Foreigners cannot start unlimited companies, enterprises, sole proprietorship companies or limited liability companies. Sole proprietorship, especially, is reserved only for Malaysian citizens. A foreign investor can only start a partnership or sole proprietorship business entity if they have a permanent residence status in Malaysia.
Foreigners are eligible for Private Limited (Sdn Bhd) Companies business entities, and also eligible for the Labuan International Company (LIC) entity. The LIC has special benefits and fewer prerequisites. It can also be 100% foreign owned, has the lowest paid up capital and involves minimum hassle.
Why Choose Sdn Bhd Company in Malaysia?
Private Limited Companies are the most popular entity because it is a separate legal entity from its shareholders. Liability of losses and debts is limited with this option. There are also benefits in terms of tax incentives, special government grants and exemptions. There is also better growth potential, and this entity allows investors to go public to publicly raise funds if needed. Investors will be required to fulfill the annual statutory audit requirement, and maintain ongoing compliance with SSM.
A foreign company can also be awarded with an MSC Malaysia status if the company is involved in developing or using multimedia technology to enhance or produce their products, services and process development. There are certain benefits which come with this status, which consist of:
- 100% tax free eligibility on taxable statutory income (refers to corporate tax). This incentive is for a period of up to 10 years for activities which are MSC status approved only.
- Investment tax allowance, where you are eligible for 100% deductions on capital qualifying expenditure.
- Duty free import and sales tax exemption
If you are a foreigner, you should decide what business entity will be most suitable prior to starting a business in Malaysia. Getting to know the local market culture is one way of familiarising yourself with the possible opportunities that may be available. When you have decided on your entity, you must check with the relevant authorities to see if it is permissible. You will also need to acquire relevant permission, and secure the right types of licenses before you commence business.