The branch office can conduct business activities in Malaysia as the ones developed by the parent company, as the branch represents a sub-division of the foreign company. Our team of agents specialized in company formation in Malaysia can provide an in-depth presentation on the legal aspects of a branch and the minimum requirements necessary to set up this type of structure.
| Quick Facts | |
|---|---|
| Applicable legislation |
For foreign countries |
|
Best used for |
– banking, – insurance, – financial operations, – trading, – manufacturing |
|
Minimum share capital |
No |
| Time frame for the incorporation (approx.) |
Around 6 weeks |
| Management |
Local |
| Legal representative required |
Yes |
| Local bank account |
Yes |
| Independence from the parent company | Dependent on the parent company |
| Liability of the parent company | Full liability on the branch office’s debt and obligations |
| Corporate tax rate | 24% |
| Possibility of hiring local staff | Yes |
Table of Contents
What are the characteristics of a branch in Malaysia?
It is important to know that, when opening a company in Malaysia set up as a branch, the entity will be fully dependent on the parent company and will represent its interests in the Malaysian market. Due to the fact that the branch office is, from a legal point of view, an extension of the parent company, the management decisions of the branch office operating in Malaysia have to be approved by the parent company abroad.
The name confirmation of your branch in Malaysia can take around 30 days. Once the approvals are done, you are required to submit other documents too, comprising information about the residence of shareholders, nationality, full names, etc.
In case you are interested in starting a branch office in another Asian country, such as India, we can put you in contact with our partners who can also help you open a new company in India.
More details on the characteristics of a branch in Malaysia are available in the presentation below:
In the situation in which the branch incurred debts through its activity in Malaysia, the investors should know that the parent company will become fully liable for these debts. Taking into consideration that the branch office in Malaysia falls under the supervision of the parent company, from a tax perspective, the branch office will not be considered a tax resident of the country. This means that the branch will become liable for taxation in Malaysia only for certain taxes and will not fall under the tax system applicable to Malaysian-incorporated businesses.
Because Malaysia is part of many double taxation agreements, branches are protected from a tax point of view. As such, Malaysian branches are levied only on the income registered in Malaysia.
Foreign entrepreneurs should also take into consideration the fact that the business can’t be the beneficiary of any tax exemptions available for other companies in Malaysia; the rule is applicable to governmental incentives as well. Our team of company registration representatives in Malaysia can provide more details on this matter.
Name requirements for a branch in Malaysia
A branch office in Malaysia must have the same name as the parent company. Even so, the name proposal must reach the SSM, where the company will be registered. We remind you that this formality also comes to the attention of our specialists who deal with setting up a branch office in Malaysia. We advise you to contact us to simplify the process of registering a branch office in Malaysia.
If you want to set up a business in Malaysia, we recommend the services offered by our local agents. They can take care of the formalities related to the documents and their preparation, as well as the collaboration with the relevant authorities. You can also ask for a registered address or redomiciliation, as such matters would permit in Malaysia. Contact us to find out all the details related to the establishment of a company in this country.
Opening a corporate bank account for a branch in Malaysia
As for any other structure in Malaysia, for the branch in Malaysia, it is necessary to open a corporate bank account. Our local agents in Malaysia can take care of the required formalities, and among them, we mention:
- Company’s Articles of Association and Memorandum of Association.
- The list of the directors of the branch, plus the authorized signatory.
- The registered office address of the branch in Malaysia.
- The board of directors’ resolution to open a bank account.
- Certificate of Incorporation of the branch office in Malaysia.
- Filling in the forms provided by the bank you want to work with.
Considering the above and other formalities, you can open a corporate bank account in Malaysia. Setting up a branch office in Malaysia can be done with the help of our local specialists, so talk to us when you decide on such a structure.
Looking for accountants in Malaysia? You can collaborate with our company to choose the necessary services. Payroll, bookkeeping, audits, annual financial statements, debt monitoring, tax registration, and tax minimization options are some of the services we can offer you. We are aware of the changes in legislation and can implement the necessary measures where necessary. So contact us to find out more about the services offered.
A bank account for a branch in Malaysia can be opened after the incorporation of the firm. One can choose from local or foreign financial institutions, considering the fees involved and the provided banking services, suitable for a business like this.
Approximate fees for registering a branch in Malaysia in 2024
Although the branch is not liable to taxation in Malaysia, the company will still have to be registered with the Companies Commission Malaysia (SSM), prior to starting its business activities there. As a general rule, the branch must undertake business activities that are carried out by the parent company. From a management point of view, the legal requirements stipulate that a branch should be represented by two Malaysian residents.
When registering a branch office, one must pay specific fees to the Companies Commission of Malaysia (SSM). In 2024, the registration of a trading name of branch offices costs around RM 60 per year, and an additional RM 5 for each branch office opened here. All companies operating in this country are legally required to inform the SSM of any updates they may bring to the data that has already been registered when the company was incorporated.
If an update appears, such as the modification of the shareholding structure, naming other directors, changing the company’s office, and so on, the investors must inform the SSM, which will update the company data. The standard fee for 2024 is around RM20 and for branches, an additional fee of RM5 will apply for each branch unit.
Establishing a branch in Malaysia also require business license, depending on the future activities. Once issued the necessary license, this has a validity of no more than 2 years. The Malaysian Labor Department accepts the documents for renewal applications of business licenses.
