For any business entrepreneur, selecting an ideal jurisdiction for company incorporation is a critical decision. Some of the most important variables to consider include the costs and procedures associated with incorporation, the regulatory requirements of the local Companies Commission and the degree of foreign ownership and directorship allowed.
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In Malaysia, company incorporation is a relatively easy and quick process. The favorable market conditions, strong economy, tax benefits and 100% foreign ownership has encouraged several entrepreneurs to incorporate limited liability (Sdh Bhd) companies in Malaysia. Foreign investors are required to apply to a foreign investment committee when applying for more than 30% shareholding of their newly incorporated company.
In addition, setting up a company in Malaysia requires the appointment of a company secretary. According the rules set out by the Companies Commission Malaysia (abbreviated SSM in local vernacular), the company secretary shall be a local resident and a natural person and not a corporate. The secretary shall also be a member of any professional body as prescribed by the Minister of Domestic Trade and Consumer Affairs or as licensed by the SSM itself.
Malaysia is one of the few Asian countries that have seen an increase in the number of foreign investors in the last few years. The country hosts several foreign and multinational companies because of the numerous business opportunities it offers. Among the industrial opportunities taken up by foreign investors include; gas, automotive manufacturing, oil, food, luxury products, aerospace, mineral exploration just to mention but a few. Most foreign-owned businesses are located in the capital Kuala Lumpur, particularly in the Klang Valley. It is important to point out that among the world’s major exporters, Malaysia is ranked number 22 and this could be the reason for the increase in the number of foreign investors.
If you are thinking of setting up a company in Malaysia, there are several things you must know about this country and the business environment as can be seen below:
Three types of companies are recognized in Malaysia: the Public Liability Company, the Limited Liability Company (LLC) and the general partnership. Just like in other countries, the PLC and the LLC requires a minimum of 2 people and a maximum of 50 shareholders, each having a minimum of two ordinary shares. It is noteworthy to state that partner’s liability to the company is limited to the nominal value of the shares.
A partnership business in Malaysia requires a minimum of 2 shareholders and a maximum of 20. The liability in this type of business is joint, and there is no least amount of capital needed in starting such a company.
Extensible Business Reporting Language, which is also known as XBRL, is an electronic language designed to enable the automation of business information requirements, i.e. the preparation, sharing and analysis of financial reports, statements, and audit schedules. Governments, regulators, and other organisations in many nations have adopted XBRL as it automates the process and communication of business and financial data. Furthermore, XBRL helps to save cost, improve efficiency and accuracy to all involved in supplying or using financial data.
XBRL initiatives in Malaysia
Although the XBRL initiatives in Malaysia are in its infancy, we can foresee that the development and deployment of a new SSM’s XRBL online document submission platform will improve the administration of business reporting and the maintenance of data.
a) The automation of business reporting
The implementation of XBRL will be enable companies to file their annual returns and audited accountselectronically. In addition, it allows SSM to capture critical financial information from registered companies and provide analytical insights into the Malaysian business landscape.
b) The improvement in transparency and efficiency of data analysis
The new XBRL initiative will improve transparency and enhance the efficiency of capital markets by enabling analysts and other users to sort out and analyse facts easily with the automation of business intelligence.
c) The enhancement in data exchange
The new XBRL platform will make business information to be exchangeable among regulators (regulators here include tax and financial authorities, central bank and governments) because XBRL is a global standard used to electronically exchange business information.
Why XBRL?
The implementation of XBRL initiative has many advantages:
a) Global standard
XBRL is a global standard that has been accepted and adopted to reduce inconsistencies in terminologies and data formatting.
b) Improved accuracy
The automation of business data improves data accuracy, as the data can be both calculated and verified.
c) Speed
XBRL enables producers and consumers of financial data to switch from expensive manual processes to the automation of business data. The automation of business information is less time-consuming – where the time needed to assembly and re-entry of data is now much shorter than before.
d) Reusable
The XBRL data is reusable – the data can be reused to represent the same data in multiple ways and multiple formats once entered.
Who will benefit from using XBRL?
The following is a list of how XBRL will affect various parties in the financial information supply chain:
a) Companies who prepare financial statements
Financial statements will be created one time and rendered as printed reports, on websites, or as other regulatory filings.
b) Analysts, Investors, and Regulators
Automated analysis, less re-entering of financial information from one form into another form, are the advantages that will benefit analysts, investors and regulators.
On a final note, XBRL’s language is flexible in which it supports all current aspects of reporting in different countries and industries. It can be adjusted to meet particular business requirements, even at the individual organisation level. SSM’s new XBRL platform will automate the data collection process, transform the submission of statutory reports by registered companies and allows data consumers to conduct company information analysis easily.
Though the concept of unfair dismissal or unlawful termination is not new in Malaysia, there have been numerous misconceptions about it. Though there has been increased awareness about the rights of employees in Malaysia, many still remain unclear. Below are several salient points on the matter.
Limitation period
From the time of dismissal, an employee has 60 days to file a complaint of unfair dismissal under Section 20 of the Industrial Relations Act 1967. As for those dismissed with notice, they are free to file the complaint any time during the notice period, but not later than 60 days from the expiry of his notice. If for any reason, the complaint is not filed within the limitation period, the complaint will be barred. If this happens, the complainant may look at other avenues in the civil courts. However, the damages and remedies awarded may differ.
