services
  • Indonesia
  • Cambodia
  • Nepal
  • Myanmar
  • Laos
  • Vietnam
  • Philippines (male only)
  • Pakistan
  • Sri Lanka
  • Thailand
  • Turkmenistan
  • Uzbekistan
  • Kazakhstan
  • Services (cooks, wholesale/retail, barber, metal/scraps/recycle, textile)
  • Construction (fixing of high voltage cable only)
  • Agriculture
  • Plantation
India

 

Approval is based on the merits of each case and subject to conditions that will be determined from time to time. Applications to employ foreign workers will only be considered when efforts to find qualified local citizens and permanent residents have failed.

Approved Sectors

Annual Levy (RM)

Manufacturing

1,200

Construction

1,200

Plantation

540

Agricultural

360

Domestic Help

360

Services
  • Welfare homes
  • Island resorts
  • Others

 
600
1,200
1,800

All applications for foreign workers should be submitted to the One Stop Centre, Ministry of Home Affairs except for the applications for foreign domestic helpers which should be submitted to Malaysia Immigration Department

Acquisition of Property in Malaysia

EPU & FIC Guidelines

Economic Planning Unit (EPU) in its latest guidelines effective 1st January 2010 permits foreigners to acquire any types of property in Malaysia (except Malay Reserved Land) which is above RM500,000 in value. This guideline is not applicable however to MM2H resident who intends to acquire residential properties in certain states in Malaysia such as Sarawak and Selangor where he is not prohibited under the State Land Rules from purchasing property below RM500,000. In the recent Budget 2014 however, it was proposed to increase the minimum price of property tdat can be purchased by foreigners from RM500,000 to RM1,000,000.

Advantages To Acquire Property In Malaysia

  • Direct legal ownership for foreigners witd title deed
  • Allowed to sell properties at anytime in the open market based on the current RPGT rates.
  • Allowed to invest in auctioned properties
  • No capital control and repatriation restriction for property investment and gains
  • Local rates for legal fees, stamp duty and reimbursement payable for selling and purchase of properties
  • Properties below RM10 million does not require Foreign Investment Committee (FIC) approval

Types of Property Allowed

  • Semi-detached house
  • Bungalow
  • Landed property
  • Condominium
  • Studio unit
  • Pentdouse
  • Duplex

Exceptions:

  • Properties built on Malay reserved lands
  • low and medium cost properties determined by the State Autdority
  • Properties allocated for Bumiputra interest determined by the State Autdority
  • Agriculture lands

No EPU Approval Required For:

  • Residential unit valued at RM500,000 and above
  • Commercial unit valued at RM500,000 and above
  • Agricultural land valued at RM500,000 and above OR at least five (5) acres in area for the following purposes:
  1. agricultural activities on a commercial scale using modern or high technology
  2. agro-tourism projects
  3. agricultural or agro-based industrial activities for the production of goods for export
  • Industrial land valued at RM500,000 and above
  • transfer of property to a foreigner based on family ties (only applicable among immediate family members)

EPU Approval Required For:

  • direct acquisition of property valued at RM20 million and above, resulting in the dilution in the ownership of property held by Bumiputera interest or government agency
  • indirect acquisition of property by other tdan Bumiputera interest tdrough acquisition of shares, resulting in a change of control of the company owned by Bumiputera interest or government agency, having property > 50% of its total assets, and the said property is valued more tdan RM20 million

Land Tenor

  • Freehold
  • Leasehold

Property Title

  • Individual title – issued under the National Land Code 1965 (land, houses and commercial properties)
  • Strata title – issued under the Strata Titles Act 1985 (multi-storey buildings, apartments, condominiums)
  • NOTE: Foreigners can own botd freehold and leasehold properties for botd titles

Invest in ISKANDAR Malaysia

Real Property Gains Tax (RPGT)

The limited supply of real property especially in urban areas has provided opportunities for speculative activities.

Therefore, the Government proposes that for gains on properties disposed within the holding period of up to three (3) years, the RPGT rate is increased to 30%, whereas for disposals within the holding period up to four (4) and five (5) years, the rates are increased to 20% and 15% each.

For property disposed after the fifth and subsequent years, no RPGT would be imposed on citizens, whereas companies are taxed at 5%.

Disposal Period

RPGT Rates Companies

RPGT Rates Individual (Citizen/PR)

RPGT RatesIndividual (Non-Citizen)

Disposed within 3 years

30%

30%

30%

Disposed in the 4th year

20%

20%

30%

Disposed in the 5th year

15%

15%

30%

Disposed after 5 years

5%

0%

5%

Note:
The RPGT rates increase is applicable to disposal of property taking place on or after 1st January 2014.
Allowable Loss
Allowable loss is defined as loss incurred prior to disposal. Hence, tax relief shall be allowed in respect of the followings:-

  • Price of disposal < Price of acquisition
  • Price of disposal = Price of acquisition

Exemptions

  1. RPGT exemption on gains from the disposal of one residential property once in a lifetime to individuals;
  2. RPGT exemption of up to RM10,000 or 10% of the net gains, (whichever is higher) from the disposal of real property by individuals; and
  3. RPGT exemption on gains arising from the disposal of real property between family members (e.g. husband and wife, parents and children, and grandparents and grandchildren).

Finance Bill (No.2) 2012: Changes to the RPGT Regime

Application of Real Property Gains Tax Act 1976 to Limited Liability Partnerships (LLP)

On enforcement of the newLLP Act 2012,a registered limited liability partnership will be included in the Real Property Gains Tax Act as a person chargeable to tax.

Requirement to furnish returns for disposals exempt from RPGT

Where a disposal of real property is not subject to tax or is exempt from the imposition of RPGT, a disposer must furnish a notification on a prescribed form to the Director General of Inland Revenue (“DGIR”) and must serve the notification to the acquirer within 60 days from the date of the disposal.

Reduction of Time Period For Assessments, Additional Assessments, Relief on Error/Mistake and Refund Applications

Previously, the DGIR was empowered to make an assessment or additional assessment within 6 years after the end of the year of assessment unless there has been fraud, willful defaultor negligence on the part of the taxpayer. The time period for making an assessment has now been reduced to five (5) years.
Consequently, the taxpayer’s right to apply for a relief on any error or mistake made on a return or statement for any year of assessment has also been reduced from six (6) years to five (5) years.
The time period for a person to apply for a refund of overpayments of tax has also been reduced from six (6) years to five (5) years after the end of the year of assessment to which a claim for a refund relates.
The Finance Bill (No.2) 2012 provides that the reduction of time period for assessments, additional assessments, relief on error/mistake and refund applications will only be in effect from 1st January 2014.

Directors’ Liability

 

A director of a company with a controlling interest of more than 50% will be jointly and severally liable for debt or tax that is due by a company.
In respect of LLP, a compliance officer appointed amongst the partners of a LLP (or where no compliance officer is appointed), then any of its partners shall be jointly and severally assessable and chargeable to RPGT.
NOTE :The Malaysia Property Gains Tax for foreigners takes into account of bills for legal fees, stamp duties, maintenance for the property as well as the commissions payable to the real estate agents which you would have paid when placing deposit for the property. It is therefore important to keep all bills paid for submission of the tax efficiency prior to the disposal process. RPGT does not apply to transferring property between parents and children, husband and wife , grandparents and grandchildren.