What’s in this article
- What is a Branch Office?
- Advantages of Setting Up a Branch Office in Malaysia
- Disadvantages of Setting Up a Branch Office in Malaysia
- Requirements for Setting up a Malaysia Branch Office
- Steps to Set Up Malaysia Branch Office
- Alternative Business Entity Types for Foreign Investors
- Malaysia as a Top Investment Destination for Foreign Investors
- FAQs
Foreign investors are choosing Malaysia for various reasons, from its favourable tax regimes, ease of business setup, and stable political environment, among others. While some may choose to incorporate a new company as a first-time entrepreneur or expand its operations as a separate legal entity such as a private limited company (Sdn Bhd), there are others who opt to set up a Malaysia branch office.
What is a Branch Office?
A branch office is a type of business entities in Malaysia for foreign investors who are looking to access a new market. As a branch office, there is no separation of legal entity from its parent company, but rather an extension. This means that both companies must operate in the exact same manner with the same business activities.
Advantages of Setting Up a Branch Office in Malaysia
There are plenty of advantages when it comes to setting up a Malaysia branch office, such as:
Greater level of control
As branch offices have their own legal entity status, they are fully under the control by the parent company.
Regulated based on parent company’s jurisdictions
The legislation of a branch office will govern by the country of the parent company. This can be an advantage or a disadvantage, depending on the regulations of the parent company’s country.
Ease of company setup & cost-effective
In comparison to incorporating a private Ltd company or a subsidiary, opting for a Malaysia branch office will deem the more economical choice. Additionally, the compliance regulations for a branch office are significantly simpler compare to other entity types. Furthermore, it is regards to the suitable business structure for low-risk business activities.
Avoidance of double taxation
As Malaysia has many double taxation treaties with other countries, the branch office need to pay tax on the income that will generate in Malaysia only.
Disadvantages of Setting Up a Branch Office in Malaysia
It is attractive for foreign investors to set up a Malaysia branch office. There are also some disadvantages that should be carefully to analyze before making a decision.
Some of the disadvantages include:
Liability of branch office
The parent company bears full responsibilities on the debts and any other forms of liabilities accumulated by the Malaysia branch office. This could be detrimental to the sustainability of the parent company should there be high levels of debt by the branch office.
Diluted reputation of branch office
Clients are more likely to be drawn to dealing directly with the parent company instead of going to a branch office. Long-term, this could be an issue for the sustainability of the branch office.
No tax benefits
Branch offices in Malaysia are usually will treat as non-tax residents. In this case, they are unable to enjoy any tax incentives that other types of entities enjoy.
Requirements for Setting up a Malaysia Branch Office
As branch offices are extensions of a parent company, there are a few legal requirements that need to fulfille for successful setup.
These legal requirements are:
- Use the same company name as its parent company
- Engage in the same business activities as its parent company
- Engage a branch agent who is a local Malaysian to be legally bound to the branch office
Once you meet these requirements, the following documents are necessary for setting up a Malaysia branch office:
- NRIC/ Passport of every shareholder in Malaysia or overseas. If it is a corporate shareholder, then the Company profile which indicate place of incorporation, registration number and registered office of such corporate shareholder
- NRIC/ Passport of every director in Malaysia or overseas
- Proof of residential address – directors and shareholders
- NRIC/ Passport of the appointed agent/ Company Secretary who is a resident in Malaysia as per stated in Memorandum of Appointment or Power of Attorney
- Certified certificate of incorporation of foreign company
- Certified memorandum and articles or other instrument defining its constitution (if any)
- Copy of name application submitted for Malaysia entity
- Copy of name approval notification for Malaysia entity
For shareholders who are corporate entities, you are need to provide the company name, country of incorporation, business registration number, and registered office address.
Steps to Set Up Malaysia Branch Office
The setup of a branch office in Malaysia is very straightforward with 2 main steps.
Step 1: Register for company name
Furthermore, as both the parent company and the foreign branch office must have the same company name, this would be a simple process without thinking of a new name. The company name should be register with SSM via MyCoid. This is usually will happen by the company secretary.