Cases are not heard immediately at the Industrial Court
Anyone who wants to lodge a complaint on unfair dismissal must firstly do so at the Industrial Relations Department (IRD). Following this, the IRD will get both parties, the employer and employee to attend a reconciliation meeting with the hope of amicably settling the dispute. However, if there is no positive outcome, the IRD can then refer the matter to the Industrial Court. At times, it could take more than a year for a claim to be referred to the Industrial Court. This all depends on the number of backlog cases. Also, there is no guarantee the claim will be referred and those who are unhappy with the IRD’s decision can apply for judicial review at the High Court.
IRD meeting not a court hearing
The IRD officer does not have any power to decide on the merits of the complaint during the conciliation meeting. It must be remembered that the IRD meeting is not a court hearing and the IRD will not make any ruling or decision as to whether the dismissal is unfair. The purpose of the IRD meeting is to get parties to reach an amicable settlement. Section 54 of the Industrial Relations Act 1967 provides that no evidence shall be given of any conciliation meeting other than a written statement agreed to and signed by the parties. Parties should feel comfortable to discuss matters freely during the conciliation meeting.
When your January payslip arrive, do you have a clue what all the figures, especially ESI, mean?
The Malaysian government has launched the Employment Insurance Scheme (EIS) on 27 October 2017. Administered by the Social Security Organisation (SOCSO), the EIS will be implemented from January 2018 onwards with the aim to provide temporary financial assistance (for up to six months) to retrenched workers.
Why do Malaysian workers need EIS?
The economic slowdown and the retrenchment rate in year 2015-2016 have factorised the implementation of EIS. According to the data reported by the Labour Department, almost 40,000 Malaysian employees were laid off in 2016. Skilled workers made up more than half of them who were retrenched in 2015 and 2016. This figure shows that even skilled worker are not spared and people of any skill are at risk of being retrenched.
What follows the retrenchment is the harsh truth of losing the source of income or having an inadequate emergency fund to live life while hunting for jobs. In relation to this, the Malaysian government has introduced the Employment Insurance System (EIS) as a new protection for workers by ensuring fair remuneration for laid-off employees.
What exactly is the EIS?
Similar to the contribution mechanism of Employees Provident Fund (EPF), the contribution is statutory by both the employer and employee. With the EIS enforced starting from January 1, 2018, employers must contribute 0.2%, while employees will contribute the remaining 0.2% under this new law. The eligible monthly salary starts from as low as RM300 where a 0.4% of contribution (RM1.20 monthly) will be made. The maximum eligible monthly salary contribution is capped at RM4,000. That means if you’re earning more than RM4,000 a month, the contribution from you and your employer is fixed at 0.4% of RM4,000, leading to the maximum amount of contribution capped at RM16 per month.
What can you claim when you are laid off?
The contribution to EIS will begin in 2018, but you can only start making claims if you are retrenched in 2019 onwards. Laid-off employees will be given a portion of the insured salary from the 0.4% monthly contribution. Retrenched employees (who will be able to claim a portion of the insured salary for a period of between three and six months), for instance, can get 80% of assumed monthly wages for the first month under the job search allowance.
One thing worth mentioning is that the EIS doesn’t just provide employees money upon retrenchment but it has a few benefits such as:
Job-hunting assistance
Re-employment allowance
Reduced income allowance
Training allowance
Career counseling
Please note that each of the above mentioned benefits will take up a percentage of their claim with the aim to help laid-off employees to move forward. Let’s say a retrenched employee get a job offer before the end of their six months (counted from the first day of retrenchment), these employees will get an Early Re-employment Allowance, which is 25% of their remaining job search allowance entitlement.
Similar to the insurance mechanism, the claimable amount depends on the contribution period – how long a retrenched worker has been contributing. That means they could get up to a certain percentage of their last drawn salary for three to six months.
On a final note, the new contribution scheme, EIS, is a kind of insurance that protects salaried employees from unexpected retrenchment. Though EIS is said to be a good initiative that will give laid-off employees a financial buffer, it would be best to develop several streams of incomes, be it investments, or moonlighting as part-timer or running your own business, or at least have a sizeable emergency fund readied for rainy days.
A big part of forming a company is choosing a name. Why is this step so important? Because the name of the company is going to be a lasting one. It is going to be around for as long as your business is, and it is what your customers will associate and come to recognize when they hear the name of your business. A lot of thought and careful planning needs to go into the company name selection process.
Another important part of the company naming process is to conduct a company name search to determine whether your chosen name is already in use or too similar to an existing company name. If the name already exists, you will need to change it and if it is too similar to an already existing company, you may want to consider changing it too because you do not want to create confusion among your clients. There is also the risk that your company name may not get approved if a similar name already exists or is in use.
How to Conduct a Company Name Search
The company name search process would depend entirely on where your company is being set up. Different countries would have their own systems and processes in place with which company name searches are performed. In Malaysia, for example, the company name search process is done through the Companies Commission of Malaysia (SSM).
