Establish a Holding Company in Malaysia

Updated on Tuesday 14th April 2020

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A holding company in Malaysia is registered with the sole purpose of controlling and managing the assets and the investment policies of another company. Usually, the holding company represents a parent company for the other businesses in which it holds voting shares; the holding company can own voting rights in more companies

This type of company can also be incorporated with the purpose of owning various types of properties, usually in the real estate and copyright fields. Investors who are interested in registering a holding company in Malaysia can address to our team of company formation representatives in Malaysia, who can offer assistance for all the steps of the registration process
 

What is a Malaysian holding company? 


Investors interested in company formation in Malaysia should become familiar with the provisions of the Companies Act 1965, the main rule of law for commercial companies operating on this market. According to the Section 5 of the Companies Act, a business is considered a holding company if it has the following rights: it controls the board of directors, it owns more than 50% of the voting rights in the other company (which can be considered a subsidiary) and it owns more than 50% of the issued share capital of the subsidiary. 

Moreover, the holding company has the right of appointing directors in the other company and the subsidiary can’t act in this sense without the consent of the holding company; our team of consultants in company incorporation in Malaysia can offer more details on the legal procedure of appointing directors. 
 

Membership in a Malaysian holding company  


Those who want to open a company in Malaysia registered as a holding company should know that they can’t accept a corporation as a member of the respective company. More importantly, the transfer of shares from a holding company to one of its subsidiaries is not allowed in Malaysia, as prescribed by the Section 17 of the Companies Act

The legislation is not applicable in the situation in which the subsidiary is comprised of a personal representative or a trustee. Foreign investors can also invest in an investment holding company, which is more suitable for the real estate market and our team of specialists in company registration in Malaysia can advise on how to start this type of business form. 
 

What is an investment holding company in Malaysia? 


An investment holding company in Malaysia defines a type of holding company which has as a basic activity the holding of investments in other legal entities. In order to qualify as an investment holding company, at least 80% of the company’s gross income has to derive from such investments. 
 

What are the main activities of an investment holding company in Malaysia? 
 

According to the Public Ruling No. 10/2015, issued by the Inland Revenue Board of Malaysia, an investment holding company (IHC) can develop only specific business activities. Article 5 provides a clear definition on the types of activities that can be developed through this type of entity. The Malaysian investment holding company can enter business activities related to the real estate sector and it is allowed to rent real estate properties and provide maintenance and support services related to the respective property.
 

What are the tax requirements for Malaysian ICHs? 


Just like any other legal entity registered in Malaysia, an ICH has to register for taxation purposes. The tax requirements for a Malaysian ICH depend on whether the company is listed or not on the Bursa Malaysia. Companies that are listed on the Bursa Malaysia fall under the regulations of the Income Tax Act, Section 60 FA, while non-listed companies are regulated under the Section 60F of the same Act. 
 

How to start a Labuan holding company in Malaysia


Labuan is a federal region of Malaysia, which has special tax regulations, different than the rest of the country. When a Labuan holding company wants to expand its operations in the other regions of Malaysia, special procedures have to be completed. The applicant company has to be previously registered following the regulations prescribed by the Labuan Companies Act 1990 and have regional/international business activities. Our team of specialists in company registration in Malaysia can assist Labuan investors in expanding their business operations. 

The Labuan holding company can develop a wide range of activities, such as holding of investments in various financial instruments - securities, stocks, shares or immovable property. The company can also provide management services to entities located in Malaysia or outside the country; such services can refer to administrative services, accounting, human resources or support services and it may also provide credit facilities or fund management services. 

In order to open a company in Malaysia as a holding company, it is necessary to establish an office in this country and to inform the local authorities on its official address and other contact details. It is important to know that the office from Malaysia has to be separated from the office in Labuan; it also needs to hire separate employees and maintain separate accounting documents.  

In terms of taxation, a Labuan holding company operating in Malaysia will be taxed following the tax legislation available in the region where the company develops its activities. Thus, when conducting business activities through a holding company, the tax regulations will be provided by the Income Tax Act and the company will need to submit the company’s financial documents as stated by the Malaysian legislation

Investors from Labuan operating through a holding company should also know that this type of company is required to pay an annual fee that needs to paid no later than 15th of January of each year of activity in Malaysia. Our team of consultants in company registration in Malaysia can offer further information concerning any other requirements that are available for this type of company

In the situation in which the Labuan holding company is interested in hiring employees who are not residents in Malaysia, the company’s representatives will need to conduct the legal requirements that are necessary for the issuance of a work permit; this type of document is issued by the Immigration Department of Malaysia and our specialists can offer in-depth information regarding the main procedures available in this case. 
 

Holding company in Malaysia – main advantages 


Choosing a place to incorporate a holding company is crucial for the future development of that particular business. The location is important in terms of the legal ways in which the company can be incorporated, but it is also important in terms of taxation and other corporate aspects. Our team of lawyers in Malaysia lists the main advantages of opening a holding company in the country:
 
  • Strategic location: Malaysia can become an attractive business location due to its geographical position (situated in the center of South East Asia),;
  • Economic development: Malaysia is, at the moment, one of the main manufacturing economies in the region. The main products manufactured here are petroleum products, rubber or palm oil; 
  • Expansion: a holding company incorporated in Malaysia can be used to expand within the region;
  • Taxation advantages: part of the expenses of the company, the “permitted expenses” can be subject to tax deductions under the investment holding company regime.
 
Our Malaysian law firm can offer more details about each of these advantages. We remind investors that a Malaysian holding company can be used to hold investments in securities, stocks and shares, deposits, loans or immovable properties. 
 
In Malaysia, the investment holding company regime (the IHC regime) allows these companies to apply for loans or external financing after incorporation.  In some cases, the maximum loan limits can vary and may depend on the types of assets that are being held, for example, companies that are used for owning commercial property compared to the ones used to hold residential properties.
 
An important characteristic for the holding company, the IHC, is that is must have at least 80% of its gross income from holding investments. The team of experts at our law firm in Malaysia can provide investors with more details about the regime and the deductions that can apply to these types of companies. 
 

Investments in Malaysia

 
Investment companies can serve various investment purposes and can be used as financial mechanisms. When doing so, investors are advised to establish the structure as required by law and observe the proper requirements for accounting, auditing or reporting as is required in general for companies and as may be required in particular. Investors should note that the requirements for investment holding companies differ when the legal entity is listed on the stock exchange compared to the situation when it is not. Seeking adequate financial counsel as well as expert legal services, such as those provided by our team of attorneys in Malaysia is recommended when opening and managing this structure.
 
Malaysia is a jurisdiction that is preferred by many investors. The statistics for the number of companies in 2019 were the following, as presented by our attorneys in Malaysia:
 
  • 46,987: local companies registered in 2019.
  • 41: foreign companies registered in the same year.
  • 47,028: companies registered with the Malaysian Companies Commission in 2019.
  • 3,943: total limited liability partnerships registered in 2019. 
  • 362,600: total businesses registered in 2019.
 
The data was presented in accordance with information from the Companies Commission, which functions under the Malaysian Government.
Businessmen interested in receiving more details on the holding companies in Malaysia can address to our team of company incorporation agents in Malaysia, who can represent investors during the registration procedure; our representatives can also advise on the tax regulations applicable to this business form.