What are the documents for opening a Malaysian branch?
As a foreign company entering the Malaysian market through a branch office or another type of business entity, it will be necessary to provide a set of company documents that will be submitted to the local authorities, as a part of the registration process. As a general rule, a foreign company will need to provide the following:
- certified copy of the certificate of incorporation of the parent company that will be represented on the local market through a branch office;
- certified copies of the parent company’s main statutory documents –the company’s charter, memorandum, and articles of association;
- Form 79 – Return by Foreign Company Giving Particulars of Directors and Changes of Particulars;
- the power of attorney or similar documents that can attest to the fact that the parent company has authorized a person living in Malaysia to accept various documents on behalf of the foreign company.
In the situation a foreign company, respectively the branch in Malaysia does not prescribe any share capital, a flat rate of RM 70,000.00 must be paid to SSM. The conversion to Malaysian currency is made at the current rate.
What are the registration fees for a Malaysian branch?
When starting the procedure of company incorporation in Malaysia, regardless of the company type selected for starting a business in this country, the investors will need to pay a set of taxes and fees, imposed by the local institutions. This is also applicable in the case of a branch office in Malaysia.
One of the necessary fees that have to be paid during the registration procedure is for the SSM, which applies its fees based on the company’s minimum share capital. In the case of a branch office, if the company has a capital of up to RM 1,000,000, the fee will be RM 5,000. The value of the fee increases if the company’s capital is larger.
Thus, in the case of a branch office with capital ranging from RM 1,000,000 up to RM 10 million, the fee is RM 20,000. In the case the capital ranges between RM 10 million and RM 50 million, the standard fee is RM 40,000, while in the situation in which the business will have a minimum share capital of RM 50 million – RM 100 million, the institution will apply a fee of RM 60,000. Any capital above RM 100 million will be imposed with a fee of RM 70,000.
However, it is necessary to know that, in the case of a branch office in Malaysia, the investors also have the possibility of incorporating the company without minimum share capital, but even in this situation, the institution will charge a fee (approx. at RM 70,000); our team of specialists in company registration in Malaysia can offer more information concerning this matter.
Main tax obligations for a Malaysian branch
As mentioned above, the Malaysian branch office is imposed with a different tax system compared to businesses registered here. However, through this type of entity, the investors will still be liable for a set of taxes. It is important to know that this business structure is liable for the payment of the withholding tax, imposed at a rate of 10%. The branch office will also be charged with the corporate tax, but only for the income obtained through its activity on the Malaysian territory.
Does the branch need to file annual returns in Malaysia?
Yes, branches operating here are legally required to provide standard accounting documents. One of the documents that need to be filed in this case is the annual return, a type of document that provides information concerning the company – on matters such as its registered office in Malaysia, types of business activities developed here, the company’s capital, or the company’s representatives.
This accounting document has to be filed as prescribed by the new Companies Act 2016, which stipulates that the company needs to submit the annual return in a period of a maximum of 30 days after its incorporation anniversary. It is necessary to know that, if this requirement is not met in the prescribed period of time, the company’s representatives can face penalties.
Differences between subsidiaries and branches in Malaysia
You can balance the differences between branches and subsidiaries in Malaysia, and get an idea of both structures before making a decision. If the branch is considered an extension of the mother company, having the same activities, the subsidiary in Malaysia benefits from more independence and can develop other operations apart from the standard ones.
Regarding taxation, both branches and subsidiaries must align with payment obligations in Malaysia as well as tax filing. It can be said that branches and subsidiaries are subject to the same corporate tax, set at a 24% rate. Setting up a branch office in Malaysia is not complicated, the same is the case with subsidiaries. But for more information, we invite you to contact us.
Tax benefits for a branch office in Malaysia
The remittance of branch profits is not subject to withholding tax in Malaysia. In other words, profits can be repatriated without being taxed in Malaysia. However, there is an exception, and this refers to the repatriation of interests, royalties, or management fee payments for which withholding tax will be paid.
Are there any restrictions when hiring employees in Malaysia?
When developing a business activity through a branch office in Malaysia, the company will also need to hire employees. In the case of this business structure, it is necessary to know that there are no restrictions on this matter, and thus, the company will be able to hire both foreign and local workforce; our team of specialists in company registration in Malaysia can provide in-depth legal assistance on the legislation addressed to employment matters and may also advise on the types of employment contracts that can be concluded in this country.
Investing in Malaysia
Among the reasons why Malaysia is considered an optimal destination for foreign investments are the experienced and multilingual workforce, the possibility to invest in most industries of interest, as well as the geostrategic position that allows access to the most important financial centers in the world.
There are a number of beneficial government programs, designed to attract foreign investment in sectors such as communications and technology, tourism, multimedia, biotechnology, and tourism. Here are some interesting figures in this direction:
- More than USD 187 billion represented the total foreign investment in Malaysia in 2021.
- Services and manufacturing, mining, and quarrying are the sectors of interest for foreign investors.
- More than USD 24 billion was the total value of greenfield investments in Malaysia in 2021.
Persons interested in receiving further information on the requirements for setting up a branch can contact our team of company formation agents in Malaysia. Our representatives can assist in all the procedures applicable when registering a branch office and can help out with advice on other business structures that are available for foreign investors, including subsidiaries.