The foundation represents a business structure that can be registered in Malaysia with the purpose of providing financial assistance to a wide range of groups of persons. It can be set up in order to help students, sustain various fields, or offer assistance to special categories of persons (disabled, poor, etc.). It is important to know that a foundation gains finances from funds donated by natural persons or legal entities. At the same time, the local legislation allows the incorporation of foundations with the purpose of providing wealth management services. Our team of company formation representatives in Malaysia can offer assistance to foreign investors who want to open a foundation in Malaysia, and may also provide advice on the tax system available for this structure.
| Quick Facts | |
|---|---|
| Structure of a foundation in Malaysia | Company Limited by Guarantee |
|
Fields in which a foundation can activate |
– education, – health, – science, – religion, and other social sectors |
|
Incorporation steps of a foundation in Malaysia |
– naming a director who can also be the founder, – creating an application letter with the purpose of the foundation, and a draft copy of the constitution papers |
| Financial contribution | RM 1 million |
| What institution issues the approvals? |
Companies Commission of Malaysia (SSM) |
| Specific trading name |
Must comprise words like “foundation” or “institute” |
| Tax exemption applicable (YES/NO) |
YES |
| Collecting money from the public (YES/NO) |
YES |
| Charitable events through a Malaysian foundation (YES/NO) |
YES |
| Property purchase for foundations in Malaysia | Restricted |
| Holding properties through a Malaysian foundation |
Only if a license is issued for this. |
| Applicable legislation for foundations in Labuan |
Labuan Islamic Financial Services and Securities Act 2010 |
| Documents provided by donors of Malaysian foundation |
Statutory Declaration comprising information about the sum of money donated |
| Costs for opening a foundation in Malaysia |
Around RM 700 |
| Services offered by our Malaysian agents |
– support in drafting the foundation documents, – registration with the relevant authorities and agencies, – assistance in varied procedures, – administrative assistance |
Table of Contents
How to register a foundation in Malaysia
Although the purpose of a foundation is not financial gain, the entity has to be registered by following the incorporation procedure available for commercial companies. If you want to open a foundation in Malaysia, you should be represented by a legal entity and registered under a trading name that is unique to the territory of Malaysia.
The following video offers a short presentation on the Malaysian foundation:
Theregistration of the trading name of the foundation is handled by the Companies Commission of Malaysia. The foundation should also be registered for tax purposes (although such entities are exempt of several taxes), have an official business address, and open a corporate bank account; our team of company incorporation agents in Malaysia can offer more details on the registration process.
What is the most suitable legal entity for a Malaysian foundation?
When starting the procedure of company registration in Malaysia for a local foundation, one of the legal requirements is to assign a legal entity. Malaysian foundations are registered as companies limited by guarantee or CLBG. The main characteristic of a company limited by guarantee is that it is set up as a public company without share capital. Some of the most common traits of this business form are presented below:
- it is necessary to appoint a board of directors, which is also commonly known as a board of trustees;
- it is regulated under the regulations of the Ministry of Domestic Trade, Cooperatives, and Consumerism;
- it is incorporated following the regulations of the Companies Act 2016;
- it is founded based on a constitution and any modifications brought to the structure or the management of the foundation need prior approval from the above-mentioned institution.
If you are looking for accountants in Malaysia, our recommendation is to look for us by phone or online to discover the services offered in this field. The most important are payroll services, audits, bookkeeping, tax registration, and preparation of annual financial statements. But in addition to these, you can also receive complete financial planning, with tax reports to help you outline a business. Therefore, do not hesitate to contact us to learn more about the services offered.
Main steps for registering a Malaysian foundation
As presented above, the foundation needs to be registered with the Companies Commission of Malaysia (SSM) and apply for a suitable trading name. When applying for a trading name, which needs the approval of the institution, it is necessary to specify the words “foundation”, “institute” or the equivalent of the word foundation in Malay, which is “Yayasan”. Our consultants in company registration in Malaysia can provide assistance on this procedure, but also on the ones mentioned below:
- the constitution of the Malaysian foundation needs to be submitted with the SSM, which has to follow the standard template provided by the institution;
- if the document is completed following the legal requirements, the SSM will provide its approval;
- after the constitution is approved, the owners of the foundation can then sign and stamp the founding document;
- only after the incorporation of the foundation, the investors can apply for a tax exemption status;
- this can be obtained following the regulations prescribed under the Income Tax Act and the status will be issued by the Inland Revenue of Malaysia.
A foundation in Malaysia can be registered for the purpose of offering assistance to several fields. It can provide assistance for religious purposes, in the fields of education, science, and literature, for social purposes, or for charitable activities. In these cases, the foundation is entitled to apply for a tax exemption status, and the criteria regarding this matter are presented below. If you would like to know more on this topic, you can discuss it with our company formation agents in Malaysia.