Should an investor or entrepreneur choose to set up a company in Malaysia for example, the company name search process through the SSM would go through the following process:
The first step is to log on to the SSM’s official website, which is the http://www.ssm-einfo.my/
Once logged on to the website, the user will be required to register as an e-account member with the SSM before they can proceed to the next step.
The user will be required to fill out an e-registration form and select a username and password to proceed with the membership signup.
Once registered as a member, the user can then begin the company name search process by entering the desired company name into the search options displayed on the SSM’s website.
Once your company name search is complete and your chosen company name does not appear in the search results, congratulations! That means your chosen company name is most likely available for use.
You can then go ahead and submit an application with the SSM to have that name registered and reserved for your use officially. The SSM will then review your submitted company name and if approved, your company name will be reserved for up to three months which gives you time to completed the entire company registration process and submit all the necessary documents accordingly.
Payroll fraud, as the name implies, is the theft of funds from a business via the payroll system. It is a form of asset misappropriation and one of the most common types of fraud in businesses. Precisely speaking, payroll fraud can be defined as the unauthorized altering of payroll where the person (an employee) committed the fraud could make financial gain.
What is Payroll Fraud?
In general, employees can commit payroll fraud in several ways.
1. Ghost Employees
One of the common ways behind the payroll fraud is the existence of ghost employee. Ghost employee is the fictitious identity created by the dishonest employee, recorded on the payroll system, but does not work for the business. The fraud happened when the salary is paid to the false employee and the dishonest employee will then collect the fund.
2. Timesheet Fraud
A timesheet fraud involves incorrect wage payment to the employees for the hours they work. The fraud happened when employees falsify records in order to get more wages. In some cases, dishonest employee will add extra hours to their timesheets, claiming for hours they did not work. There are also cases that companies overpay employees based on falsified timesheet submissions.
3. False Expense Claims
Another common type of payroll fraud is false expense claim. It involves the submission of completely fake or unreal expenses for items (or events) which never happened. Other than this, it could also be the submission of duplicate claims and inflated expenses.
How to Identify and Eliminate Payroll Fraud in Malaysia
Though payroll fraud is unavoidable, it is preventable. The key idea here is to identify the fraud before it spirals out of control and eliminating the risk. Below are some preventive measurements in identifying and minimizing the occurrence of payroll fraud.
1. Schedule Regular Payroll Audits
Conduct regular payroll audits to review the company’s payroll records and identify any suspicious activity in the payroll system. The regular payroll audit will help to minimise the risk of fraud cases within the company.
2. Eliminate and Identify Ghost Employees
One way to identify ghost employee is to have periodic checks on the employee information to ensure that every employee indicated on the payroll system is real and working in the organisation.
3. Verify Employees’ Timesheets
Timesheet fraud happens especially in organisations that require tracking of employees’ working hours. Employees might falsify records, which could result in overpaying. One way to minimize timesheet fraud is to conduct regular timesheet audits to ensure the accuracy of the working hours as recorded in the timesheets.
4. Engage a Payroll Services Provider
Another effective way that worth mentioning is to engage a payroll service provider to ease the hassle of payroll as well as to prevent the fraudulence. Having to manual calculate and handle payroll can be a very taxing and tedious. At times, miscalculating or mistakes occurring while preparing the payroll may leave a negative impact on the business, let alone the risk of payroll fraud that may hurt the organisation. To hack this problem, outsourcing the payroll matters to a third party payroll services provider is one of the good solutions
How do you choose the type of business structure or entity that is best suited for your business? Well, for one thing, it would depend on the type or products or services that you intend to provide with your business. Other factors that would help to determine the business entity choice would be the kind of ownership structure preferred and what the current state of finances are (some business entity structures are more affordable than others).
There are several options of business entity structures to choose from, such as sole proprietorship, partnership, limited liability companies and private limited companies to name just a few. As an entrepreneur, what should you take into consideration when deciding the type of business entity you should choose?
What to Consider When Choosing a Business Entity
Below are some of the considerations an entrepreneur should take into account to help them select the right kind of business entity for optimum success:
The Ability to Raise Capital – Capital is one of the most important factors of any business success. If a business is not raising capital, it isn’t making money. And if it isn’t making money, it is only a matter of time before it goes under. Analyse your business plan and if your plan does not already do so, analyse the strategy portion of your plan and what needs to be done to achieve your business targets. Having a clearer picture about your business goals and strategies will help you better decide on which type of business entity will be the best fit for you to achieve those targets.
The Types of Taxes – Different business entity types would have different tax structure systems in place. For example, the tax on businesses which are partnerships, LLCs or sole proprietorships may not necessarily be the same amounts or percentages. Some structures even allow for exemptions depending on the type of business you run and where you run your business.
The Risk Factor – With every business, there is risk involved. But a smart entrepreneur looks for ways to minimise risk, including selecting the right kind of business entity that will help achieve that goal. Selecting the wrong business structure could result in your business being more of a liability than a profit maker, so take your time, scrutinise every aspect before making a decision.
