Establish a Branch in Malaysia

Updated on Thursday 24th June 2021

Rate this article
based on 8 reviews


Establish a Branch in Malaysia Image
Foreign businesses can expand their operations in Malaysia by opening a branch office, as stipulated by the applicable law available in this country. When expanding a foreign business on the local market, investors have the possibility of choosing between a subsidiary and a branch office; the latter represents a type of entity that is dependent to its parent company abroad

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 companyOur 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. 


 

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 on 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. Some of the most important aspects concerning the Malaysian branch office are presented below: 

 
Name of the branch office   It is necessary to register the same trading name as the one of the parent company abroad.
Types of activities    Tt is compulsory to develop only business activities that are performed by its parent company.
Ownership and liability   The branch office in Malaysia falls under the ownership of the parent company, which holds the responsibility for any type of debts concerning the activity of the branch in this country.
Accounting requirements  The branch office must file its annual accounting documents with the local institutions.
 

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 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. 
 
Foreign entrepreneurs should also take into consideration the fact that the business can’t be the beneficiary on 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. 
 

Register a branch in Malaysia - fees updated for 2021 
 

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 which 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 with the Companies Commission of Malaysia (SSM). In 2021, the registration of a trade name of branch offices costs 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 on 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 2021 is RM20 and for branches, an additional fee of RM5 will apply for each branch unit.  

 

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 with the local authorities, as a part of the registration process. As a general rule, a foreign company will need to provide the following:
 
  • a 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 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 the fact that the parent company has authorized a person living in Malaysia to accept various documents on behalf of the foreign company
 

What are the registration fees of 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 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 of 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 a capital ranging from RM 1,000,000 up to RM 10 million, the fee is of RM 20,000. In the case the capital ranges between RM 10 million and RM 50 million, the standard fee is of 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 a minimum share capital, but even in this situation, the institution will charge a fee (aprox. at RM 70,000); our team of specialists in company registration in Malaysia can offer more information concerning this matter.  
 

What are the 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 a set of standard accounting documents. One of the documents that need to be filed in this case is the annual return, a type of document which 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 maximum 30 days since 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.  
 

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. 
 
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 the subsidiary.