Malaysian charity documents
Some documents need to be prepared if you want to set up a foundation in Malaysia. We list the most important of these:
- The application letter must contain details about the purpose of the foundation, as well as if and how the word “Foundation” is used.
- A document containing details about the activities of the Malaysian foundation is required
- A statutory statement will be made by the promoter and the proposed director confirming or not whether such a request has been made under the Societies Act 1966 of Malaysia. The necessary documents, in this case, will be attached.
- A draft copy of the Constitution on which the foundation in Malaysia is based will also be prepared.
- A letter of consent will be added to act as a director. This is done by each director separately.
- The authorities solicit Information about the taxpayer and/or donor confirming the financial contribution of RM 1 million to be made within 6 months from the date of registration of the foundation. The donor can be an individual or a company, on a case-by-case basis.
These are some of the most important documents required to open a foundation in Malaysia. We remind you that our agents can help you with these formalities and with drafting the necessary documents.
Other requirements for Malaysian foundations that should be considered
There are several formalities related to registering a foundation in Malaysia, and most of them are not that complex. Once understood, registration is easy, as well as compliance with the general rules of operation. Here are a few of them:
- If you want to appoint new directors for the Malaysian foundation it is necessary to ask for approval from the Commission.
- Founding directors in Malaysia are not placed on payroll. They cannot receive salaries, bonuses, or other benefits.
- You can’t make money collection from the public with a foundation in Malaysia.
- It is also forbidden to request donations from the public.
- “Berhad” or the abbreviation “Bhd” cannot be part of the name of the foundation in Malaysia unless approval is obtained in this sense.
- Foundation owners must present the latest financial statements for the last 3 years at annual general meetings.
If you have any questions about the Malaysian foundation, please contact our local agents. They can offer assistance if you want to open a foundation in Malaysia, with respect to the local legislation.
Foundations and properties in Malaysia
It is important to make some clarifications regarding the properties of a Malaysian foundation because there are certain restrictions. Here are some of them:
- If you want to open a foundation in Malaysia you cannot purchase a property or land in this country.
- It is also forbidden to hold, lease, sell, or mortgage properties while having a foundation in Malaysia unless you have the necessary approvals.
Criteria for tax exemptions on local foundation
The manner in which a Malaysian foundation can apply for a tax exemption status with the Inland Revenue of Malaysia is prescribed by the Income Tax Act, Section 44(6). One of the main requirements is to have a foundation registered in Malaysia that offers charitable activities. According to the definition prescribed by the Income Tax Act, charitable activity can refer to the relief of poverty, investments in the field of education, promoting religion, or any other purposes that can aid a local community.
In order to benefit from the tax exemption status, the Malaysian foundation needs to invest at least 70% of its income registered in the previous financial year for charitable purposes. Also, when establishing the board of trustees, at least 50% of them have to be members who are not related to the owner/founder of the Malaysian charitable organization. The foundation has the legal obligation to submit its financial statements to the tax authority, assessing its activity during a financial year.
Are there any stipulations concerning the dissolution of a foundation?
Yes, in the eventuality of a winding-up, there are special regulations that have to be respected. For example, if after the dissolution the foundation still has various types of assets (after any debts or liabilities were covered), such assets will fall under the jurisdiction of the Malaysian government as a donation and they shall not be distributed amongst the foundation’s members.
The remaining assets can also be donated to another similar institution or to other funds that are approved by the Director-General of the Inland Revenue of Malaysia. In the case in which a foundation enters the dissolution procedure in Malaysia, the Inland Revenue has to be notified concerning this matter. Our team of consultants in company formation in Malaysia can provide in-depth advice and legal representation for the dissolution procedure available here.
Labuan foundation in Malaysia
The Labuan foundations were created in Malaysia under the Labuan Foundations Act 2010, which provides a legal framework for the purposes and the ways in which such entities can be registered. It is important to know that the Labuan foundations are also tailored in accordance with the regulations applicable to Muslim businessmen, under the Labuan Islamic Financial Services and Securities Act 2010.
Those who want to register a foundation in Labuan can set it up for the purpose of offering wealth management services or for charitable purposes. According to the law applicable to Labuan foundations, the entity can be set up by asingle founder, who can be a Malaysian citizen or a foreigner, represented by a natural person or by a legal entity. The beneficiaries of the foundations can be individuals or corporations, residents or non-residents of Malaysia.
We also present some interesting facts about foundations in Malaysia:
- There are currently over 81,500 charities in Malaysia.
- There are charitable foundations in Malaysia that were established in the 1970s and are still active in the market.
- Most charities in Malaysia are registered in sectors such as health, education, food, and environment.
Businessmen who want to open a foundation in Malaysia can contact our team of company formation consultants. Our specialists in company registration in Malaysia can assist in any legal matter related to the incorporation of a local foundation and can provide in-depth information on the documents that must be prepared by the owners of this legal entity.