Whether you’re a Malaysian or a foreigner looking to start a new business or grow an existing one, here’s a checklist of critical action steps you can follow to plan and execute the process efficiently. These phases are not in any particular order but rather a list of essential moving pieces, some of which can be completed simultaneously.
After this post, we’ve also included a handy reference checklist that gives a general idea of the action steps’ available chronology, timing, and cost.
Get Local Advice From Professionals
It is not impossible to complete tasks on one’s own. Specific crucial applications, filings, or submissions may be challenging to achieve without the assistance of local service providers, agents, or runners who are familiar with the system’s complexities and quirks.
Procuring business premise and signboard license from municipal councils, work visas and permits from the immigration department, filing documents with state land offices for property-related dealings, tax-related registrations and filings, and so on are examples of critical steps to register a company in Malaysia that may be difficult to complete without the help of such service providers.
Malaysia’s national language (Bahasa Malaysia) is the default language in government offices and official documents, with few English translations available.
Foreigners may also have trouble finding accurate information or updated paperwork online or over the phone. They may discover that specific tasks are best completed ‘over the counter.’
Getting professionals such as accountants, auditors, tax agents, business secretaries, lawyers, work permit agents, property agents, etc., onboard is, therefore, a crucial first step to registering a company in Malaysia.
Licenses & Requirements For Each Industry
While Malaysia has eased limits on foreign investment in numerous sectors during the last decade, specific industries remain restricted or protected owing to national policy considerations.
Oil and gas services, bonded storage and freight, land transportation services, wholesale and retail commerce, tour operators, franchises are a few sectors that require special licenses and conditions.
It is critical to assess whether the commercial activity you plan to do in Malaysia is subject to the following regulations:
- Any special licenses or requirements,
- If there are any limitations on foreign stock ownership,
- Any criteria for minimum paid-up capital, or
Getting A Bank Account
One of the first things that need to be done is to open an individual or company bank account locally (ideally near the proposed business property) to make payments, share issuance, deposits, and fees that require local currency.
It’s a good idea to check with local or international banks ahead of time to find out what documents, requirements, and time are required to open a bank account, keeping in mind the anti-money laundering compliance checks and “know your customer” requirements that all banks must meet before approving a new bank account.
Securing A Business Address And Location
A physical premise or mailing address within Malaysia, whether rented or purchased, virtual office, service office, or even a permanent residence address, is frequently necessary for other applications for bank accounts, company formation, licenses, and work permits, among other things.
Foreigners may explore renting service offices or co-working spaces, frequently located in famous commercial centers, for a quick and economic ‘temporary company address’ before committing to a longer-term leasing or property purchase.
Secure Immigration Permits And Visas
While foreigners have various options for entering and staying in Malaysia, different forms of work permits and visas may be required based on the type of activity and duration of stay.
Here are a few examples:
- The visitor (single entry or multiple entry visas)
- Spouse (spousal visa / long term social visit pass)
- Migration (under the Malaysia My Second Home program)
- Employee (types of employment passes may vary depending on skillset and salary)
- Short-term contract & engagements (professional visit pass), shareholder or director of a newly incorporated company (work permit)
- When setting up a regional office / representative office where a company has already been established (work permit) (work permit).
It is not easy for many foreigners to comprehend and follow the requirements and procedures necessary to obtain a valid work permit or visa, not to mention the actual filing and communication with the immigration department.
In addition, the minimum paid-up share capital of the applicant company may vary depending on the type of work permit.
Employment And Human Resources
Malaysia has a large pool of educated and skilled human resources, many of whom can speak many languages or dialects, for comparatively low wages (mainly English, Malay, Chinese, Tamil, Cantonese, Hokkien).
There is also significant mobility of talent from Malaysia’s smaller cities, hungry for better professional opportunities.
Before hiring its first employees, every business owner should be aware of their obligations as an employer in terms of employee-related statutory deductions and contributions such as Employees’ Provident Fund, Social Security Organisation, Human Resources Development Fund, and Monthly Tax Deductions.
Moreover, Malaysian labor laws are generally viewed as favoring employees, making it more likely that an employer will face industrial action suits if it fails to comply with local labor laws.
Tax Planning And Registrations
Tax consequences and compliance requirements should never be overlooked.
When deciding on the type of business vehicle to use, take into account the various income tax rates, allowable tax deductions, tax incentives available, and the burden of tax filings and compliance, which may differ depending on whether a private limited company, limited liability partnership, partnership, or sole proprietor is used.
Final Words
Income tax, withholding tax, real property gains tax, stamp duty, and goods and services tax are direct taxes most firms will face (GST).
For instance, putting GST registration off until later may result in missed opportunities to claim lucrative input tax credits on large-ticket setup fees. Similarly, knowing which pre-operational and pre-start-up charges are tax-deductible against Malaysian income tax may result in immediate tax savings for your company.
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