Forming A Company In Malaysia: The Complete Guide

Published on October 2, 2025 and written by Cyril Jarnias

Malaysia is establishing itself as a premier destination for entrepreneurs looking to expand their operations in Southeast Asia. With a dynamic economy, strategic location, and business-friendly environment, this country offers numerous opportunities for foreign investors. In this article, we will explore in detail the benefits and steps for setting up a company in Malaysia.

Malaysia: A Promised Land for Entrepreneurs

Malaysia offers numerous advantages that make it an attractive destination for business creation:

A strategic location: Situated at the heart of Southeast Asia, Malaysia provides privileged access to ASEAN regional markets, representing over 600 million consumers.

A dynamic economy: With sustained economic growth (averaging 4.5% over the past 5 years) and modern infrastructure, Malaysia offers an environment conducive to business development.

A favorable regulatory framework: The Malaysian government has implemented attractive policies for foreign investors, particularly through the Malaysia My Second Home (MM2H) program.

A skilled workforce: Malaysia has a young and educated population with good English proficiency, facilitating the recruitment of local talent.

Advantageous taxation: The Malaysian tax system is competitive, with relatively low tax rates and numerous incentives for businesses.

Available Legal Structures

Several legal forms are available for entrepreneurs looking to establish themselves in Malaysia:

Sdn Bhd (Private Limited Company): This is the most common structure for foreign companies. It offers limited liability to shareholders and can be 100% foreign-owned in most sectors.

Labuan International Company (LIC): This offshore structure, based on Labuan Island, benefits from advantageous tax treatment and is particularly suited for international activities.

Representative Office: This structure allows foreign companies to have a presence in Malaysia for non-commercial activities (market research, coordination, etc.).

Branch Office: A direct extension of a foreign company, without separate legal personality.

Limited Liability Partnership (LLP): A hybrid structure combining the advantages of a company and a partnership.

Attractive Corporate Taxation

The Malaysian tax system offers several advantages for businesses:

Corporate tax: The standard rate is 24%, but SMEs benefit from a reduced rate of 17% on the first 600,000 MYR of taxable income.

Tax exemptions: Many strategic sectors (high-tech, renewable energy, etc.) can benefit from tax exemptions of up to 10 years.

Double taxation: Malaysia has signed tax treaties with over 70 countries, avoiding double taxation.

Labuan tax regime: Companies based in Labuan can opt for a fixed tax rate of 3% or a flat amount of 20,000 MYR per year.

Investment incentives: Tax deductions are granted for certain investments, particularly in R&D and training.

Setting Up Your Company in Malaysia: A Simplified Process

Setting up a company in Malaysia generally follows these steps:

1. Choose a business name: Check name availability with the Companies Commission of Malaysia (SSM).

2. Prepare incorporation documents: Draft the company’s articles of association and other required documents.

3. Appoint directors and shareholders: At least one director residing in Malaysia is required.

4. Deposit share capital: The minimum capital is 1 MYR, but a higher amount is recommended.

5. Submit incorporation application: File documents and pay fees with the SSM.

6. Obtain necessary licenses: Depending on the business sector, specific licenses may be required.

7. Register with tax authorities: Obtain a tax identification number from the Inland Revenue Board.

Malaysia Compared to Other Offshore Jurisdictions

Compared to other popular offshore destinations, Malaysia offers several advantages:

Singapore: While Singapore is known for its stability and business environment, Malaysia offers lower operational costs and easier access to skilled labor.

Hong Kong: Malaysia benefits from greater political stability and a lower cost of living than Hong Kong.

Cayman Islands: Unlike the Cayman Islands, Malaysia offers a diversified economy and a genuine domestic market, while maintaining attractive tax benefits.

Dubai: Malaysia offers a more diverse multicultural environment and generally lower setup costs than Dubai.

Social Obligations: A Flexible and Protective Framework

Companies in Malaysia must comply with certain social obligations:

Social contributions: Employers must contribute to the Employees Provident Fund (EPF) and Social Security Organization (SOCSO).

Paid leave: Employees are entitled to a minimum of 8 days of paid leave per year, increasing with seniority.

Working hours: The standard work week is 48 hours, with provisions for overtime.

Workplace safety: Employers must comply with occupational health and safety regulations.

Non-discrimination: Malaysian legislation prohibits discrimination based on gender, race, or religion in employment.

Opening a Corporate Bank Account: Key Steps

Opening a corporate bank account in Malaysia typically involves the following steps:

1. Choose a bank: Select a local or international bank present in Malaysia.

2. Prepare documents: Gather incorporation documents, identification for directors and shareholders, and proof of address.

3. Complete application form: Fill out the account opening form provided by the bank.

4. Make initial deposit: The minimum amount varies by bank, typically between 1,000 and 5,000 MYR.

5. Bank interview: An in-person interview may be required to verify identity and business activities.

6. Wait for approval: The process can take from a few days to several weeks.

Future Growth Sectors in Malaysia

Several sectors offer promising opportunities in Malaysia:

Information technology: Malaysia is heavily investing in developing its digital economy, offering numerous opportunities in AI, big data, and cybersecurity.

Renewable energy: The country aims to increase its share of renewable energy, creating opportunities in solar, wind, and biomass.

Halal industry: Malaysia is a global leader in the halal industry, covering food, cosmetics, and financial services.

Biotechnology: The government actively supports the development of the biotechnology sector, particularly in healthcare and agriculture.

Medical tourism: Malaysia is establishing itself as a premier destination for medical tourism in Asia, offering quality care at competitive prices.

Building Your Team: Recruitment in Malaysia

To recruit effectively in Malaysia, follow these tips:

Understand the local job market: Familiarize yourself with salary expectations and common benefits in Malaysia.

Use recruitment platforms: Sites like JobStreet and LinkedIn are popular for recruitment in Malaysia.

Collaborate with recruitment agencies: They can help you navigate the local job market and find the best talent.

Respect cultural diversity: Malaysia is a multicultural country, and it’s important to be sensitive to this diversity in the recruitment process.

Obtain work permits: For foreign employees, ensure you obtain the necessary work permits from the Immigration Department.

Setting up a company in Malaysia offers numerous opportunities for foreign entrepreneurs. With a business-friendly environment, attractive taxation, and strategic position in Southeast Asia, Malaysia positions itself as a premier destination for business development. By following the steps outlined in this article and working with local professionals, you can successfully navigate the business creation process and fully leverage the benefits offered by this dynamic country.