A SPV/SPE company refers to a special purpose vehicle/entity, which is registered as a subsidiary with a legal status which allows it to secure its asset structure; the advantage of using a SPV/SPE company in Malaysia is given by the fact that the entity will not be affected, provided that its parent company will enter the bankruptcy procedure.
In Malaysia, investors can set up a SPV/SPE company, following a set of regulations in this sense. Foreign investors are advised to receive assistance from local specialists and our team of company incorporation representatives in Malaysia can provide an in-depth presentation on this matter, as well as on the registration procedures.
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Legislation referring to a SPV/SPE company in Malaysia
In order to open a company in Malaysia registered as a SPV/SPE, investors have to follow the rules prescribed by the Securities Commission Act 1993. The legislation stipulates that, if a person issues structured products or offers them for subscription or purchase, he or she has to register for approval from the Securities Commission of Malaysia.
The legislation also states that amongst several other types ofentities, the SPV/SPE incorporated in Malaysia is considered an eligible issuer, provided that the respective entity is sponsored by a qualified bank. They can also be sponsored by a qualified dealer or by the Cagamas Berhad, the National Mortgage Corporation. Our team of company formation consultants in Malaysia can offer more details on the requirements referring to the eligibility of the SPV/SPE.
What are the characteristics of a Malaysian SPV/SPE company?
A SPV/SPE company in Malaysia will issue sukuk, a type of Islamic ownership interest that is held in the company’s underlying assets. The SPV/SPE company, just like any other type of legal entity available in this country, is taxed for its business activities. However, in the case of a Malaysian SPV/SPE company, once the company starts issuing sukuk, it will be exempted from the payment of the income tax. This is prescribed by the Income Tax Act 1967. The SPV/SPE company is also characterized by the following:
| Profit sharing contract – sukuk mudharabah | it refers to a type of certificate issued for the activities developed through the SPV/SPE company |
| Profit and loss sharing partnership – sukuk musyarakah | it defines a partnership agreement established by two or more entities, which must mention the capital contribution with which each party contributed |
| Deferred payment agreement – sukuk murabahah | a contractual agreement established between an investor and the purchaser |
| Agreement established with an agent – sukuk al-wakalah | it defines a contract through which the representatives of the SPV/SPE company in Malaysia appoint an agent to represent the interests of the company |
One of the main characteristics of the SPV/SPE company in Malaysia is that it needs to comply with the principles of Sharia. Thus, the company must issue only Islamic securities, which have to be approved by the Malaysian Securities Commission. Provided that the company is incorporated in Labuan, it will comply with the regulations imposed by the Labuan Offshore Financial Services Authority.
A CPA in Malaysia can be contracted if you have a business in this country. Our specialists offer payroll, bookkeeping, debt monitoring, audits, complete financial expertise, financial analysis, and reports services. In this way, you will know every time what financial position your company is in, and where necessary, financial measures can be implemented. Contact us for a free evaluation and various benefits.
Why set up a SPV/SPE company in Labuan?
Labuan is a special region of Malaysia, which has an attractive tax system. The regulations for the registration and taxation of a Labuan company are different than the ones available for the rest of Malaysia. The SPV/SPE company can also be incorporated in this special region, Malaysian incorporated businesses being able to establish their own SPV/SPE entities here.
In order to set up an SPV/SPE company in Labuan, a Malaysian-incorporated company needs to obtain approval from the Central Bank of Malaysia, as this approval will be needed for obtaining borrowings from foreign sources. Our team of consultants in company registration in Malaysia can assist with legal advice on the procedure of opening a Labuan business.
There are several advantages for Malaysian companies opening an SPV/SPE structure in Labuan, especially when considering the tax regulations. For instance, the funds obtained by the SPV/SPE entity in Labuan may be used and transferred to the Malaysian company without the payment of specific taxes that can apply in this case.
One of the taxes that are not imposed on this procedure is the withholding tax on interest, which is stipulated under the Income Tax Act (Section 109). The debit instruments of the Labuan businesses can be listed on the local exchange market – the Labuan Finance Exchange.
The withholding tax will also be exempted for other types of financial transfers, such as payments of interest or royalties; this tax exemption is prescribed under the Income Tax Act, Section 4(f); our team of specialists in company registration in Malaysia can offer more details on other tax advantages available for this structure.
The purpose of an SPV/SPE company in Malaysia
An SPV/SPE company is incorporated to develop a specific investment project (an infrastructure facility) in a period of a few years. In order to do so, the company will require a license, issued for the respective number of years. At the end of the project, the facility will enter into the possession of the Malaysian state.
The licenses issued in Malaysia for SPV/SPE companies are valid for a period that can vary between 12 to 99 years. It is important to know that the local legislation stipulates that the Malaysian government can retain a part of the company’s equity through a Malaysian company, part of the SPV/SPE.
What is the level of investment in Malaysia?
The total level of investments in Malaysia in 2017 stood at RM 41 billion. The top economic sectors preferred by foreign investors were the following: the services sector, with the investment activities developed in fields such as real estate, finance, insurance, and ICT. Businessmen who want to open a company in Malaysia must also consider that foreign investors made relevant investments in the manufacturing sector and the mining industry. The characteristics of the foreign investments for 2017 are presented below:
- 63.5% of all foreign investments were concluded by other Asian investors;
- the main investment tools preferred by foreign investors were debt instruments (13.7%) and equity and investment fund shares (86.3%);
- the investments in the services sector accounted for RM 19.8 billion (representing 48.2% of the total value of investments);
- mining and quarrying activities accounted for 31.2% (or RM 12.8 billion);
- the manufacturing sector stood at RM 6.4 billion (or 15.7%);
- the investments concluded by investors from Asia had a total value of RM 26.1 billion;
- European investments accounted for RM 12.2 billion (or 29.7%);
- Hong Kong was the main Asian investor, concluding investments with a value of RM 7.5 billion.
The SPV/SPE can also be incorporated in the region of Labuan, known for its tax-friendly framework. Businessmen interested in the registration procedure of a SPV/SPE company are invited to address to our team of company formation agents in Malaysia; our specialists can provide more details on the tax system available for a Malaysian SPV/SPE company.