Business in Malaysia

Country Desk

THE TOP 5 THINGS INVESTORS NEED TO KNOW ABOUT MALAYSIA

(1) Currency control

Periodically, the Malaysian government and/or the central bank (Bank Negara) may implement new foreign exchange management requirements and investment remittance rules on companies incorporated in Malaysia (resident or otherwise) to strengthen the market for its currency and manage exchange rate volatility. Nonetheless, investors can still remit profits to their headquarters as well as transfer dividend payments, loan payments, royalties or other fees to their home countries.

(2) Foreign ownership restriction

The Malaysia Companies Act 2016 allows for a sole member/shareholder in companies incorporated in Malaysia and such companies can be 100% foreign-owned. However, there are certain business activities in Malaysia that are subject to specific equity requirements by locals/Bumiputeras and minimum paid-up share capital. These must be met before companies can apply for certain licences and tenders, or conduct businesses in regulated areas. For example, foreign-owned companies in wholesale, retail and trading require approval from the Ministry of Domestic Trade prior to commencement of business and for licence renewal.

(3) Requirement of local representative/director and qualified secretary

As of 31 January 2017, the Malaysia Companies Act 2016 and Companies Regulations 2017 have simplified the process of incorporating a Malaysian company. Companies now only need to have a minimum of one local resident director or a local representative of the foreign branch. Additionally, companies need to have at least one qualified company secretary who must be appointed within 30 days from date of incorporation.

(4) Employment matters

Minimum wages

The Malaysian government has a mandated minimum wage policy in place. As of 31 December 2017, no worker in Malaysia can be paid less than RM1,000 per month or RM4.81 per hour on the Peninsula (West Malaysia), and RM920 per month or RM4.42 per hour for the states of Sabah, Sarawak and Labuan (East Malaysia). The minimum wage regulation was last changed on 1 July 2016.

From time to time, the Malaysian Human Resources Ministry may announce a new minimum wage to bridge the income gap between Peninsular Malaysia and East Malaysia as well as among workers in Malaysia.
Relevant employment regulations

The Employment Act 1955, Industrial Relations Act 1967, Employment (Part-Time Employees) Regulations 2010 and other legislative enactments/codes protect the health, safety and general well-being of employees in Malaysia. It is worth noting that omnibus or general workers’ unions are not permitted but unions belonging to the same industry may apply to form a federation of trade unions. They can also become affiliated with the Malaysian Trade Union Congress or the Malaysian Labour Organization.
HR issues

Malaysia has a flexible visa policy that allows business travelers from most countries to enter without a visa for no longer than 90 days. This includes foreign nationals from the United States, France, Australia, Brazil, Germany and the United Kingdom. If visas are required, there are two types of visas available - the single entry visa (valid for 3 months) and multiple entry visa (valid for three to 12 months).

Companies incorporated in Malaysia that wish to employ foreign workers must work with the government or relevant government agencies to ensure that the foreign workers are granted the relevant work passes. Approvals for expatriate positions are given by different authorized bodies or agencies depending on the company’s business activities. Some of these are:
- The Malaysian Investment Development Authority (MIDA)
- Multimedia Development Corporation
- Public Service Department
- Central Bank of Malaysia
- Securities Commission
- Department of Immigration Malaysia
Statutory contributions from employers

In Malaysia, the following statutory contributions are required from employers based in Malaysia:
- Employees’ Provident Fund (EPF) – compulsory for Malaysian citizens and permanent residents
- Social Security Organization (SOCSO) ‒ an insurance scheme that cover Employment Injury and Invalidity Pension Scheme ‒ a monthly contribution must be made for each eligible employee
- Human Resources Development Fund (HRDF) - provides financial training by contributing employers under certain designated training schemes. Employers that fall under the industries listed by HRDF are required to register with the HRDF and contribute on behalf of employees who are Malaysian citizens

(5) Language

The official/national language of Malaysia is Bahasa Malaysia but English is commonly used in business. The judicial language used in the country is Bahasa Malaysia. Generally, the language of contracts in Malaysia should be in Bahasa Malaysia and/or English.

THE IMPORTANCE OF WORKING WITH ADVISORS WHO KNOW MALAYSIA

Investors will be able to:

Understand the finer details of doing business in Malaysia
Develop a greater appreciation of practical issues on the ground and the best ways to overcome them
Better manage the budget for the incorporation and maintenance of the company
Obtain holistic advice on advisory and compliance matters

YOUR IDEAL LAUNCHPAD INTO ASEAN

Singapore is an excellent base for reaching out to the region’s developing markets.

Businesses in Singapore enjoy tax and other benefits of intra-ASEAN trade. They also enjoy free trade and double tax agreement benefits that Singapore has with neighbouring countries such as China, India, Australia, Japan and South Korea
Singapore is the de facto financial capital of ASEAN’s treasury function
It enjoys a low corporate income tax rate (currently at 17%), has no tax payable on dividends earned externally from its borders (subject to meeting conditions) and offers tax incentives/financial assistance to small-medium enterprises wishing to establish operations overseas
There is no capital gain tax. If a Singapore holding company were to sell its shares in the subsidiary and makes a profit, there is no capital gain tax at the Singapore holding company level
Strong reputation as a leading global financial hub