Doing Business In Malaysia


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ASQ CONSULTANTS SDN BHD shares about doing business in Malaysia on 4 March 2010

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Doing Business In Malaysia

  1. 1. ASME – S P Setia Bhd Group Seminar and Networking Session 3 March 2010, Wednesday a c 0 0, ed esday
  2. 2. ASQ Seminar on I S i Investment in t ti Malaysia ASQ CONSULTANTS SDN BHD Date : 3rd March 2010
  3. 3. FORMATION OF COMPANIES INCORPORATION OF PRIVATE LIMITED (SDN. BHD.) COMPANY IN MALAYSIA - Any two or more persons may f A t form a C Company (S 14) (S.14). - Minimum two residence directors (S.122). - Any person who stays in Malaysia more than 182 days a year can be considered as residence Director. - Minimum paid-up capital is RM2-00. - Minimum authorised capital is RM100,000-00. - Foreigner may hold 100% of shares.
  4. 4. FORMATION OF COMPANIES PROCEDURES 1) Choosing a name requesting for the availability of the name for the intended Company. 2) Filing the M & A Form 6 and 48A A, 48A. 3) Filing Forms 24, 44 and 49. ) g ,
  6. 6. MINIMUM LICENSES REQUIREMENT FOR SETTING UP FACTORIES IN MALAYSIA 1) MANUFACTURING LICENSE Only manufacturing companies with shareholders’ funds of RM2 5 million shareholders RM2.5 and above or engaging 75 or more full time employees need to apply for a license under the ICA. 2) APPROVAL FROM DEPARTMENT OF ENVIRONMENT (DOE) All manufacturing projects need to comply with the requirements stipulated in the Environmental Quality Act, 1974.
  7. 7. 3) APPROVAL FROM DEPARTMENT OF OCCUPATIONAL HEALTH & SAFETY Under the Factories and Machinery Act 1967, manufacturing projects are required to :- - Obtain design approval of ‘certificate machinery’ i.e. steam boilers, unfired pressure vessels and hoisting machines such as cranes and lifts. - Obtain a ‘Certificate of Fitness’ prescribed for ‘certificated machinery’. - Serve written notice to the nearest Inspector of Factories and Machineries of the intention to take occupancy of the Factory and operate the machine.
  8. 8. 4) LOCAL TRADE/BUSINESS LICENSE An investor must obtained a local trade / business license. This is issued by the Local Authorities. 5) SALES TAX LICENCE A sales tax is levied on imported and locally manufactured goods (except those exempted by the Ministry of Finance) either at the Finance), time of import or at the point of sale. Manufacturing companies should apply for a license under the Sales Tax Act, 1972. Companies manufacturing taxable goods but where the sales are goods, below RM100,000 per year, may apply for a certificate of exemption.
  9. 9. 6) NOTIFICATION TO THE LABOUR DEPARTMENT Under Section 63A of th E l U d S ti f the Employment A t 1955 all C t Act, ll Companies i must submit a notice within 90 days of establishment to the nearest Labor Department. 7) EPF / SOCSO Registration of workers with the Employee Provident Fund (EPF) under th E l d the Employees’ P id t F d A t 1951 and S i l S ’ Provident Fund Act, d Social Security it Organization (SOCSO) under the Employees’ Social Security Act, 1969. 8) FIRE SERVICES DEPARTMENT 9) LAND OFFICE APPROVAL 10) IMPORTER & EXPORTER CODE CODE.
  10. 10. 11) OTHER APPROVALS : a) Chemical Project / Industry - Pharmaceutical projects are required to obtain :- a) “Good Manufacturing Practice” ( ) g (GMP) approval for the ) pp manufacturing process. b) A license to manufacture drugs under the control of Drugs and Cosmetics Regulation 984 and to register the products with the Drug Control Authority. - Projects which p p j propose to use p poisonous materials are required to q obtain a Poisons License from the Ministry of Health. - Companies proposing to manufacture pesticides are required to register their products with the Pesticide Board Department of Agriculture.
  11. 11. 2) Electrical and Electronic Industry A Company is required to apply for certificate of approval to manufacture and sell electrical apparatus or accessories. 3) Wood-based Industry Wood-based projects such as sawmilling, plywood mills, f it W db d j t h illi l d ill furniture mills, ill etc. are required to obtain a license from the respective State Forestry Department. Wood-based projects (with the exception of furniture projects) are required to register with the Malaysian Timber Industry Board.
  12. 12. 4) Rubber-based Industry ) y Latex-based projects are required to obtain a license to Purchase and store latex from the Malaysian Rubber Exchange and Licensing Board. 5) Palm Oil-based Industry ) y Palm oil-based projects are required to obtain a license to sell, purchase, store and export palm oil products from Palm Oil Registration & Licensing Authority (PORLA).