The Liability Involved – Some business entities offer more personal liability protection for the owner than others. For example, certain structures like corporations and LLCs separate ownership and management, thereby protecting the business owner from any potential suits brought against the business. Other structures, such as sole proprietorships for instance, leave the owner exposed and vulnerable to being held personally responsible for all business and managerial decisions.
At the end of the day, it also comes down to the personal preference of the business owner in question. After taking into account all the different scenarios and possible risk factors involved, the entrepreneur would have to make the choice that is going to bring about the most benefit not just for themselves, but for the overall business involved.
Malaysia has always had the benefit of a strategic location on its side when it comes to doing business in the international front. Strategically positioned right in the trading path in the middle of the Eastern and Western world, Malaysia is known as one of the important shipping routes in the world.
Doing business in Malaysia has also been of keen interest to many an investor because of the rich natural resources that the country has to offer. Malaysia for example, is the largest producers and exporters of tin, rubber and palm oil, all of which are lucrative trades that have bolstered the country’s economic status.
Malaysia is ranked as the 23rd in the world for the ease of doing business by the World Bank Group, although it is continually recognised for its business-friendly policy and competitive economy. Malaysia’s excellent infrastructure, transport connectivity, well-developed financial sector make it a very cost-effective gateway into doing business in Malaysia and the Asian markets that surround the country as well.
Doing Business in Malaysia – How to Set Up Your Own Company
Establishing a company for the purpose of doing business in Malaysia can be accomplished with the following steps:
Reserve a name for your company with the Companies Commission of Malaysia, known locally as the SSM. The SSM is the Suruhanjaya Syarikat Malaysia, which is the local Malay name equivalent of the Companies Commission of Malaysia.
The company secretary would need to prepare the required documents for incorporation and provide a statutory declaration of compliance, in accordance with the Companies Act 1965.
The required documents would need to be filed with the Companies Commission of Malaysia to obtain the incorporation and post-incorporation package which include the company seal, share certificates and statutory books.
Opening a bank account for the business can be done at any of the local banks.
Registration for the goods and services tax needs to be done at the Royal Malaysian Customs.
Registration for the income tax needs to be done at the Inland Revenue Board of Malaysia, known locally as the LHDN.
Employees would need to be registered for the Employees Provident Fund.
Employers would also need to be registered for social security at the Social Security Organisation, known locally as SOCSO-PERKESO.
Entering into the local market when it comes to doing business in Malaysia is best done by working with a local business counterpart if you have one. A local business counterpart would best understand the needs and inner workings of the market, and they would know how to handle matters related to customs clearance, wholesalers, retailers and more.
The safest way to establish a company to do business in Malaysia would be to enlist the help of a professional services agency to handle the paperwork and navigate the bureaucracy with minimal hassle.
Accounting is a necessary part of the business process and many business owners and entrepreneurs need the services of a good accounting firm in their fold to use them to their best business advantage.
Accounting firms are essential to business owners because without, for example, a system of internal controls which are also known as audit systems, it would be difficult for a company to evaluate the effectiveness of its internal controls. And monitoring this effectiveness if a company is determined on achieving its business objectives, acquiring reliable financial reports on its operations, prevent fraud and misappropriation of the business assets as well as minimise the cost of the business capital.
Running the business aspect of the business is challenging enough as it is, sometimes demanding long hours to be put in. There is just not enough time for an effective businessman to run the day to day operations and manage the booking side of the business as diligently as they should, and that is where the services of accounting firms come in handy.
Accounting Firms and The Services They Offer
The services offered by accounting firms would differ depending on the size, experience and specialisation of the firm in question.
In general, an entrepreneur can expect accounting firms to cover the following services:
Accounting – High level accounting services are usually offered by CPAs employed by accounting firms. The range of services include assisting clients with budget creation, perfecting financial statements as well as preparing local, state and federal tax returns. Audit and business valuation services are also included under this branch, with some firms even offering forensic accounting services for companies who are faced with fraud issues.
Bookkeeping – Services that fall under the bookkeeping category include accounts payable and receivable, billing, payroll, monthly and quarterly taxes, general ledger entries, bank reconciliations and monthly trial balances.
Tax Filing and Planning – Accounting firms assist businesses in figuring out tax codes to ensure that the businesses financial reporting practices are in compliance with the current regulations, determine the company’s tax liability and ensure that the businesses meet the necessary filing requirements and deadlines. Accounting firms come in handy in this aspect to help businesses prepare the federal, state and local tax returns, and how to reduce the taxes to be paid.
Consulting – Accounting firms also provide consultancy services for clients who need advice on the financial strategies they may need to take for their business. The subjects that consultancy would cover include advice or suggestions on how the client can lower their tax burden, review or suggest updates on business plans and in some cases, how to manage financial investments.
When selecting an accounting firm, consider what the needs of the business are and what kind of accounting servicesare the most important to the smooth running of the business. That would help business owners narrow down the kind of accounting firm they would prefer to engage with.
Planning to start your very own business in Malaysia? Then this how to register a Sdn Bhd company in Malaysia guide is exactly what you are going to need as you get started on incorporating your very first company in Malaysia.
