Open a Malaysian Foundation

Updated on Tuesday 19th March 2019

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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 to 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 for the registration process of a foundation in this country and may also provide advice on the tax system available for this structure.  

Register a foundation in Malaysia  

Although the purpose of a foundation is not the financial gain, the entity has to be registered by following the incorporation procedure available for commercial companies. The foundation should be represented by a legal entity and registered under a trading name which is unique on the territory of Malaysia

The following video offers a short presentation on the Malaysian foundation:

The registration 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. The main characteristic of a company limited by guarantee is that is set up as a public company without a 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 needs a prior approval from the above mentioned institution. 

What are the 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 team of 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. 

What is the criteria for tax exemptions on local foundations? 

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 which offers charitable activities. According to the definition prescribed by the Income Tax Act, a 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 a charitable purpose. 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 with 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 a single 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

Businessmen interested in receiving further details on the types of foundations available in this country or opening a company in Malaysia can contact our team of company formation consultantsOur 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.