For a foreigner willing to open a business in Malaysia, you should know that the government encourages and offers special incentives to foreigners to invest in the manufacturing as well as the service sector of the country. The objective of the New Economic Model planned by the Malaysian government is to elevate the country to a high-income economy. In its quest to reach this objective, the government of Malaysia keenly focuses on developing the service sector so the economy can grow to its desired potential. Furthermore, the service sector has been singled out to become the main catalyst for economic growth in the Eleventh Malaysia Plan, 2016-2020. The forecast from economists and business analysts identifies the financial services, communications, wholesale and retail trade to provide the strongest thrust for economic growth in Malaysia. The service sector in Malaysia is expected to create 9.3 million jobs and contribute at least 56.5% to the Gross Domestic Product in 2020 while growing at the rate of 6.8% per year.
Among the numerous options to choose from, you will find that there are mainly three types of business entities preferred by a foreigner to open a business in Malaysia. They are the Sendirian Berhad or Private Limited Liability Company, the Labuan Company while the third option is the representative office.
Open Private Limited Liability Company or Open a business in Malaysia
A Private Limited Liability Company is a company limited by shares. Consequently, the nominal value of the shares a person holds will define his or her personal liability in such a company. It must have a minimum of two subscribers to the shares of the company and a minimum of two directors by law. The basic requirement for incorporating a private limited liability company under the Companies Act 2016 states that at least a single director and a promoter’s main place of residence must be in Malaysia and should generally live in the country.
You are required by law to employ a company secretary and that person must be approved by the Companies Commission of Malaysia or SSM. A member of a professional body can also be your company secretary if only the body is approved by the Minister of Domestic Trade Cooperative and Consumerism. Based on which type of business you may choose to operate a foreigner is permitted to register a Private Limited Liability Company at the Companies Commission of Malaysia with 100 percent foreign ownership and this facility is available for almost all the industrial sectors of the country. If you need to know the bus inesses in detail where you can invest in Malaysia, you should visit the website of the Malaysian Investment Development Authority (MIDA) for your convenience.
A Labuan Company is primarily established to serve the international market and is entitled to various tax benefits as stipulated in the Labuan Business Activity Tax Act of 1990. Apart from paying overheads and legal expenses, a Labuan Company must use a foreign currency for its day to day business transactions. It can exist in the form of a company limited by shares or guarantee as well as an unlimited company in Malaysia. This type of company is quite beneficial especially when a foreigner intends to invest in the financial sector or set up an international trading or distribution business. Foreigners can also have 100 percent foreign ownership of a Labuan Company and the registration procedure for this type of company is reasonably inexpensive and hassle free.
It is mandatory for a Labuan Company to have at least a single director and a resident secretary. Authorized share capital necessities do not apply for a Labuan Company as well as the minimum amount of capital to start or open a business in Malaysia. The different classes of shares issued by this type of company will not have any par or nominal value and the company is allowed to trade in treasury shares by law. Several Labuan Companies can merge to form a single business entity. A registered office is required for a Labuan Company which will serve the purpose of the resident secretary’s office in Malaysia.
Representative or Regional office
A foreigner can also operate or open a business in Malaysia by establishing a Representative Office (“RE”) or Regional Office (“RO”). This office gives the opportunity to evaluate one’s business prospects in the country before committing into a permanent investment. The RE or RO can only stand for its head office to perform its duties and cannot engage in any commercial activities on its own. It can carry out the activities to enhance bilateral trade relations and encourage export of Malaysian commodities while gathering appropriate information on its business outlay and opportunities in Malaysia. The office will be financed from outside the country and its sphere of influence will be limited to the region it would function in. A foreigner is not allowed to set up a RE or RO and Serviced office Malaysia without the consent of the Malaysian Government.