When you register a Sendirian Berhad company, you will be incorporating a private company, and the words Sdn Bhd will appear together with the company’s name. A Sdn Bhd is also the most common form of business entity in Malaysia, with many foreign and local entrepreneurs opting to register a Sdn Bhd company.
The reason why Sdn Bhd companies are the most popular business entity option in Malaysia is because it is a separate legal entity from its shareholders. This means that the directors have limited liability for the debts and losses of the company.
How Would I Register a Sendirian Berhad Company in Malaysia?
All companies in Malaysia can only be registered through a licensed Company Secretary, which means you would need to appoint one for the process. All companies will be required to register with the Companies Commission of Malaysia, known locally as the SSM (Suruhanjaya Syarikat Malaysia). The SSM is the statutory body which regulates all companies and businesses legally operating in Malaysia.
All entrepreneurs will also be required to obtain approval for the intended or proposed business name from the SSM before you can proceed to the next stage of the registration process. Currently, all companies can only be registered in Malaysia via the SSM’s MyCoID system, which can only be done through your registered Company Secretary.
What Are the Requirements to Register a Sdn Bhd Company in Malaysia?
To register a Sdn Bhd company in Malaysia, you are going to need at least 2 directors who are residing in Malaysia, and 2 shareholders. Your directors must not have been declared bankrupt prior to their appointment.
You would also need to prepare the following details:
The proposed company name.
The business activities of the new company (a maximum of 3 should be listed).
Photocopy of the passport (foreigner) or IC (Malaysian) for all directors and shareholders.
The residential address of all directors and shareholders.
Information about the paid-up capital of the company.
The share structure of the new company.
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There is certainly a demand that is on the rise among entrepreneurs seeking to incorporate and register a Sdn Bhd company in Malaysia. That’s because registering a company in Malaysia is now easier than ever, especially when you’ve got a team like BAYABUMI ACCOUNTANCY SERVICES on your side helping you navigate the process.
Our Annual Financial Audit approach is based on an understanding of our clients’ business processes, goals, and strategies. This enables us to identify and assess the risks that impact their business and achievement of goals
We understand how important it is for you to maintain business as usual during the audit process, with minimal disruption to your day-to-day operations. We will also work with you to identify weaknesses and assist with suggested rectification procedures.
Statutory audit not only requires the review of financial information and application of regulation, but there also needs to be support; support for the accountants completing the compliance, the trustee and the members. Our team of specialists can be relied on to not only identify issues but to also provide assistance and guidance according to the International Auditing Standards and compliance with the requirements of Malaysian Institute of Accountants.
As Malaysia is transitioning to adopt the Financial Reporting Standards, our professional auditors are prepared to guide your finance department on the complexity of changes and keep you updated on current and upcoming amendments so that your financial statements remain relevant and fully compliant at all times.
Advantages of Auditing
A true and fair financial statement may be able to satisfy the following:
Satisfy stakeholders such as employees, customers, suppliers and pressure group, as well as the investing community, as to the credibility of published information
Facilitate the payment of corporate tax, goods and services tax, and other taxes on time and accurately, thereby avoiding interest, penalties and investigations
Enable company to comply with banking covenants
Help to deter and detect material fraud and error.
Facilitate the purchase and sale of businesses
Take advantage of the spin-off benefits such as advice on the structure and operations of systems
Demonstrate good corporate governance and citizenship
Every company operating in Malaysia must file tax returns every year. This is for resident companies i.e. those that have their management and control based in Malaysia, and non-resident companies i.e. companies that have more than 50% in foreign shareholding. The Inland Revenue Board is the tax agency to which these returns are made.
Corporate Tax
Effective rates
For Small and Medium Enterprises the rate is 19% for the first RM 500,000 and 24% for any amount beyond that was effective 2016. SMEs in Malaysia are defined as companies with a paid-up capital of less than RM 2.5 million. This company should not be part of a company group that has a company with a paid up capital of this amount.
The standard tax rate is 24% for other companies.
Labuan companies or representative offices are allowed to choose a minimum tax rate of 3% on any amount of profits or pay a flat rate of RM 20,000 per financial year. All income derived from doing business in Malaysia is taxed. Income from foreign sources is not taxed unless the company is in banking, insurance, shipping and air transport.
Taxable income is calculated as all income that is accrued from doing business in Malaysia which includes gains and profits, rents, interests, dividends, premiums, royalties and any other income. Companies are required to adopt the Single-Tier System (STS) and companies that do so are exempt from tax on dividends.
Capital gains are tax exempt except when the gains are realized through the sale of real property, or when a shareholder sells shares in a real property company at a profit. The tax rate is 30% for selling in less than 3 years after the acquisition, 20% in the 4th year, 15% in the 5th year and 5% in the 6th year and beyond.
Losses are permitted to be carried forward indefinitely and offset with income from the same company.
Foreign tax credit
If the company has paid a foreign tax, the same tax may be credited against the Malaysian tax on the same profit. Note that,this is limited to 50% if the tax jurisdiction has a tax treaty with Malaysia. This tax credit is only applicable to foreign income. Domestic dividends are also tax exempt.
Tax for holding companies
An investment Holding Company is defined as one that is involved in holding investments and derives a minimum of 80% of its gross income from such investments. Such a company is only permitted expenses that are tax deductible.