  13. 13. 6) Food Industry Projects which propose to manufacture foodstuff must observe and comply with the Food Act, 1983 and Food Regulations, 1985. Food processing projects which intend to produce ‘halal’ food products are required to obtain a certificate from the Islamic Affairs Division, Prime Minister’s department. Projects which propose to can pineapples are required to obtain a Certificate of Registration from the Malaysian Pineapple Industry Board.
  14. 14. 7) Textile Industry Textile projects which propose to export products with quota restrictions to USA, EEC, Canada, Norway and Sweden are required to obtain a Quota Allocation and Export License from the Ministry of International Trade and Industry. y y 8) Printing Industry Printing companies are required to obtain a printing press license from the Ministry of Home Affairs. 9) Film / Video Production Industry Film /Video production projects are required to obtain a license from the National Fil D th N ti l Film Development B d (FINAS) l t Board (FINAS).
  15. 15. 10). Aquaculture Project ) q j Aquaculture projects which propose to import or export live fish / prawns are required to obtain the approval of the Department of Fisheries. Fi h i 11) Storage of Control Items Projects which propose to store, manufacture and trade ‘controlled items’ under the Control of Supplies Act, 1961, are required to obtain a license from the Ministry of Domestic Trade and Consumer y Affairs.
  16. 16. GUIDELINES ON EMPLOYMENT OF EXPATRIATE PERSONNEL TYPES OF EXPATRIATE POST 1) Key Post - Permanent 2) Executive Post - Maximum 10 years 3) Non-executive Post - Maximum 5 years y
  17. 17. GUIDELINES - Manufacturing companies with foreign paid-up capital of US$2 million and above will automatically be allowed 10 expatriate p p posts including 5 key p g y posts. - Manufacturing companies with foreign paid-up capital of more than US$200,00 but less than US$2 million will automatically be allowed 5 expatriate posts including 1 key post. - Key post can be considered when the foreign paid up capital is at least RM500,000-00.
  19. 19. TYPES OF CUSTOMS DUTIES EXEMPTION I) CUSTOMS ACT, 1967 (a) Licensed Manufacturing Warehouse (LMW) under Section 65/65A. (b) Drawback of Import Duty and Surtax Under Section 99. (c) Drawback of Import Duty and Surtax Under Section 93.
  20. 20. TYPES OF CUSTOMS DUTIES EXEMPTION II) SALES TAX ACT, 1972 (a) Exemption from Sales Tax (b) Drawback of Sales Tax III) SPECIAL INCENTIVE SCHEMES (a) Treasury Exemption - PC 2 (97)
  23. 23. LICENSED MANUFACTURING WAREHOUSE (LMW) ESTABLISHED UNDER SECTION 65A CUSTOMS ACT, 1967 1. Objective j S.65 - To establish Warehouse for storage of dutiable goods. S.65A - To enable manufacturing process to be gp carried out in Licensed Warehouse. 2. Period of License - 2 years - To be renewed at least one month before expiry 3. Type of Premises - Approved factory
  25. 25. TAX INCENTIVE TAX AVOIDANCE TAX EVASION VS reduce tax by means which are within the law reduce tax by illegal means
  26. 26. TAX INCENTIVE Tax Incentives • Important to choose the right incentives!!!!!! - Some incentives are mutually exclusive
  27. 27. TAX INCENTIVE SME – LOWER CORPORATE TAX RATE • Ai f th use of 20% reduced t rate if you can Aim for the f d d tax t • - tax saving of RM25,000 (YA 2009) if the chargeable income > RM500,000
  28. 28. TAX INCENTIVE 税务优惠 Pioneer status Vs Investment tax allowance choose the right one….. g
  29. 29. TAX INCENTIVE PIONEER STATUS tax exemption of 70% / 100% of statutory income
  30. 30. TAX INCENTIVE INVESTMENT TAX ALLOWANCE allowance = 60% 0r 100% of capital expenditure maximum exemption on 70% / 100% of statutory income
  31. 31. TAX INCENTIVE REINVESTMENT ALLOWANCE make the most of the RA……. it is available for 15 years
  32. 32. TAX INCENTIVE REINVESTMENT ALLOWANCE * manufacturing / agriculture * allowance = 60% of capital expenditure * must have been in operation > 36 months * qualifying project – expansion, modernisation, automation, diversification eg : cost of machine = RM1,000,000 ( f 1 000 000 (cash) ) RA = RM1,000,000 x 60% = RM600,000
  33. 33. TAX INCENTIVE EXEMPTION FOR VALUE OF INCREASED EXPORT If you are exporting goods to overseas, make use of the incentive on exemption for value of increased exportt
  34. 34. TAX INCENTIVE • Exemption for value of increased export 1. significant increase in export = 30% of value of increased export 2. 2 Penetrating new export market = 50% of value of increased export P t ti t k t f l fi d t 3. 3 Export excellence award = 100% of value of increased export
  35. 35. TAX INCENTIVE What is significant increased in e po t ? at s s g ca t c eased export i.e : value of increased in export > 50% Eg: Value of increased export (VIE) Export value (FOB) YA 2007 RM1,000,000 YA 2008 RM1,800,000 VIE = RM 800,000 % of VIE = 80% > 50%
  36. 36. TAX INCENTIVE DOUBLE DEDUCTION– promotion of export DEDUCTION pay attention to promoting export, it can earn you double deduction deduction….
