Top 4 common challenges when starting a business in Malaysia.

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Top 4 common challenges when starting a business in Malaysia

When starting a new company in Malaysia, there are certain requirements you must complete to ensure that your company is correctly set up and to avoid any mistakes regarding the Malaysian law. This article has gathered the top four common challenges when starting a business in Malaysia. Let’s see what these challenges are.

1. Applying for entry permits

Foreigners must apply for entry permits before they are able to enter and reside in Malaysia as a permanent resident.

There is a total of four entry permit categories available to foreigners under Section 10 of the Immigration Act and Regulation 4, Immigration Regulations 1963.

  1. Investors and experts
  2. Professionals
  3. Spouse of Malaysian citizen and child/children of Malaysian citizen below age of six
  4. Point system

Requirements for entry permit application

Investor

  • An individual with a minimum of USD 2 million fixed deposit at any bank in Malaysia, and will only be allowed for withdrawal after five years
  • Requires one Malaysian sponsor

Expert

  • An individual with expertise, talent and skill
  • Needs a recommendation by a relevant agency in Malaysia
  • Must have a Good Conduct Certificate from the country of origin
  • Requires one Malaysian sponsor

Professional

  • Professional in any field who has outstanding skills
  • Needs a recommendation from a relevant agency in Malaysia
  • Must have a Good Conduct Certificate from their country of origin
  • Requires one Malaysian sponsor
  • Has worked in a government agency or private company in Malaysia for at least three years and certified by the relevant agency in Malaysia

Spouse of Malaysian citizen

  • Married to a Malaysian citizen
  • Has been issued with the Long-term visit pass and stay in Malaysia for at least five years
  • Required to submit the Surat Akuan Perkahwinan
  • Spouse has to be the sponsor
  • For child/children of the Malaysian citizen below six years old, the parent must be the sponsor

Point system

  • Application is open to all foreign nationals except for investors, experts, professionals and spouse of Malaysian citizen
  • Application is evaluated through the following seven criteria:
    • Age
    • Qualification
    • Duration of stay in Malaysia
    • Familiarity with the Malaysia Institute
    • The values of investments
    • Working experience in Malaysia
    • Proficiency in Bahasa Malaysia

Applicants need to score a minimum of 65 points to be able to submit an application.

List of relevant agencies in Malaysia that issue recommendations for permanent residency

Field of expertiseAgencies
Health and medicalMinistry of Health
Industrial, services and manufacturingMinistry of International Trade and Industries (MITI) / Malaysian Industrial Development Authority (MIDA)
Agriculture and agro baseMinistry of Agriculture and Agro Base Industry
Maritime, air and land and transportationMinistry of Transport
Higher educationMinistry of Higher Learning
Science, technology, culture and artsMinistry of information, Communication and Culture
SportsMinistry of Youth and Sports / Malaysian Sports Council
Banking and financeCentral Bank
Investment and capitalSecurity Commission

According to section 6(3) of the Immigration Act 1959/63, if a foreigner enters Malaysia without a valid entry permit, you will face a penalty of a fine not exceeding RM 10,000 or imprisonment of not more than five years or both a fine and imprisonment.

2. Opening a corporate bank account

Foreigners can open a business bank account, but some banks may not allow foreigners to open one. To open an account, it is better if you are physically present in Malaysia.

The documents required to open a bank account differs based on the bank since there is no fixed law regarding the documentation required to open an account. Most local banks in Malaysia will require an introduction from an existing customer of the bank.

There are four main local banks in Malaysia you may choose:

  1. CIMB
  2. Maybank
  3. Public Bank
  4. RHB Bank

3. Obtaining related business licenses

Before legally operating your business in Malaysia, it is important that you have a valid business license that is required for your business. The business licenses you may need are general licenses, industry/sector-specific license or activity-specific license.

To avoid any complications or mistakes when getting business licenses, we recommend engaging with Acclime’s services.

What are general licenses?

General licenses are the necessary licenses you need when you establish a business in Malaysia, which include:

  • Company registration
  • Company and employee’s income tax registration
  • Employees provident fund (EPF)
  • Social security organisation (PERKESO)
  • Human resources development fund (HRDF)
  • Business premise licenses and signboard licenses

What are industry/sector-specific licenses?

Industry/sector-specific licenses are the licenses that are needed for a specific industry or sector specified by the Malaysian government.

These include licenses related to:

  • the manufacturing sector
  • the wholesale and retail trade
  • the telecommunication sector
  • the broadcasting sector
  • the oil exploration sector
  • the construction sector
  • the banking sector
  • public houses

What are activity-specific licenses?

Activity-specific licenses are the type of licenses that regulates specific activities and can be applied to more than one industry or sector.

This type of license includes:

  • Certificate of fitness for certified machinery
  • Approval of expatriate posts
  • Approval to install, resite or alter air pollution control equipment
  • Building plan approval
  • Sales tax license
  • Fire brigade approval

4. Obtaining halal certification

It is important that you follow the halal standards if your business nature involves food or goods as Malaysia is a Muslim country.

All meat products, poultry or eggs that are produced or imported must be halal-certified from the Department of Islamic Development Malaysia (JAKIM) or any foreign halal-certified body recognised by the JAKIM.

There are specific conditions that applicants must follow, which include:

  • Registering with the Companies Commission of Malaysia (SSM), Co-operative Societies Commission or other government agencies
  • Hold a business license from the local authorities (PBT) or testimonial from a government agency
  • In full operation before an application is made
  • Produce and/or handle only halal products and comply with the specified halal standard
  • Make sure ingredients are halal and choose suppliers who supply halal materials or have a recognised halal certificate
  • Applications that are not eligible are:
    • Non-halal products
    • Companies that produce and distribute halal and non-halal products
    • Food premise or products that give negative implication towards religion and social, such as entertainment centre, drug, cigarette, hair dye, etc.
    • Fertiliser and animal feed
    • Crockery
    • Paper
    • Hotel with kitchens that prepare pork-based menus

If you make any false halal description on products or services, you will be faced with a penalty as Malaysia has government regulations regarding the matter. It is fully your responsibility to obtain a halal certificate before selling products.

Conclusion

When setting up a business in Malaysia, it is important that you know the pitfalls to avoid in order to prevent any mistakes or any problems that could occur involving the business in the future.

We recommend engaging with Acclime’s corporate services, and we will ensure that you comply with the rules and regulations.

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