Tax incentives
Industries that enjoy tax incentives include IT, Islamic Finance, biotechnology, environmental protection and energy conservation. Pioneer status investments enjoy up to 10 years’ tax holiday. This can be 60-100% investment tax allowance, accelerated capital allowance, and reinvestment allowance up to 60% of invested capital.
Withholding tax
There is no withholding tax on dividends. Interest paid to a non-resident is subject to 15% withholding tax unless there is a tax treaty. However, interest paid by a Malaysian bank to a non-resident is exempt unless that interest forms part of income accruing at the non-resident’s place of business in Malaysia, or is part of networking funds.
Royalties to a non-resident are subject to 10% withholding tax unless there is a tax treaty with the non-resident’s tax jurisdiction.
Technical services payments to non-residents for work done in Malaysia are subject to 10% withholding tax. This rate also applies to payments of rental of movable property or installation fees paid to non-residents unless there is a tax treaty in place.
We have gained vast experience in accounting in Malaysia as well as account auditing.
Our accounting services include:
In today’s dynamic business environment, companies who have access to timely and accurate financial information gives them a competitive advantage. With vast experience in Malaysian accounting standards, we will be able to provide you with the assistance you need to set up your business in the country. We specialize in meeting the basis to complex accounting and accounting-related requirements of businesses in Malaysia. We provide your business with an expert team of professionals such as tax consultants, lawyers, accountants, company secretaries, and immigration experts who are deeply familiar with Malaysia’s legal entities and regulatory framework too.
Besides that, Bayabumi Accountancy Services provides a full range of services including bookkeeping, payroll services, tax, accounting, auditing and compliance matters for small and medium-sized businesses.
If you require professional, affordable and accurate accounting services for small business, Bayabumi Accountancy Services is the right choice.
If you want an instance access to our FREE consultation for your company registration, accounting and corporate secretarial services, tax planning, and business loans application, contact us here or drop us an email at info@bayabumi.com.my
f you are a foreigner looking to do business in Malaysia, you have the choice of picking the sole proprietor model of business, partnership or a private limited company. Among the three models of business ownership, the private company (Sendirian Berhad Company, Sdn Bhd) is the preferred choice as it has numerous advantages in legal matters as well as in raising financial capital.
he private limited company by shareholding is known as “Sendirian Berhad” (Sdn Bhd) Company. This type of company is a separate legal entity from its owners. This means that the company is considered a legal ‘person’ that can buy or sell property, enter into legal contracts, sue and get sued in courts of law.
There are several advantages and disadvantages of the Sendirian Berhad company. However, the advantages far outweigh the disadvantages. They include:
Personal Wealth Protection
The Sdn bhd company is a limited liability entity. This means that the liability of the owners end at being shareholders. They are not responsible for the company’s debts. This means that the investor’s wealth as a shareholder is protected. His assets cannot be attached to pay for the Sdn Bhd company’s debts unless he has provided a personal guarantee for the debt. This is unlike the sole proprietorship or partnership models where the owners are responsible for the debts of the company.
Continuous Existence
As a legal entity able to buy and sell property, the sdn bhd is able to operate continuously expanding its assets and business portfolio even as the owners come and go. Private companies stand in existence until such a time when they are dissolved by a court of law. This means that an investor can achieve a long term business vision through a company safe in the knowledge that his goals will be achieved by those who come after him. This is unlike a sole proprietorship or partnership where the business dissolves upon the departure of one of the owners.
Transferable Ownership
Ownership in a private company is held among several shareholders. These shareholders can transfer shares among one another, or sell to outsiders who then become owners of the business too. The investor is able to transfer his ownership to relatives, friends or other entities without changing the ownership structure of the company. This is very flexible for the business as the operations are not affected by changes in ownership. This is unlike a sole proprietorship or partnership where the ownership transfer is complex.
Better Access to Capital
Need for capital arises now and then when a business wants to expand? A Sdn Bhd company will find it easier to raise capital by issuing more shares, or bonds which buyers hold as guarantee against debt. A private company can access more capital through the stock exchange by issuing an IPO, which makes its access money by selling shares to the general public. These options are unavailable to sole proprietorships or partnerships in which owners have to personally raise funds at a risk to their assets.
Lower Taxes
Malaysian tax laws are more favorable to the Sdn Bhd company than any other model of business or taxpayer entity. The corporate tax for the first MYR 500,000 profit is taxed at 20%, and 25% beyond this amount. The maximum tax rate is 26%. This is unlike tax rates applying to individual tax payers which can rise up to 30% and beyond.
Other Factor to Consider
However, there are some requirements / disadvantages of a Sdn Bhd company that foreign investors must be aware of when looking to invest in Malaysia.
-Local partnership
Forming a company in Malaysia using Sdn Bhd company structure requires you to have at least two directors living in Malaysia. This means the foreign investor will have to identify suitable partners in his ventures. This bears an element of risk as control of the business is whittled down.
-Legal compliance
Even when the sdn bhd company becomes dormant, it will be forced to file tax returns, do annual returns and be open for audit.