  37. 37. TAX INCENTIVE DOUBLE DEDUCTION – ADVERTISING EXPENDITURE ON MALAYSIAN BRAND NAME GOODS - 70% Malaysian shareholder - At least 20% export - Company (or holding co) is registered proprietor
  38. 38. TAX INCENTIVE SME -ACCELERATED CAPITAL ALLOWANCE ACCELERATED - YA 2009 TILL YA 2010 - Capital allowance on plant and machinery = 100%
  39. 39. TAX INCENTIVE SMALL VALUE ASSETS - value < RM1,000 per item - 100% capital allowance - No threshold
  40. 40. ISKANDAR MALAYSIA • Special economic zone in South Johor • Covers 2,217 square kilometres of land area • 3 times the size of Singapore
  41. 41. ISKANDAR MALAYSIA • Five flagship zones Johor Bahru City Centre Nusajaya Port Tanjung Pelepas Senai A S i Area Tanjung Langsat
  42. 42. ISKANDAR MALAYSIA • Focus on the following industry clusters Electrical and electronics Petrochemicals and oleo chemicals Food and agro processing Logistics and related services Tourism Health services Education services Ed ti i Financial services Creative industries
  43. 43. ISKANDAR MALAYSIA ISKANDAR REGIONAL DEVELOPMENT AUTHORITY (IRDA) Roles include : • Act as a coordinator between government agencies, to promote trade, investment and development within IM and to handle all matters relating to the general administration of IM. • Act as the agent in relation to applications for approvals • Recommend incentives for tax, customs, duties and other fiscal incentives
  44. 44. ISKANDAR MALAYSIA INCENTIVES IN IM : Targeted service sectors: creative industries Education Financial advisory and consulting Healthcare Logistics; and L i ti d Tourism
  45. 45. ISKANDAR MALAYSIA • CRITERIA • Approved by IRDA • Carry out activities in the above targeted service sectors • Situated in the designated zones
  46. 46. ISKANDAR MALAYSIA Incentives: • Exemption from foreign investment committee rules which require a minimum 30% Bumiputra equity shareholding; • Freedom to source capital globally • Ability to employ foreign employees freely within the y p y g p y y approved zones, depending on the amount of space occupied in these zones; • Exemption from corporate income tax for a period of 10 years from commencement of qualifying activities within the zone and outside Malaysia. (provided operations commence before end of 2015)
  47. 47. ISKANDAR MALAYSIA Incentives: • Ability to carry forward losses to post tax exempt period with certain conditions • Foreign knowledge workers living in IM and working in IRDA status companies will be entitled to import or purchase one car per person f free of import duties or excise duties f and sales taxes subject to conditions;
  48. 48. ISKANDAR MALAYSIA Incentives: • Chargeable income of resident knowledge workers in respect of qualifying activities (QA) who apply and commence employment in IM between 24 October 2009 to 31 December 2015 be taxed at 15% indefinitely. (QA= green technology, biotechnology, educational services, healthcare services, creative industries, financial advisory and consultancy services, services logistic services and tourism ) tourism.)
