100 Percent Foreign Owned Company In Malaysia

Foreigners who want to set up businesses in Malaysia with 100 percent ownership often get confused when it comes to deciding as to what kind of an entity they should establish. It is, therefore, important that they have a clear understanding of the differences between an Sdn Bhd company and a Labuan International company. This is because there are certain business entities that foreigners are allowed to own in Malaysia.

Ownership

Not all businesses can be registered as a Sdn Bhd Company with 100 percent foreign ownership. The industries in which foreign investment is being encouraged by the Malaysian government are Education; Petroleum, Oil and Gas; Outbound Tourism and Ticketing; Banking and Finance; and Agriculture. On the other hand in Labuan, all kinds of businesses can be set up as a Labuan International company with 100 percent foreign ownership. It is much easier to set up a Labuan offshore company as only one director and one shareholder are needed. Furthermore, these positions can be held by the same person.

Corporate Tax/Audit

Irrespective of the nature of the business carried out by an Sdn Bhd Company, the annual audit report is a must. Further, the tax applicable is as follows:

  • Locally controlled company (A Malaysian owns more than 50 percent of the shares) – 19 percent on net profit up to MYR 500,000; 24 percent for net profit above MYR 500,000
  • Foreigner-controlled company (A foreigner owns more than 50 percent shares - Flat rate of 24 percent on net profit

A Labuan company has three options:

  • Dormant company – No tax and audit
  • Investment Holding Company – No tax and audit
  • Trading business – 3 percent on net profit; audit report required

100 percent Foreign Owned Company Setup Cost

In the case of a foreign-owned Sdn Bhd company, the following conditions apply:

  • Minimum paid-up capital required is MYR 1 million
  • Fully functional office and telephone number required
  • Ministry of Trade Consumerism's permission required

The advantages of a Labuan company are:

  • Paid up capital required is just USD 1.00
  • No trade licence required for most businesses
  • The tax rate applicable for a Labuan company is 3 percent

Work Permit

To apply for two years renewable work permit for the owner of an Sdn Bhd company, full office setup, a fixed telephone connection, and a minimum of MYR 350,000 – MYR 1 million paid-up capital is a must. It is also dependent on shareholding structure, nature of the business, and transaction activities. On the other hand, the owner of a Labuan company and family members are able to opt for a two-year renewable work permit. Recently the paid-up capital requirement of MYR 250,000 has been remove, making it easier to relocate to Malaysia and build their business in Asia with lower operational costs.

This is not all. The owner of a Labuan International Company that holds a work permit for two years enjoys certain income tax benefits as well. In addition, they are not subjected to Sales & Service Tax, GST, and VAT on international sales. Most foreigners prefer to set up a Labuan company because of all these benefits.

At QX Trust, we specialise in helping you set up a 100 percent foreign-owned company in Malaysia depending on your area of operation. Get in touch with us right now for more information.