Advantages of Malaysia

Low growth in the national economy, various regulations on companies, high corporate tax, inheritance tax, etc. Today, Korea is a difficult environment to grow businesses. Apart from such Korea, more and more people are trying to establish local corporations in major Asian countries. Among them, I will explain the establishment of a corporation in Malaysia, which is considered one of the best countries for business or investment.

Advantages of Malaysian subsidiary

  • Due to the signing of a double tax treaty, there is no withholding tax on dividends paid to countries other than Malaysia.
  • There is no inheritance tax and gift tax.
  • Very low rent (average monthly rent of $17 USD per m2),
  • High economic growth compared to low wages (approximately $3.24 per hour).
  • Favorable for financial transactions.
  • Offers strong incentives to encourage capital investment and business formation.
  • So it is friendly to business online companies.

Malaysia corporation establishment requirements

You must provide a unique company name. Trade names similar to or identical to existing companies are prohibited, so you must submit a unique company name that does not resemble a previously registered company name. You need to search the database of the Malaysian Corporation (Suruhanjaya Syarikat Malaysia), check whether the name is duplicated, and then approve it. Malaysia office and local representative are required. You must have an official company address where company notices can be served. At least one shareholder is required. At least one director and at least one secretary are required.​ Directors and secretaries must be listed with local resident qualifications. In general, it takes about two weeks to complete the incorporation process, but the period of incorporation may vary depending on the nature of the business, the composition of capital, and details.

Malaysia corporate tax

If the management and control of a corporation is exercised in Malaysia, the corporation is considered a Malaysian taxpayer. Management and control are usually considered to have been exercised at the location of the board of directors.

Normally, corporations are subject to a corporate tax rate of 24%, but corporations with capital less than RM2.5 million are subject to the following tax rates: Initial revenue of RM500,000 (from YA 2020 to RM600,000 applied) is applied at 17% 24% of excess revenue of RM500,000 (RM600,000 applied from YA 2020) is applied.

Withholding tax is a tax system levied on non-residents in Malaysia on profits subject to Malaysian tax laws. Malaysian taxpayers must subtract withholding tax from the total amount payable to non-residents, and report and pay the IRS within one month from the date of payment after payment.

Subject to withholding tax:

Loyalty-10% Rent of movable property – 10% Technology and management service costs-10%* Interest-15%* Dividend-Waiver Other income-10% (*Interest paid to non-residents by banks in Malaysia)

Malaysia Personal Income Tax

Not all foreigners residing in Malaysia are required to file personal income tax. Foreigners with less than 60 working days per year, such as sailors on Malaysian ships, and Malaysian pensioners over 55 years of age are not subject to reporting. Non-resident tax rates apply to foreigners with more than 60 working days and less than 182 working days per year.

Regardless of the actual payment, income from Malaysian sources is taxable. However, individuals who are obligated to pay tax in countries that have a double taxation prevention agreement with Malaysia are exempt from personal income tax.

In addition, income generated from certain industries such as aviation/sea/transport and banking is subject to international taxes.

The Malaysian government provides various income deductions and tax benefits to foreign taxpayers as follows.

  • Income deduction for spouses without income
  • Income deduction for parenting
  • Income deduction for children under the age of 18
  • Income deduction for children receiving tertiary education

Malaysia Taxpayer Satisfaction Requirements

Live in Malaysia for at least 182 days in one year While staying for less than 182 days in one year, they lived consecutively in the previous and subsequent years and stayed for a total of 182 days or more. If a person is temporarily absent due to the following reasons but continues to stay before or after the absence, the period of absence is also considered

  • Business trip – Sick leave – Less than 14 days of travel If you have stayed for 90 days or more for one year and lived for at least 90 days in 3 of the past 4 years or have been a resident If you are a resident in the immediately following year and a resident in the previous 3 years Personal income tax is applied at a progressive tax rate of 0% to 28%, and some income is deductible. Initial income of RM5,000 is tax-free. Non-resident individuals are subject to a flat rate of 28% (30% from YA 2020) or a progressive rate, whichever is greater. Director’s remuneration, consulting expenses, and other revenues are also subject to a 28% (30% applied from YA 2020) fixed tax rate (30% applied from YA 2020). Income deductions do not apply to non-resident individuals. In case of termination/resignation of labor contract or leaving Malaysia for more than 3 months, tax settlement is required. After receiving the tax certificate issued by the Internal Revenue Service stating that there is no unpaid amount, the employee can pay the salary to the employee.

Capital gains tax and stamp duty

Characteristics of real estate capital gains tax If you buy property in Malaysia, you may be subject to Property Transfer Income Tax (RPGT). Real estate capital gains tax is levied on profits from the sale of real estate, and the rate varies depending on the length of time the real estate is owned.

When purchasing real estate in Malaysia, stamp duty for legal effect may be incurred depending on the contract of sale (SPA) and loan agreement.