  50. 50. TYPES OF INCENTIVES AVAILABLE FOR SERVICE- BASED OPERATIONS a) Operational Headquarters b) International Procurement Centres / Regional Distribution Centres c) Regional Office / Representative Office d) Foreign Fund Management Company e) Malaysian International Trading Company
  51. 51. a) Operational Headquarters • Local incorporation under the Companies Act 1965 but 100% foreign equity is allowed • A minimum paid-up capital of RM0.5 million • A minimum total business spending (Operating Expenditure) of RM1.5 million per year • Serve at least 3 related companies outside Malaysia • A sizeable network of companies outside Malaysia which includes the parent company or its head office and related companies
  52. 52. Exempted from Income Tax for 10 years for the following sources E t df I T f f th f ll i of income • B siness Income Business • Income arising f I i i from services rendered i d d to its offices or related companies outside Malaysia • Interest • Income derived from interest on foreign currency loans extended to its offices or related companies outside Malaysia • Royalties • Royalties received from research & development work carried out in Malaysia on behalf of its offices or related companies outside Malaysia
  53. 53. b) International Procurement Centre (IPC) IPC refers to a company undertakes procurement & sales of raw p y p materials, components and finished products to its group of related & unrelated companies in Malaysia and abroad • Local incorporation under the Companies Act 1965 • A minimum paid-up capital of RM0.5 million • A minimum total business spending (Operating Expenditure) of RM1.5 million per year • Incremental usage of Malaysian ports & airports • A minimum annual sales turnover of RM50 million by the third year of operation • Drop shipment permitted up to 30% of annual sales turnover
  54. 54. Facilities Accorded to IPC • Expatriate posts based on the requirement of IPC • Bring in raw materials, components or finished products with custom duty exemption into free industrial zones, licensed manufacturing warehouses, free commercial zones & bonded warehouse for repackaging, cargo consolidation and integration before distribution to its final consumers
  55. 55. Incentives • Tax exemption on the statutory income for 10 years: • Dividends paid out from the exempt income will be exempted f t d from t i th h d of it shareholders tax in the hands f its h h ld • Expatriates working in an IPC are taxed only on that portion of their chargeable income attributable to the number of days that they are in the country
  56. 56. Eligibility Criteria For Incentives • It must have an annual sales turnover of at least RM100 million with export sales of at least RM80 million (out of which direct export must be at least RM50million) • Sales to the domestic market are limited to 20% of its sales turnover • S l to Free Zones and Licenced Manufacturing Sales d d f Warehouse (LMW) are considered as domestic sales
  57. 57. Regional Distribution Centre (RDC) Same conditions & tax incentives as International Procurement Centre (IPC) except that the RDC is allowed to deal with its own brand of goods only and must be located in free zones or licenced warehouse or licenced manufacturing warehouse.
  58. 58. c) Representative Office / Regional Office • An office which is established in Malaysia to y perform permissible activities for its head office/principal. • N t required t b i Not i d to be incorporated or registered t d i t d under the Companies Act 1965 • Not allowed to carry out any business transaction or derive income from its operations • Expatriate posts based on requirements p p q
  59. 59. Representative Office • An office of a foreign company approved to collect relevant information on investment opportunities in the country especially in the manufacturing sector, develop bilateral trade relations, promote the export of Malaysian goods/products and carry out research and development (R & D).
  60. 60. Regional Office • An office of a foreign corporation that serves as the coordination centre for the corporation’s affiliates, affiliates subsidiaries and agents in South-East South East Asia and the Asia Pacific. The Regional Office established is responsible for designated activities of the corporation within the region it operates.
  61. 61. d) Foreign Fund Management Company • A company incorporated in Malaysia and licensed under the Securities Industry Act 1983 • Issued share capital can be wholly foreign owned • Paid up capital must be at least RM 2 million p p • Provision of fund management services to foreign investor in their home countries which includes investment portfolio advisory services portfolio, and other activities incidental to fund management
  62. 62. Incentives • Concessionary tax rate of 10% • Net of tax income is allowed to distribute as Tax Exempt Dividend
  63. 63. e) Malaysian International Trading Company (MITC) • Local incorporated under the Companies Act 1965 & at least 60% of the issued share capital is Malaysian owned • Annual sales of more than RM 10 million have been achieved • 20% of the value of increased export (incentive amount) can be set off against 70% of statutory income to be credited y into an exempt income account.
  65. 65. SELF ASSESSMENT SYSTEM : Group Year of Implementation a) Companies 2001 b) Individual Businesses, Partnerships, Cooperatives and Salaried Group 2004
  66. 66. 1)What are the responsibilities of a company under Self Assessment System and penalties on non-compliances? • Notification of Estimated Tax Payable & Submission of Form CP 204. (a) Due Date : Not later than 30 days before the beginning of the Basis Period/Financial Period. E.g. ASQ Tax Services Sdn. Bhd. g SQ a Se ces Sd d With financial year end 31/12/2010. (Financial Period 1/1/2010 - 31/12/2010). Due Date : 1/12/2009. A company is still required to submit the Form CP204 within the stipulated deadline even if it expects its estimate of tax payable to be NIL. (Exception : a) SME exempted from filing the estimation for first 2 years of assessment assessment. b) Companies with Basis period for first year of assessment < 6 months are exempted from filing.
  67. 67. ASQ Thank you 谢谢