Malaysia is one of the region’s fastest-growing, most dynamic economies and attracts leading companies who come to the country to tap its growing Middle Class and use it as a base for further expansion into Asia.
Companies in Malaysia are governed by the Companies Act 2016 (CA 2016) and its legal and accounting practices originate from the British system and so are very familiar to many international firms. The country adheres to most international reporting criteria when it comes to accounting and tax and adheres closely to the International Financial Reporting Standards.
With good infrastructure, a modern, well-connected international airport and well-educated, predominantly English-speaking population, Malaysia has become an attractive place for companies to incorporate and do business. However, there are a number of areas that entrepreneurs and business leaders need to be aware of:
- Taxes – The corporate tax rate in Malaysia is 24% with the rate for start-ups and SMEs is 17% (certain conditions apply) on the first RM500,000 with 24% applied on the balance. There are approximately eight taxes to be paid depending on the type of company including taxes on interest, vehicles and real estate. Labuan, in East Malaysia, has a very preferential tax regime minimal foreign exchange controls and minimal taxes among other benefits. Corporate tax ranges from 3% (for international revenue) to 24% (for local Malaysian revenue) and there are few other taxes for firms and investors to think about
- Incentives – The Malaysian government provides a number of incentives and support for companies looking to invest in Malaysia. Pioneer Status (PS) or Investment Tax Allowance (ITA) can provide up to 100% of income tax exemption on statutory income for companies in the manufacturing sector. Companies in the Biotechnology sector can also apply for 100% income tax exemption and any locally incorporated company that uses Malaysia as a base for conducting its regional and global businesses can apply for a number of tax reductions and incentives. These are just some of the incentives and tax breaks on offer
- HR and hiring – employment law in Malaysia is governed by the Employment Act and there are many things that employers need to know. For example, the minimum retirement age for employees is 60 and retirement ages must be included in labour contracts (in order to avoid paying severance pay to older employees). When it comes to termination of employment, notice periods must be given based on the tenure of the individual, with longer notice periods provided for longer tenures. Both employees and employers are required to pay into the employee’s social insurance via Malaysia’s Employees’ Provident Fund (EPF) and the Social Security Organization (SOCSO). These are just some of the usual areas companies need to consider when hiring in Malaysia
Understanding which incentive scheme and tax break you can benefit from, which regulations are most relevant and what tax bracket you and your company are in is vital if you are going to succeed in Malaysia. While the business environment is positive for companies and entrepreneurs of all sizes, there are still complexities that companies need to overcome. Therefore, employing the services of an experienced expert who can advise on a wide range of business areas is always a necessary first step for those doing business in Malaysia.
For more information on Alpadis Group’s services in Malaysia please contact us here