-Annual expenditures
The sdn bhd company has to engage a tax auditor and a company secretary every year to remain compliant with corporate requirements in corporate tax and governance regulations. These are professionals whose services do not come cheap. A dormant sdn bhd will spend MYR 4,000-5,000 for just staying legally compliant.
-Strict bookkeeping
Sdn bhd companies operate under a more watchful eye from the government. There are many corporate regulations and laws to observe, and failure to do so will result in a risk of heavy fines.
The structure of Sdn Bhd company still offers the best flexibility and protection for anyone intending to do foreign investment in Malaysia. Registering one is not difficult as Malaysia has eased the incorporation procedures.
The first stage would involve deciding on the business entity type you’re going to go with. Each entity has its own compliance requirements, benefits and tax structure. You must choose one based on what will work best for your business structure.
For local entrepreneurs, your options consist of Sole Proprietorship, Limited Liability Partnership or General Partnership. If you are a foreigner, you can choose between a locally incorporated company, or a foreign-owned company. Foreigners may also opt to go with the Private Limited Company entity, representative office or Labuan company.
The company incorporation procedure can be completed through the following steps:
Filling out the incorporation form.
Paul Hype Page can assist with the name search check and revert within 24-hours.
If available, your chosen name can be reserved once payment has been made.
Search for a suitable business premise.
Prepare a registered office address location.
Prepare your incorporation documents
Once SSM has approved, the full set of registration documents must be submitted.
Incorporate the company with SSM.
SSM will inform you once the Issuance of Notification of Incorporation is ready.
If you intend to relocate to Malaysia to run your business, you will need to arrange for your work permit. Bayabumi Accountancy Services can provide assistance with that.
In 2018, the World Bank ranked Malaysia one of the easiest place in the world to start a business. This is a testament to how easy it is to start a business in Malaysia, especially with the right guidance from company formation experts in Bayabumi Accountancy Services.
All companies in Malaysia must be registered with the Companies Commission of Malaysia, known locally as Suruhanjaya Syarikat Malaysia (SSM). They are the statutory body responsible for overseeing and regulating corporate and business affairs.
Being the capital city of Malaysia, Kuala Lumpur is not only the business hub for the country, but also the place most foreigners seek out to start their Malaysian company incorporation journey.
To open a company in Malaysia is a fairly straightforward process. This guide will provide you with all the requirements you need for your Malaysia company incorporation process.
Malaysia Company Incorporation End Goals
Before commencing your business in Malaysia, it is important that determine your end goals. Why do you want to start your business in Malaysia? Clarifying your intention and reasons helps to put your goals into perspective. It is not just about preparing for the how to incorporate a company in Malaysia part, but why you’re choosing Malaysia as your base of business?
When starting any business in Malaysia, chances are you might make it, or you might just fail. Not everyone that has started their business in Malaysia has succeeded. However, there are a few that actually surpassed expectation and eventually made it to the top too.
Malaysia Company Incorporation Requirements
To register a company in Malaysia, you will need to fulfil the following requirements:
Prepare the minimum paid-up capital of RM 1.
Have a minimum of one director who is at least 18-years old with no prior criminal convictions and bankruptcy records. The director should also be residing in Malaysia.
Have a minimum of one subscriber to the shares of the company.
Have a minimum of one Company Secretary. They must be a member of any of the prescribed professional bodies or licensed by the SSM. Alternatively, Bayabumi Accountancy Services can assist through our Company Secretarial Services package.
Have a registered office address in Malaysia.
You will also need to provide the following information:
Prepare your proposed company name and its meaning.
State the primary business activities of the company.
A copy of the NRIC or passport of all directors and shareholders.
Recent proof of residential address of all directors (utility bills, phone bills, etc).
Contact details and occupation of all directors and shareholders.
Details of the beneficial owner (if they are not listed as the shareholder).
Information about your paid-up capital.
Registered business address.
Source of funding.
Expected location of customers and suppliers.
Written confirmation from directors, shareholders and beneficial owners that they are not a Politically Exposed Person. Email confirmation is acceptable.
Types of business structures and company incorporation in Malaysia
Sole-Proprietor: is a traditional and a commonly used business structure around the word. Sole Proprietor is also known as a Sole Trader. For some businesses, this structure is suitable because it is the easiest and the cheapest form of business structure out there.
Partnership: is the second most common structure of business out there. Basically what happens in a partnership is that the business is owned by two or more separate entities.
SDN BHD: stands for Sendirian Berhad. SDN BHD is a private limited company which cannot make its shares available to the general public. To Incorporate or register a SDN BHD (Private Limited or LLC) company in Malaysia must have a minimum of 2 directors. As the shareholder / director of a SDN BHD, you don’t need to put your personal wealth and assets at risk.
Why is choosing the right business structure for your business important?
Choosing the right business structure is crucial decision for a business. If the right business structure is chosen it boosts a business towards success. The correct business structure will help businesses to reach their full potential. If a business fails in choosing the right structure it will face several severe difficulties while operating in the long run.
Setting up a company in Malaysia by using the SDN BHD (Sendirian Berhad) structure is the best choice for an Entrepreneur. This structure should be opted for by an entrepreneur who is committed and ambitious about his or her business. There are major benefits of using this structure which no other structure offers.
