Foreigners’ Complete Guide: Tax, Compliance and Business License for Company in Malaysia

This complete guide provides the compliance obligations on a foreigner after setting up a company in Malaysia. The newly set up company must comply with various tax responsibilities, laws, and obtain a business license. It also need to comply with other employment laws, such as employee compensation, leave, working hours, safety and health requirements, and more. Last updated in February 2023.

Tax and Compliance by the Company

  • What are the annual reporting requirements for a company in Malaysia?

    Companies in Malaysia are required to file annual returns and financial statements with the Companies Commission of Malaysia (SSM). The annual returns must be filed within 30 days from the anniversary date of the company’s incorporation. The financial statements must be submitted within 6 months from the end of the financial year.

  • Is there a requirement for an annual audit for a company in Malaysia?

    Yes, companies in Malaysia are required to appoint an auditor to perform an annual audit. The auditor’s report must be submitted together with the financial statements to the SSM.

  • What is the compliance related to governmental tax and contribution in Malaysia for a company?

    Companies in Malaysia are required to register with the Inland Revenue Board of Malaysia (IRB), Employees Provident Fund (EPF), Royal Malaysian Customs Department, The Social Security Organisation (SOCSO), Human Resources Development Fund (HRDF) for tax and contribution purposes. Companies must also keep proper records of their financial transactions and make them available for tax inspection. The latest rates of these taxes and contributions are available at the government’s official websites. A rough elaboration (subject to the actual latest rates published by the government) of the rates as of February 2023:

    – Company Income Tax: 24 -30%
    – EPF Contribution: from 12% of an employee’s salary
    – SOCSO Contributions: 1.2% of an employee’s salary (for both social security and employment insurance system)
    – HRDF: 1% of an employee’s salary
    – Service Tax: 6%

  • What are the employment law requirements for a company in Malaysia?

    Companies in Malaysia are required to comply with various employment laws such as:-

    (a) Employment Act 1955, the main legislation governing employment in Malaysia, which provides the minimum terms and conditions of service for employees.
    (b) Industrial Relations Act 1967 – governs the relationships between employers and employees, trade unions, and the Industrial Court.
    (c) Employees Provident Fund Act 1991 – requires employers to contribute to a provident fund on behalf of their employees, to provide retirement benefits.
    (d) Social Security Act 1969 – requires employers to contribute to the Social Security Organization (SOCSO) for their employees’ protection in the event of injury, illness, or death.
    (e) Income Tax Act 1967 – imposes tax on income earned by employees and employers in Malaysia.
    (f) Human Resources Development Fund Act 2001 – requires employers to contribute to a fund for (g) Employment Insurance System Act 2017 – provides protection to workers who lose their jobs and includes provisions for unemployment benefits.
    (h) Workmen’s Compensation Act 1952 – requires employers to provide compensation to employees in case of injury, illness or death arising out of work.

    It is important to note that these laws are subject to change, and companies should stay up to date with the latest regulations and requirements.

Business License

  • What is a business license and why is it necessary for doing business in Malaysia?

    A business license is a permit granted by the Malaysian government that allows a company to legally operate a business within a specified location. It is necessary for all companies operating in Malaysia to obtain a business license as it is a requirement under the law. To enable working visa approved, the company must have the required business license prior to the application.

  • What are the types of business licenses required in Malaysia?

    There are 2 categories of business licenses:

    (a) municipal license, licenses issued by local municipal council relate to the location of the business and signboard of the business; and

    (b) specific license, related to the specific nature of business, only if applicable. Common types of specific licenses include a wholesale, retail and trading license, real estate license, banking license, capital markets service license, construction contractor license, manufacturing license, tourism license, recruitment license and more. Some businesses do not require specific license to operate, such as ICT, consultancy, agriculture etc.

  • How long does it take to obtain a business license in Malaysia?

    The process of obtaining a municipal license in Malaysia typically takes 2-6 weeks, once all the necessary documents and requirements are submitted to the relevant authorities. Timeframe for obtaining specific license depends on various factors including the efficiency of the relevant government department in processing the application. Generally, it takes 2 weeks – 3 months.

  • What are the fees for obtaining a business license in Malaysia?

    The fees for obtaining a business license in Malaysia vary depending on the type of business and location. In general, the municipal license fee ranges from RM50 to RM1,000 and is renewable annually.

  • What are the ongoing obligations for a company to maintain its business license in Malaysia?

    The ongoing obligations for a company to maintain its business license in Malaysia include renewing the license annually, and ensuring that the business activities are conducted in accordance with the terms and conditions of the license and relevant laws and regulations. The company may also be required to submit regular reports to the relevant authorities and pay relevant taxes and fees.

  • Can a business license be transferred to another company or individual?

    No, a business license cannot be transferred to another company or individual. A new business license application will need to be made if a company or individual wishes to change the type of business or location.

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