In light of the rising economic openness of Malaysia, JC Legal joined hands with their associate partner firm in Malaysia to stage a fireside chat on the basics to establish and grow business presence in Southeast Asia. The seminar featured Malaysian lawyers Chai Chuan Long, Partner of real estate practice, Lew Choon Meng and Ong Yee Chee, Partners of corporate and commercial practice, who shared the economic incentives and practical tips for doing business in Malaysia.
Like Hong Kong, Malaysia inherits the common law system from the United Kingdom. Judgements obtained in Hong Kong are enforceable in the High Court of Malaysia subject to the Reciprocal Enforcement of Judgements Act 1958.
Comparing business operating costs with Singapore and Hong Kong, Malaysia is the most cost-effective, around two to three times lower than those of the other two markets. “With labour salary and office rental lower by more than half, Malaysia is favourable for startups to develop,” Ms Ong said. A wide range of tax incentives are also in place for pioneers in manufacturing, innovative technology and biotechnology, with income tax exemption ranging from 70% to 100% for five years.
With mega projects such as the revived East Coast Rail Link under the Belt and Road Initiative and the Bandar Malaysia Project under way, Malaysia is set to emerge as a more investor-friendly and integrated global hub for foreign investment. In 2018, Malaysia’s foreign direct investments hit an all-time peak at RM80.5 billion, surging 48% over the previous year even as the global figure dipped to the lowest level in a decade. The most robust growth was seen in manufacturing.
Malaysia shares a similar company registry system as Hong Kong. Apart from common entity types such as sole proprietorship, limited liability partnership and private limited company, investors also have the option to incorporate an offshore Labuan company. A slight difference from Hong Kong practice is that Malaysian companies require at least one resident director. The resident director is not obliged to stay in Malaysia; a Malaysian address would suffice.
A company could be set up within 8 to 11 days, with generally no restriction on foreign interest on licensing. “Even if you are unsure whether to put an office in Malaysia, a representative office would be a good choice to explore the market in Malaysia as no corporate tax is levied,” Mr Lew suggested.
Foreign citizens and companies are welcome to buy property in Malaysia under the registration of a Malaysian local company, subject to approval by the Economic Planning Unit (EPU) and state authorities. Purchases not subject to approval by the EPU but subject to approval by state authorities include residential, commercial and industrial units valued at RM1 million or above. Such exemption also extends to residential purchases under the Malaysia My Second Home (MM2H) Scheme.
For approval on the state level, each state authority has imposed various minimum purchase prices for properties that can be acquired by foreign interest. For instance, the thresholds for acquisitions in the Federal Territory of Kuala Lumpur, Penang Mainland, Selangor (Residential Zone 3), Malacca and Johor are RM1 million respectively.