The most challenging part of any expansion is establishing a subsidiary in a new country. Each country has different incorporation laws, so the amount of time and money required can often vary. In Malaysia, laws and cultural factors may even vary by region.
It’s important to know that a subsidiary in Malaysia is controlled to a certain degree by another legal entity, which can be a holding company or a parent company. To qualify as a Malaysian subsidiary, companies need to comply with various complex legal requirements.
How to establish a Malaysia subsidiary
The first step to set up a Malaysia subsidiary is to determine several factors, such as the type of business you want to open, the nationality of the individuals you will hire, and any existing trade agreements that could impact your business.
Learning all facets of the local culture is the next key step. Malaysia is a multicultural society with influences from China and India. The Peninsular Malaysia and East Malaysia are 2 separate geographical regions with cultural differences, which ultimately impacts how companies conduct business. You’ll want to take these nuances into consideration when deciding where to base your Malaysia headquarters.
The local language also changes based on your location in the country. Malay is the official language, but you will often encounter Chinese and Indian languages when doing business.
After considering these factors, the steps to set up a Malaysia subsidiary include:
- Verifying and reserving the company name
- Submitting incorporation documents
- Choosing a shareholder and a director
- Registering an office
- Opening a commercial bank account
- Registering for Goods and Service Tax (GST)
- Registering for payroll tax
- Enrolling with the Social Security Office (SOCSO)
Malaysia subsidiary laws
A private limited liability company (also known as Sendirian Berhad or “Sdn. Bhd.”) is the most popular type of Malaysia subsidiary. Companies can incorporate this type of subsidiary with 1 shareholder and 1 director. The subsidiary can be registered with 100% foreign ownership and be incorporated by a maximum number of 50 members.
The directors and secretary do not have to be Malaysian citizens, but they will need a work permit issued by local authorities as well as an official residential address in Malaysia. Additionally, the secretary needs to be licensed by the Companies Commission of Malaysia (SSM) or a member of a professional body prescribed by the Minister of Domestic Trade Cooperative and Consumerism.
Any international investor that has more than a 30% share in the company will have to apply for approval from a Foreign Investment Committee.
Keep in mind that all companies that decide to set up a Malaysia subsidiary need to register an office where communications can be sent.
Benefits of establishing a Malaysia subsidiary
One of the main advantages of setting up a subsidiary in Malaysia is that 100% foreign ownership is allowed. A company can be set up as a public limited company or a private company, yet it will be treated as a local company from a tax perspective. Financial documents will need to be filed before the Companies Commission of Malaysia and the subsidiary will need to conduct a yearly audit of the company’s accounts.
Other important considerations
If you choose to set up a subsidiary, you’ll need a significant amount of time and money. It will also likely involve moving members of your team to Malaysia to start your subsidiary or onboard new hires that reside in Malaysia.
Throughout the process, you’ll likely have to travel back and forth, whether it’s to help onboard employees or find a suitable office space. Finally, you’ll also need a thorough understanding of Malaysia’s subsidiary laws to remain compliant.
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