Upon approval, the authority will reserve the name for 30 days from the date of confirmation. For this option can extend for another 30 days, up to a maximum of 180 days.
Step 2: Official company registration with SSM
The registration of the foreign branch office must be with SSM after company name approval. The fee to incorporate a branch office is dependent on the amount of your share capital.
| Share Capital (MYR) | Registration fees (MYR) |
|---|---|
| Not more than MYR 1 million | 5,000 |
| More than MYR 1 million but less than MYR 10 million | 20,000 |
| More than MYR 10 million but less than MYR 50 million | 40,000 |
| More than MYR 50 million but less than MYR 100 million | 60,000 |
| More than MYR 100 million | 70,000 |
| No shares prescribed | 70,000 |
The SSM will issue a notice of registration under Section 15 of the foreign company within 1 to 3 working days upon compliance with the procedures and submission of completed documents.
Upon request with a prescribed fee, the SSM may issue a certificate of registration under Section 17.
Alternative Business Entity Types for Foreign Investors
Additionally, if a foreign branch office is not for you, there are also other options to consider when it comes to investing in Malaysia as a foreigner. The most popular choice is a private limited company (Sdn Bhd). However, the type of entity you choose is dependent on the objectives of expanding into Malaysia.
Here are some of the options available:
1. Private Limited Company
Furthermore, foreign investors find this to be a great option since they can own it entirely, set it up easily, and face limited liabilities. Furthermore, the company gets to enjoy tax allowances and benefits should they fulfil the eligibility requirements.
2. Representative Office
Similar to a foreign branch office, setting up a representative office in Malaysia is a straightforward process.
The downsides of the representative office are that it cannot:
- Conduct any business activities
- Generate invoices and income
It also has a limited validity of 2 years, with renewal subject to approval.
3. Subsidiary Company
The third option is a subsidiary company. This company type operates as a separate legal entity from its parent company. With this structure, an unrelated management team typically makes day-to-day operations and decisions.
It is only in situations where the subsidiary would have an impact on the company as a whole that the parent company’s board of directors will involve.
Malaysia as a Top Investment Destination for Foreign Investors
Setting up a branch office, or any other types of companies in Malaysia, is commonplace in today’s business environment. The country has progressed through the years to establish herself as one of Southeast Asia’s economic powerhouses with its ability to attract and retain businesses globally.
Some of the pro-business initiatives that the government has put forth to cement its position and continually increase foreign direct investments include:
- Tax incentives and allowances for companies, especially for tech companies, which they are looking to accelerate growth in
- Growing its skilled workforce through subsidiaries to improve their skillsets
- Attracting & retaining global talent through various work visa schemes
FAQs
Copyright terms depend on the country in question, for Malaysia specifically, 50 years after the death of the owner/artist, which is the duration copyrights expires, the works will be released into the public domain.
Any person who is the original creator of any artwork, literary work, film, or any other copyrightable work is legally permitted to receive copyright protection in Malaysia. So long as the work meets the required criteria:
- The work has not been copied from any other present source or any previously existing work
- Works include literature, film, photographs, and sculptures among others
- The work must also be able to be verified as genuine before it may receive copyright protection
- Works created by an architect or engineer will only receive copyright protection if the work is completely designed, built, and located in Malaysia
- In the case of broadcasts, only broadcasts which have solely been transmitted through Malaysia are protected by the country’s copyright laws.
Any person’s work which has fulfilled all the requirements which have been stated will automatically receive protection according to the copyright laws of Malaysia.
In Malaysia, such a move is certainly possible as long as the details of this transfer are registered with the copyright office in Malaysia. The certified copy which confirms the transfer as well as the signatures of all people involved must also be supplied.
Anything that originates from a creator from another country is permitted to be copyrighted in Malaysia. This is the case due to the details stated in the Berne Convention. The Berne Convention is an agreement which has been signed by the vast majority of countries in the world today. It serves the purpose of providing protection for the works of the authors, musicians, sculptors, photographers, and others in similar lines of work.