The liability is limited. An entrepreneur’s personal wealth is protected if the business encounters a loss or if the business fails.
Another major advantage of this structure is that the income tax risk exposure is low. Most SDN BHD are better managed and regulated. The tax planning is better as the company is a separate legal entity. Tax saving up to 20% compared to individual tax rate.
The Business Continuity will never stop. A company using SDN BHD structure will never expire and the company will exist even if the key owner passes away.
Getting a loan is easier for this structure. It all depends on company’s cash flow, strategy and business prospects. Accounts of SDN BHD Company are more reliable and trustworthy.
Incorporation company in Malaysia require you to engage the service of company secretary, to help you to complete the company registration process.
Every company (sdn bhd) must have at least one company secretary in the Board and the company secretary must be a member of a professional body or licensed by SSM Malaysia.
Contact Bayabumi Accountancy Services today for all your incorporation needs.
Malaysia as a new highlight in the economics of the ASEAN is a prospective place to set up a company. A lot of business owners around the world compete to set their camp on it as a company. The interesting question popping up is “how to incorporate business in Malaysia?” This question should be answered in advance so no unnecessary, time-wasting questions appear in the future where mistakes mean loss of money.
Requirements to Incorporate Business in Malaysia
Prior to discussion about how to incorporate business in Malaysia, we should know the definition of company itself in Malaysia. There are two types of company eligible for company incorporation: (1) a company limited by shares, and (2) an unlimited company. The business owners can determine whether their company will be incorporated as a private company (Sdn. Bhd. / Sendirian Berhad) or public company (Bhd. / Berhad). The requirements of both companies are the same, including:
Two shareholders (Section 14CA)
Two directors (Section 122)
A company secretary, a member of a professional secretarial firm under the Minister of Domestic Trade Cooperative and Consumerism, or an individual licensed by SSM.
Note: Both the directors and company secretary must have their only residence in Malaysia.
Procedures
Once the business owners fulfilled the requirements, they will likely hand over the rest of the secretarial matters to the company secretary. There would be two important steps in company incorporation: (1) application of name search, and (2) lodgement of incorporation documents.
Application of Name Search
This step is conducted to determine the availability of the proposed name. The business name must initiate the step by the completion and submission of Form 13A CA to SSM and a fee of RM 30.00 per each name. After approved by SSM, the name will be reserved for three months from the date of approval. This period will be used for completing and submitting documents necessary to incorporate business in Malaysia.
Lodgement of Incorporation Documents
This step is so crucial because the failure will cause an obligation to repeat the whole process from the application of name search. So, all documents must be completed and submitted within 3 months. The documents include:
The Memorandum and Article of Association stamped at RM 100.00.
Form 48A
Form 6
An original of Form 13A
A copy of the approval letter from SSM
A copy of the identity card (usually passports) of directors and company secretary
The whole process of company incorporation is completed with the release of a Certificate of Incorporation by SSM.
Malaysia starts stealing the world’s attention for its business potential. A decade ago, this country was mostly known as one of the most favorite tourist destinations in the ASEAN. But, today’s Malaysia is quite different. It has strengthened its pillar of economics and successfully created a conducive atmosphere for the global trend of multinational companies. So now, it is not complicated to make your company building plan come true in Malaysia. The following guideline will assist you and answer all of your questions in association with Malaysia company registering.
Malaysia Company Registration Guideline
Malaysian warmly welcomes foreigners to plunge into the economics of the country. There are two ways foreigners can take if they wish their company to legally enter Malaysia business sector. The first is incorporating a local company with Suruhanjaya Syarikat Malaysia (SSM), or registering their foreign company. The latter refers establishing a form of SDN BHD company that is fully owned by two foreign directors. In short, foreign business owners must select whether they want to go on with incorporation or registration. The legal matters associated to Malaysia company registration are under provisions of the Companies Act 1965 (CA 65). In general, there are two steps the business owners (usually represented by a company secretary in Malaysia) must take in company registration in Malaysia.
Step 1. Name Application
In the step, the business owners must check the availability of the company’s name proposed. The form involved is Form 13A. The Malaysia company registration form must be requested from SSM, completed and submitted back to SSM. The submission includes a fee of RM30.00 valid for one name. The name refers to the name registered in its homeland.
Step 2. Company Registration
This step starts after the approval of the company’s name – which means that it is available to use. The business owners must request the Malaysia company registration form from SSM, complete and compile it with other necessary legal documents for submission to SSM. The submission must be done in 3 months after the name approval.
Documents in Malaysia Company Registration
A copy of the registration or incorporation certificate of the company
A copy of the statute, charter or Memorandum of Association of the company
Form 79
A memorandum of power of the authorized attorney residing in Malaysia
Form 80
Additional legal documents including: (1) copy of Form 13A (2) a copy of the letter justifying the approval of the company’s name
Besides the name approval and submission of company registration documents, the business owners must also regard other requisite terms in the form completion. For instance, the company must have at least two directors and one company secretary. Both directors may be or not residents in Malaysia depending if they select incorporating or registering their company. But, a company secretary must be a resident in Malaysia.
