Eight reasons for setting up a business in Malaysia.

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Eight reasons for setting up a business in Malaysia

Acclime has put together a list of eight reasons why you should consider setting up a business in Malaysia.

There are many reasons to choose Malaysia other than Malaysia having a healthy business environment and being one of the most fast-growing economies in Southeast Asia.

If you are finding out why you should set up a business in Malaysia, then you are at the right place.

1. Low corporate tax rates

Malaysia is another country in Asia that has a low corporate tax rate.

A resident company is subjected to pay a corporate tax rate of 17% if the resident company:

  1. Has a paid-up capital of RM 2.5 million or less and income of not more than RM 50 million
  2. Does not control, directly or indirectly, another company with paid-up capital of more than RM 2.5 million
  3. Is not controlled, directly or indirectly, by another company with paid-up capital of more than RM 2.5 million

After the first RM 600,000, the resident company will pay a rate of 24%.

Resident companies other than the companies as described above and non-resident companies are taxed on a CIT rate of 24%.

2. New companies act

With the new Companies Act 2016, registering a company in Malaysia is easier and more cost-effective. Not only is the registration process more convenient, but there are also other changes that apply to companies in Malaysia.

These changes include:

  • Incorporating a company with one shareholder and one director
  • Audit exemption for dormant companies, zero-revenue companies and threshold qualified companies
  • No annual general meeting for private companies
  • Easier passing of written resolutions for private companies

3. Educated and low-cost labour

Most of the workers in Malaysia are highly educated as the government supports the development of human resource in every sector. Malaysia has one of the best workforces in Asia with costs that are lower than other countries in the region.

Malaysia puts a lot of importance on education and training, and there has been an increase in the number of public training institutions such as technical schools, polytechnics, industrial training institutes and skill development centres to meet the growing demand and qualifications of the industry.

4. No language barrier

Malaysia is a multilingual country.

The official language of Malaysia is Bahasa Malaysia or Malay, but other common languages are English, Mandarin and Tamil.

Most Malaysians, especially the younger generation, are able to speak several languages fluently.

5. Strategic location

Malaysia is located in the Asia Pacific rim and in the heart of the ASEAN Community, which consists of Brunei, Cambodia, Indonesia, Laos, Myanmar, Philippines, Singapore, Thailand and Vietnam.

Malaysia’s strategic location is the gateway to a huge ASEAN population of 667.3 million people.

Malaysia is also ideal for sea route trading businesses as Malaysia is home to four seaports which are Port Klang, Johor Port, Port of Tanjung Pelepas, Kuantan Port, Penang Port, Bintulu Port and Kemaman Port.

6. Free trade agreements

Malaysia has entered several free trade agreements. Malaysia currently has seven bilateral free trade agreements and seven regional free trade agreements.

The bilateral free trade agreements include:

  • Malaysia-Japan Economic Partnership Agreement (MJEPA)
  • Malaysia-Pakistan Closer Economic Partnership Agreement (MPCEPA)
  • Malaysia-New Zealand Free Trade Agreement (MNZFTA)
  • Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA)
  • Malaysia-Chile Free Trade Agreement (MCFTA)
  • Malaysia-Australia Free Trade Agreement (MAFTA)
  • Malaysia-Turkey Free Trade Agreement (MTFTA)

Malaysia is also part of the ASEAN Free Trade Agreement (AFTA). The AFTA is a trade agreement between the members of the ASEAN countries.

Benefits of the agreement are:

  • Lowers or offers zero tariff on import and export goods under the FTA
  • Removes and modifies import restrictions
  • Allows easier entry for investors
  • Less complicated custom procedures
  • Improves the market access for different services

The regional free trade agreements include:

  • ASEAN, Australia and New Zealand Free Trade Area (AANZFTA)
  • ASEAN-China Free Trade Agreements (ACFTA)
  • ASEAN-India Free Trade Area (AIFTA)
  • ASEAN-Japan Free Trade Area (AJFTA)
  • ASEAN-Republic of Korea Free Trade Area (AKFTA)
  • ASEAN-Hong Kong, China Free Trade Agreement (AHKFTA)

7. Ease of doing business

Malaysia ranked 12th place in the World Bank’s Ease of Doing Business report in 2020. Malaysia has been increasingly developing to make establishing businesses for residents and non-residents easier.

Malaysia ranked 24th place on the world’s freest economy based on the Index of Economic Freedom published by The Heritage Foundation. Malaysia is also at 27th place as the world’s most competitive economy based on the Global Competitiveness Report 2019 issued by the World Economic Forum. Malaysia is the second-best in the world in protecting minority shareholders.

Registering a company in Malaysia is a straightforward process; there are three main steps of incorporating a company.

First is the registration preparation, which includes choosing a business entity, a company name and its officers. Second is registering your company with the Companies Commission of Malaysia, and lastly, following up with any on-going compliances such as filing annual returns, filing taxes and obtaining business permits.

8. Investment guarantee agreements

Malaysia has entered into many Investment Guarantee Agreements (IGA) which are also known as the Promotion and Protection of Investment Agreements.

Countries that signed an IGA with Malaysia

AlbaniaItalySpain
AlgeriaJordanSri Lanka
ArgentinaKazakhstanState of Bahrain
AustriaKuwaitSweden
BangladeshLebanonSwitzerland
Belgo-LuxembourgMacedoniaSyrian Arab Republic
Burkina FasoMongoliaTaiwan
CanadaMoroccoTurkey
ChinaNamibiaTurkmenistan
CambodiaNetherlandsUnited Arab Emirates
CroatiaNorth KoreaUnited Kingdom
CubaPeruUnited States
Czech RepublicPolandUruguay
DenmarkRepublic of ChileUzbekistan
EgyptRepublic of EthiopiaVietnam
FinlandRepublic of SudanYemen
FranceRomaniaZimbabwe
GermanySan Marino
GhanaSaudi Arabia
GuineaSenegal
HungarySlovak Republic
IranSouth Korea

Conclusion

If the eights reasons for setting up a company in Malaysia are the answers to why you should start a business in Malaysia, you can always contact Acclime to support you throughout the process of setting up a company.

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