DOING BUSINESS IN MALAYSIA
Economic Policies
Foreign Exchange
Regulation
Financial Reporting
Accounting and Auditing
Tax
SQM
Doing business in Malaysia
ECONOMIC POLICIES
Foreign and private investments are important factors in the growth of the country's economy.
However, these must be compatible to the objectives of the New Economic Model.
The economic policies and strategies of the country are set out
in the New Economic Model. These are implemented through
five yearly economic action plans. The current action plan is the
Tenth Malaysia Plan (2011 - 2015).
The government has introduced the Economic Transformation
Programme, driven by eight Strategic Reform Initiatives to
transform the country into a high income, developed, resilient
and competitive nation by 2020.
Previous policies have concentrated on creation of employment,
eradication of poverty, infrastructure development, a balanced
lifestyle and correcting the economic imbalance among the
communities.
The current emphasis is to develop our human capital and
resources to improve our competitiveness and to bring about change to enhance our
productivity and income and achieve the status of a developed economy by 2020.
Under the Tenth Malaysia Plan, investments will be promoted in high and modern technology
in 12 National Key Economic Areas. Private investments will be actively promoted and the
challenge is to grow them to at least RM115 billion per annum. As at 2011 the proposed
capital investments stand at RM56,087 million with foreign investments at RM34,150 million
representing 61% of the total proposed investments and domestic investments accounting for
the balance.
To encourage foreign direct investments there will be no foreign equity restrictions, except for
strategically sensitive industry sectors.
The government is also reducing government bureaucracy and removing unnecessary
government regulations to promote ease of doing business.
The country has shown improvement in the last ten years in the World Competitiveness
Ranking Knowledge Infrastructure Components rising from 29th (2001) to 16th position
(2011). (Source: IMD World Competitiveness Yearbook 2012). In 2010 Malaysia was placed
fourth. The World Bank Doing Business Report 2012 and WEF Global Competitiveness
Report 2011-2012 also show Malaysia’s improvement in the competitiveness ranking, 18th
and 21st in 2011 a jump from 21st and 26th in 2010 respectively. For 2012 Malaysia has
moved up to 12th position in the world ranking. This reflects the government’s initiatives to
reduce bureaucracy and make doing business in Malaysia much more easily.
Under the Economic Transformation Programme further improvements are envisaged and
policies will be investment, business and people friendly.
For information on the economic policies of Malaysia visit the following portals.
Office of the Prime Minister of Malaysia :
Economic Planning Unit :
National Economic Advisory Council :
Government of Malaysia :
http://www.pmo.gov.my
http://www.epu.gov.my
http://www.neac.gov.my
http://www.malaysia.gov.my
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Doing business in Malaysia
FOREIGN EXCHANGE
The country has a liberal foreign exchange administration policy. The foreign exchange
administration rules are prudential measures to support the overall macroeconomic objective
of maintaining monetary and financial stability conducive to the sustainable growth of the
economy, enhance business efficiency and promote foreign direct investments.
There are no capital exchange controls on external accounts, trade settlements and currency
and no restrictions on direct investment and repatriation of interest, dividends and capital.
The ringgit is freely convertible through authorised depository
institutions within Malaysia. Current account transactions will
continue to be convertible.
All settlements of exports and imports may be made in any
currency.
Travellers are allowed to import or export ringgit currency of not
more than USD10,000 equivalent per person. There are no
limits on the import and export of foreign currencies. The export
of foreign currencies by non-residents is permitted up to the
amount of foreign currency brought into Malaysia by the nonresident.
Resident companies are required to obtain approval before they can borrow in foreign
currency of more than the equivalent of RM100 million from non-residents. The limit for
resident individuals before they require approval is RM10 million.
For information on the Foreign Exchange Administration Rules visit the official portal of Bank
Negara Malaysia at http://www.bnm.gov.my.
REGULATION
There is only a single set of regulation for Malaysians and foreigners doing business in
Malaysia.
A foreign entity may carry out trade or services direct with any business entity in Malaysia.
However, to carry on business in trade or services in Malaysia it has to be carried out through
a registered business entity under the laws of Malaysia.
This can be achieved in many ways. However, for foreign investors the avenues opened to
them is either through a corporation limited by shares incorporated under the Companies Act,
1965 or through a branch registered under the Companies Act, 1965. Corporations
incorporated or registered pursuant to the Companies Act, 1965 have to comply with the
requirements of the Companies Act, 1965 such as the regulation of the corporation,
maintenance of registers and books of accounts, reporting, capital and distribution and
incorporation and liquidation.
For Malaysians they are also able to carry on business through a sole proprietorship or a
partnership registered under the Registration of Businesses Act, 1956 and a limited liability
partnership registered under the Limited Liability Partnership Act, 2012.
Foreign entities may also set up a representative office if they do not intend to carry out
business activities but would like to oversee their operations or investments or to gather
market information in Malaysia.
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Doing business in Malaysia
Malaysian laws are governed by statutes and the other principal statute that all businesses
have to comply with is the Income Tax Act, 1967. Most industries are well regulated and
specific legislation applies to specific businesses.
Information on the laws of Malaysia may be obtained from the official portal of the Attorney
General’s Chambers http://www.agc.gov.my
FINANCIAL REPORTING
The Companies Act, 1965 requires that a corporation should prepare annual accounts and
have it audited before tabling it at an annual general meeting of members for their approval at
least once in each calendar year. The accounts should be prepared in accordance with the
Companies Act, 1965 which includes the compliance with approved accounting standards.
