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Malaysia

 
   

Executive Summary
Malaysia is a federation located in South-Eastern Asia, which covers a total are of 329,847 sq km. Kuala Lumpur is the capital of Malaysia, but Putrajava is the city where the federal government resides. Malaysia as a unified state has been created in 1963. Before that year its separate territories belonged to the UK and other countries. Malays represent the largest group of the population, Chinese and Indian communities are relatively large within Malaysia.

Malay is the official language of the country, but English may be used for several official purposes as well. It is a member state of a number of international organizations. Malaysia is a federal constitutional elective monarchy, the King of Malaysia is the head of the country. The political system is largely based on the Westminster parliamentary system. Legislative power belongs to a bicameral parliament; the Prime Minister is the head of the cabinet which has executive power. Malaysia is a multi-religious country, Islam is its main religion.

Till the middle of the 20th century Malaysia was the world’s leading producer of tin, rubber and palm oil. Malaysia has experienced a rapid economic growth since the 80th of the 20th century, and the country has been transformed into a newly industrialized economy. In the second half of the 20th century the country was not far from being defined as an Asian Tiger together with Taiwan, South Korea, Hong Kong and Singapore.

International trade has an important significance for the country, as it is one of three countries that has control over the Strait of Malacca. Manufacturing also plays an important role in the country. Today its economic development is no longer defined as rapid, but as a sustainable with a well-developed and solid financial industry.

The Malaysian Ringgit (MYR) is the national currency.

Geography
Malaysia is a densely populated country, which is comparable to Venezuela and Saudi Arabia as a population size and to Norway and Vietnam as the area it covers. Moreover, Malaysia is one of 18 countries of the world which are defined as megadiverse countries, with a rich range of flora and fauna.

Two main parts of Malaysia are separated from each other by the South China Sea, both of which have a similar landscape which comprises plains, hilly territories, forests and mountains. Mount Kinabalu is the highest point of Malaysia which raises at 4,095 metres above the sea level. Malaysia has an equatorial climate and is a popular tourist destination.

Map, Flag and Coat of Arm


Types of Company

Limited Liability Company
A company in Malaysia may be limited by shares, guarantee or it may be unlimited.  Every company must be registered with the Companies Commission not later than one month after it has started operating; it must have a registered office in the jurisdiction. Directors must be private persons, residents in Malaysia. All the books and documents must be kept in the registered office. Audited annual returns must be submitted by all companies, except exempted entities.

Branch of a Foreign Company
A company incorporated in a foreign country that wishes to conduct a business activity in Malaysia must be registered with local authorities by submitting all the required documents. It may apply to establish a representative office, which however does not have any legal status and cannot be involved in trading activities. It may only serve as a promotion base, liaison and a place for market research which acts on behalf of a company’s head office.

Sole Proprietorship
Individuals of different nationality but residents in Malaysia can register this type of company in the Companies Commission.

Partnership
Two or more residents of Malaysia come together to work under the common name of a prtnership.

Malaysian Satay (Holding Company)
Malaysian Satay is a Malaysian resident holding company wholly owned by a Labuan offshore company, but itself it owns a foreign subsidiary; this structure  has significant tax advantages. It has become a popular instrument for international tax planning purposes.

N.B.
Labuan is controlled by Malaysia, and offers attractive business structuring and management opportunities. Please see Labuan for more details.

Taxation

Personal

Residents are liable for paying taxes on their Malaysian and world-wide source of income. Generally, residents are persons who spend 182 or more days in a year on the territory of Malaysia. Income tax has a scalable nature and reaches the maximum of 28%, depending on the total amount earned by an individual. Certain reliefs are available for residents, non-residents may not have any reliefs, but are liable to pay tax only on income derived within the territory of Malaysia.

Corporate
A company which is incorporated in Malaysia and/or its active management is exercised from within the jurisdiction is considered to be resident for taxation purposes. Corporation tax rate is 28%, however, those companies which conduct activities of petroleum operations, are liable to pay corporation tax of 38%. Capital gains tax is payable on real estate properties situated in Malaysia or on shares held in a real estate company. The rate of this tax varies between 5% and 30%. Withholding tax is levied on various transaction starting from 10% to 20%. Government grants certain tax incentives for companies which operate in  particular market segments.

Stamp duty is levied on certain documents; custom duties are applied on imports and exports, sales and service taxes are added to the majority of goods and services.

 
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