1. Setting up a Business Entity
    1. A foreign entity may carry out trade or services direct with any business entity in Malaysia.
    2. In the event that the predominant business activities are carried out on business in Malaysia, it has to be carried out through a properly registered business entity.
    3. For foreign investors, this can be achieved either through:
      1. a Corporation limited by shares incorporated under the Companies Act, 1965 (in the form Private Limited – “Sendirian Berhad” or Limited “Berhad”); or
      2. a branch registered under the Companies Act, 1965.
    4. Corporations described under 1.3(a) above shall comply with the various requirements of the Companies Act, 1965; such as the regulations of the corporation, maintenance of registers and books of accounts reporting, capital and distribution and incorporation and liquidation.
    5. Foreign entities may also set up a representative office as described under 1.3(b) above if they do not intend to carry out business activities but would like to oversee their operations or investments or to gather market information in Malaysia.
    6. Other than the Companies Act, 1965, business entities registered in Malaysia shall also comply with the Income Tax Act, 1967; while most industries are well regulated and specific legislation applies to specific businesses.
    7. These are the main applicable legislations applicable to Employer:
      1. Employment Act, 1955
      2. Industrial Relations Act, 1967
      3. Trade Unions Act, 1959
      4. Employees Provident Fund Act, 1991
      5. Employees Social Security Act, 1969,
  2. Foreign Exchange
    1. Foreign investments are recognized as an important factor in the growth of the Malaysian economy, provided that it is compatible to the objectives set in the National Development Plan.
    2. While there are capital exchange controls on external accounts, trade settlements and currency, there are no restrictions on direct investment and repatriation of interest and dividends and capital.
    3. While the Ringgit is not freely convertible and can only be transacted through authorised depository institutions within Malaysia, current account transactions will continue to be convertible.
    4. All settlements of exports and imports must be made in foreign currency.
    5. Withdrawals from external accounts require approval except for purchase of Ringgit assets.
    6. Travellers are allowed to import or export Ringgit currency of not more than RM1,000 per person. There are no limits on the import of foreign currencies. The export of foreign currencies by residents is permitted to a maximum of RM10,000 equivalent. The export of foreign currencies by non-residents is permitted up to the amount of foreign currency brought into Malaysia by the non-resident.
    7. Residents are required to obtain approval before they can borrow in foreign currency of more than the equivalent of RM5 million from non-residents. Non resident controlled companies operating in Malaysia are required to obtain permission for credit facilities exceeding RM10 million and are required to obtain at least 60% of their domestic credit facilities from Malaysian owned financial institutions.
  3. Accounting and Auditing

    Malaysia uses International Accounting Standards and International Standards on Auditing as a basis for the setting of approved accounting standards and approved standards on auditing respectively.

  4. Tax
    1. Malaysian taxation is based on the imputation system and is territorial. Malaysia has signed Tax Treaties with over 45 countries.
    2. The principal statute is the Income Tax Act, 1967 which governs the taxation of income.
    3. The income tax rate for corporation is 28% (and gradually reducing to 26% now for the Financial Year of 2009) and for individuals is on graduated rates up to a maximum of 30%.
    4. Real Property Gains Tax that was levied on real estate related transactions at the rate of tax range between 5% to 30% is now suspended since 2007. Therefore, gains made therefrom are not taxable now.
    5. There is also direct tax legislation covering import duty and excise duty ranging from 5% to 300% and sales tax and service tax ranging from 5% to 10%.
  5. Foreign Trade
    1. The Malaysian government provides for several incentives to promote growth in exports. The incentives can be obtained though foreign guidelines.
    2. The following factors are considered in determining the percentage of approved foreign equity for the enjoyment of these incentives.
      1. Level of technology
      2. Size of Investment
      3. Location of project (Eg: the heavily promoted region of “Iskandar Malaysia”)
      4. Spin-off effect
      5. Value added and high utilisation of raw materials and components.
    3. Infrastructures set up to support promotion of trade includes:
      1. Malaysian External Trade Development Corporation (MATRADE)
      2. Malaysian Export Credit Insurance Berhad (MECIB)
      3. Malaysian Trade Missions Overseas
      4. Foreign Currency Exchange Accounts
      5. Free Zones and Licensed Manufacturing Warehouses
      6. Trade and Bilateral Payment Agreements / Arrangements