Accounts have also to be prepared for the Inland Revenue Board for the purpose of
assessment to income tax.
ACCOUNTING AND AUDITING
Malaysia uses International Financial Reporting
Standards for financial reporting and International
Standards on Auditing for auditing.
The financial reporting standards in Malaysia are
referred to as Malaysian Financial Reporting
Standards.
TAX
Malaysian taxation is based on
the unitary system and is
territorial.
Malaysia has signed Tax Treaties
with over 70 countries.
The principal statute is the
Income Tax Act, 1967 which
governs the taxation of income.
The income tax rate for
corporation is 25% and for
individuals is on graduated rates
up to a maximum of 26%. For small corporation with a paid-up share capital not exceeding
RM2.5 million the tax rate for the first RM500,000 of assessable income is 20%.
Tax is assessed on a current year basis and is on a self-assessment system.
Real Property Gains Tax is also assessable on realty related transactions and the rate of tax
for disposals within two years is 10% and for disposal after two years and within five years is
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Doing business in Malaysia
5%. Disposals after five years of first acquiring a chargeable asset is free from capital gains
tax.
There is also indirect tax legislation covering import duty and excise duty ranging from 5% to
300% and sales tax and service tax ranging from 5% to 10%.
Incentives and facilities are also available under the legislation.
For information on tax visit the following portals.
Treasury – Ministry of Finance Malaysia :
Income Tax – Lembaga Hasil Dalam Negeri Malaysia :
Royal Malaysian Customs Department :
Malaysian Investment Development Authority :
http://www.treasury.gov.my
http://www.hasil.gov.my
http://www.customs.gov.my
http://www.mida.gov.my
Other useful links and references
Government
Legislation
Finance
Banking
Investments
Income Tax
Customs
Statistics
Business
Securities
Stock Exchange
Kerajaan Malaysia
Malaysian Government
Jabatan Peguam Negara
Attorney General’s Chambers
Kementerian Kewangan
(Perbendaraan)
Treasury
Bank Negara Malaysia
Central Bank
Kementerian Perdagangan
Antarabangsa dan Industri
Ministry of International Trade and
Industry (MITI)
Lembaga Kemajuan Perindustriaan
Malaysia
Malaysian Industrial Development
Authority (MIDA)
Lembaga Hasil Dalam Negeri
Malaysia
Inland Revenue Board
Jabatan Kastam Diraja Malaysia
Customs
Jabatan Perangkaan
Department of Statistics
Suruhanjaya Syarikat Malaysia
Companies Commission of Malaysia
Suruhanjaya Securiti
Securities Commission
Bursa Malaysia
Kuala Lumpur Stock Exchange
www.malaysia.gov.my
www.federalgazette.agc.gov.my
www.treasury.gov.my
www.bnm.gov.my
www.miti.gov.my
www.mida.gov.my
www.hasil.gov.my
www.customs.gov.my
www.statistics.gov.my
www.ssm.com.my
www.sc.com.my
www.bursamalaysia.com
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Doing business in Malaysia
Other useful links and references
Labour
Employees Social
Security
Employees
Provident Fund
Occupational Safety
and Health
Human Resources
Development
Immigration
Education
Health
Tourism
Public Security
Kementrian Sumber Manusia
Ministry of Human Resources
Pertubuhan Keselamatan Sosial
(PERKESO)
Social Security Organisation (SOCSO)
Kumpulan Wang Simpanan Pekerja (KWSP)
Employees Provident Fund (EPF)
Jabatan Keselamatan dan Kesihatan
Pekerjaan
Department of Safety and Health
Pembangunan Sumber Manusia Bhd
www.mohr.gov.my
Jabatan Imigresen
Immigration Department
Kementerian Pengajian Tinggi
Ministry of Higher Education
Kementerian Pelajaran
Ministry of Education
Kementerian Kesihatan
Ministry of Health
Tourism Malaysia
Polis Diraja Malaysia
Police
www.imi.gov.my
Malaysian Bar
Malaysian Institute of Accountants
Chartered Tax Institute of Malaysia
www.malaysianbar.org.my
www.mia.org.my
www.ctim.org.my
www.perkeso.gov.my
www.kwsp.gov.my
www.dosh.gov.my
www.hrdf.com.my
www.mohe.gov.my
www.moe.gov.my
www.moh.gov.my
www.tourism.gov.my
www.rmp.gov.my
Professional Bodies
Lawyers
Accountants
Tax Professionals
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Doing business in Malaysia
FOR MORE INFORMATION ON DOING BUSINESS IN
MALAYSIA AND GETTING STARTED YOU SHOULD CONTACT
OUR CORPORATE CONSULTANTS WHO WILL BE ABLE TO
ADVICE YOU
Disclaimer
The information contained in the article is for guidance only and is not exhaustive.
The information is provided gratuitously and without liability.
SQM and the ASQ group of companies shall not be liable for any loss or damage
caused by the usage of or reliance on the information and guidance provided in this
article and other information provided on the SQM and ASQ websites.
Professional advice and assistance must always be obtained before you act on any of
the guidance provided.
Please refer to the respective source of information, legislation and the regulatory
authorities for authoritative guidance.
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