BUSINESS ARTICLE

Business Expansion into Malaysia — Yay or Nay?

Business Expansion Malaysia

Business Expansion into Malaysia — Yay or Nay?

4 Reasons why incorporating in Malaysia could be a wise decision

Over the last ten years, Malaysia has become a destination of choice for business expansion. The World Bank ranked Malaysia at a respectable 55th place out of 157 countries, across the globe, as the easiest place to do business. While the government continues to play its part in facilitating greater ease, there are geological factors that help boost Malaysia’s chances as your next business expansion destination. The country is strategically located in the Asia Pacific Rim, at the centre with numerous other ASEAN nations surrounding it. This means businesses in Malaysia can take advantage and gain easy access to a substantial 667 million regional population1, which together, boast a combined GDP of over US$3.3 trillion1.

If you are thinking of expanding your business into Malaysia, here is FOUR reasons why it would prove to be a wise choice.

01 It’s Quick, Easy and Low-Cost to Incorporate

Comparatively, Malaysia is possibly one of the easiest places for businesses to incorporate. Malaysia’s effort to reform —policy enhancements and procedural improvements — over the past few years have increased efficiencies and reduced the waiting time involved with registration and permit application processes. Registration of a new business takes between 5-10 days and employment permits for expatriates will be processed within 5 working days.

Operationally and financially Malaysia builds a strong case for itself. It boasts one of the lowest start-up costs compared to the other Asia Pacific countries. This is largely driven by its low property rental rates and generally low minimum wage.

Knight Frank currently estimates supply of office space in Kuala Lumpur (KL) city is 58.26 million sq ft, followed by KL fringe with 29.43 million sq ft and Selangor with 23.91 million sq ft. This brings the total to 111.60 million sq ft2 with affordable average office rental rate at RM5.55 psf2.

In addition to low office rental rates, businesses can operate economically because of Malaysia’s relatively low minimum wage, which sits at RM1,200 (US$286) per month.

incorporating in Malaysia

02 You’ll Avoid Double Taxation

In most countries, double taxation usually occurs when any taxpayer of a specific country engages in international business transactions. However, this is not the case for businesses in Malaysia. The country is a part of DTAs (Double Taxation Agreements) involving counties located in every continent of the world. This allows Malaysia to create an attractive tax environment where a greater international flow of investment, trade and financial activities, and technical knowledge are facilitated and exchanged.

These DTAs, outline the treatment of income or profits earned outside of Malaysia by Malaysian businesses and within Malaysia by foreign-owned businesses. On that note, businesses in Malaysia are protected against the possibility of a singular income being subject to two countries’ tax simultaneously. The double taxation agreement also provides taxpayers with certainty about their tax treatment. In the event of an absent DTA, businesses are still eligible for tax relief through the foreign tax credit.

03 The Locals are Ready to Buy

When shortlisting a country for your business expansion plans, qualifying your list of countries based on their economic strength is an excellent place to start. A country’s GDP is the best measure to assess its’ overall economic strength because it is closely connected with the country’s average consumer purchasing power. Malaysia’s GDP is expected to reach US$359 Billion by the end of 20213 with a healthy growth rate of 3.0% – 4.0%.4

Malaysia’s strong GDP is attributed to the government’s effort to remain robust in the agriculture, construction, manufacturing, mining, and services industries. One of the main objectives of its Budget 2022 is to strengthen economic recovery and improve business resiliency as the world move into the Covid-19 epidemic stage. With such a thriving market, Malaysians’ incomes are increasing and depending on your type of business, you can expect a growing number of consumers becoming or already are in the position to purchase low to middle market products and services readily.

04 The Local Government Supports You

Malaysia has been growing economically in tandem with global trends. In line with the Industrial Revolution 4.0 (IR4.0) adoption, it has introduced its own National 4IR Policy – a broad, overarching national policy that drives coherence in transforming the socioeconomic development of the country through ethical use of 4IR technologies.

While there are limited restrictions on foreign ownerships in certain strategic sectors, the Malaysian government encourages inflow of foreign investments. This is apparent in the incremental liberalization of equity conditions by various government agencies and the broad range of attractive incentives to entice new foreign investments and promote local start-ups. These incentives range from generous tax exemptions and allowance to grants.

Depending on your business, you might even be eligible for specific grants and incentives aimed at supporting innovation or projects that contribute strategically to the country’s economy and industries. Having a good knowledge of these incentives and how they may apply to you will allow you to maximise your business potential and put you on the fast track to success. Here are 5 grants that might be helpful as you incorporate in Malaysia.

  1. Cradle Investment Programme 300 (CIP300)
  2. MaGIC Global Accelerator Programme (MaGICGAP)
  3. Technology Acquisition Fund (TAF)
  4. Domestic Investment Strategic Fund
  5. Women Exporters Development Programme (WEDP)

The Malaysian government also has a dedicated agency – the Malaysian Investment Development Authority (“MIDA”) to help facilitate your new venture into the country.

business expansion support

Conclusion

So, if you were wondering if you should incorporate in Malaysia, here is our advice; you should. Whilst it is a relatively simple process — requiring only basic knowledge of application processes and local regulations — you should always consult a team of dedicated experts. Experts can assist you in leveraging Malaysia’s incentives and opportunities to their fullest extent while allowing you to have peace of mind, knowing that your company will remain compliant with the local regulation. By doing so, you can ensure the best possible outcome for your business planning and investment strategy.

Here is where BoardRoom can help.

BoardRoom is the market leader in Malaysia for Corporate Services as we command the majority of the market. Our affiliation with local regulators and government agencies such as the Malaysian Investment Development Authority (MIDA), local stock exchange Bursa Malaysia, Companies Commission of Malaysia, InvestKL, Malaysia Digital Economy Corporation (MDEC), etc. allows us to advise on the latest regulatory requirements and incentives accurately and swiftly put your business on a fuss-free journey towards success.

Are you planning to incorporate in Malaysia? Perhaps we could be of some help. Contact our Corporate Secretarial experts today!

Source
  1. www.statista.com
  2. Knight Frank Kuala Lumpur and Selangor Office Monitor 2Q2021. The Edge Malaysia, 7 October 2021
  3. www.tradingeconomics.com
  4. Press Release by the Ministry of Finance, Malaysia on 12 November 2021

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