Category: Business Insights

Malaysia Budget 2024 – Tax Highlights

MY 2024 Budget Report Banner

Malaysia Budget 2024 – Tax Highlights

boardroomsuperadmin

Malaysia’s 2024 Budget introduced several tax reforms which will impact local businesses and disposable income of general Malaysians.

On 13 October 2023, Malaysia’s Prime Minister and Finance Minister, YAB Dato’ Seri Anwar bin Ibrahim, presented the Budget 2024 focusing on three pivotal areas:

  • optimising governance for enhanced service agility
  • economic restructuring to foster growth, and
  • elevating the standards of living for Malaysian citizens.

The expansionary budget is designed to address contemporary challenges and enhance the quality of life for Malaysians.

To fortify the government’s fiscal responsibilities, reduce the deficit to 4.3%, and augment revenue to RM307.6 billion, the budget incorporates significant structural changes to the tax system, including:

  • E-invoicing for taxpayers with an annual turnover above RM100 million (starting 1 August 2024)
  • Capital Gains Tax (CGT) arising from the disposal of unlisted shares in local companies (starting 1 March 2024)
  • Global Minimum Tax (GMT) applicable to large multinational enterprises (MNEs) with global revenue of at least EUR 750 million (starting in the year 2025)
  • Service Tax will be raised to 8% for all services except food, beverage, and telecommunication services
  • Luxury Goods Tax ranging from 5% to 10%

 

Download our Budget 2024 Report today to find out more. If you have any questions, please reach out to your respective BoardRoom client managers or email us at [email protected].

DOWNLOAD THE FULL MALAYSIA BUDGET 2024 REPORT

Related Business Insights

How full suite share registry services help with AGM preparation

How full suite share registry services help with AGM preparation

How full suite share registry services help with AGM preparation

boardroomsuperadmin

Annual general meetings (AGMs) play a pivotal role in shaping the future of public companies by encouraging informed decision-making and strategic planning. These crucial gatherings bring together key stakeholders, including board members and shareholders, to collectively steer the company’s direction. They can help your company build shareholder confidence and maintain a competitive advantage.

In addition to traditional share registrar duties, a full suite share registry services provider can offer support for various types of meetings such as AGMs, extraordinary general meetings, and special general meetings, provide companies with secure processes to protect clients’ data while also offering a wide range of polling solutions and assistance for companies navigating the complexities of IPO listings. In this article, we focus on how full suite share registry service providers can empower businesses to prepare their board members for AGMs, with the view to facilitate meaningful shareholder engagement and promote strong compliance with local regulations.

Understanding annual general meetings

AGMs hold a critical place on the corporate calendar. They provide a platform for stakeholders to convene, deliberate and make decisions that shape the future trajectory of a company.

Per the Malaysian Companies Act, public companies must adhere to local AGM regulations regarding the following:

    Timing
    AGMs must be held once every calendar year, within six months of the company’s financial year-end and no more than 15 months from the last AGM.
    Location
    Companies incorporated in Malaysia must hold their AGM in Malaysia, regardless of whether the meeting mode is physical, virtual or hybrid.
    Quorum
    Unless the company has only one member, at least two people must be present at the AGM. Proxy attendance is permitted.
    Notice period
    Attendees must have at least 21 days written notice of the AGM date, but a 28-day notice period is advised for good corporate governance.

    In the lead-up to an AGM, the company secretary plays a pivotal role in preparing for regulatory compliance, precise documentation, and smooth communication, all essential for a successful shareholder assembly. However, AGM attendance rules and their adherence are the responsibility of the chair.

    Poor compliance can have serious consequences for your business. Disordered or legally invalid meetings can lead to shareholder complaints, fines and reputational harm, and recovering can take significant time and resources. Meanwhile, compliant AGMs that encourage open, orderly discussion will help to foster stakeholder confidence and bolster your corporate reputation.

    It is not unusual to feel daunted at the prospect of ensuring all your AGM obligations are satisfied, especially when requirements and standards vary for physical, virtual and hybrid formats. As a solution, many businesses engage professional full suite share registry service providers for personalised assistance with running productive, efficient and compliant AGMs.

    Preparing board members for AGM attendance

    Mandatory participation in the company’s AGM stands as a responsibility of board membership. AGMs play a crucial role in demonstrating your company’s commitment to transparency and accountability. Well prepared board members ensure a well run AGM that will leave a positive impression on shareholders and enable businesses to spend more time on strategic planning and less on administrative work. Your company can prepare for a successful AGM by:

    • understanding the company’s regulatory obligations for running a physical, virtual or hybrid meeting;
    • reading meeting materials thoroughly at least one week prior to the meeting and asking clarifying questions ahead of the meeting;
    • providing sufficient notice to shareholders of the date, time and location of the meeting;
    • sending clear instructions to shareholders explaining how they can attend the meeting, access relevant documents and participate in discussions and polls;
    • providing detailed information to shareholders about matters for discussion;
    • ensuring shareholders will have the opportunity to ask questions at the meeting and vote on important matters relating to the company’s governance;
    • anticipating shareholder questions in advance and formulating helpful answers (without divulging sensitive information such as trade secrets); and
    • preparing a shareholder presentation before the AGM to highlight company milestones, achievements and financial highlights.

    Preparing an AGM can be a complex, time-consuming process. Partnering with an experienced full suite provider that offers share registry, meeting and corporate secretary services can reduce the burden on your company during the planning stage and further minimise your risk of non-compliance.

    Preparing board members for AGM attendance

    Mitigating technology risks in AGMs

    As AGMs evolve to accommodate diverse formats, technology has emerged as both an enabler and a potential hurdle. According to Alex Chew, Director of Share Registry Services for BoardRoom Malaysia, the technology risks of AGMs vary depending on the meeting mode selected.

    “If it’s a virtual meeting, then connectivity is a key risk, especially as it has a third-party element,” he says. “Ensuring a good connection as the meeting organiser is only half of the success – for best experience, remote participants at home or in the office need to ensure good, stable, and unfiltered internet connection besides having a good working device.”

    In physical meetings, power outages and hardware failure (e.g. audiovisual equipment and electronic voting systems) can also cause problems.

    Businesses can effectively mitigate technology risks and ensure meeting continuation by implementing thorough contingency plans.

    “For virtual and hybrid meetings, we take steps to ensure a dedicated connection and backups are in place, and we also educate remote participants on how to achieve a good connection,” Alex says. “In physical meetings, we always prepare backup hardware equipment to ensure service continuation and minimise any disruption risk.”

    Mitigating technology risks in AGMs

    Engaging advanced share registry services in Malaysia

    In Malaysia, where digital technology is rapidly advancing and regulations are becoming more complex, businesses must embrace innovation to keep up with AGM trends. Thus, selecting a meeting services provider specialising in powerful, secure, easy-to-use digital meeting technology is important.

    “At BoardRoom, we partner with a reputable meeting platform Lumi Global, which is a certified system that supports all types of meetings,” Alex says. “The system is designed to manage all aspects of security risk.”

    Expert full suite providers like BoardRoom, powered by premium general meetings platforms, like Lumi Global provide a variety of features that empower you to:

    • implement AGM best practices and strategies to enhance engagement, streamline proceedings and promote transparency; and
    • satisfy regulatory requirements with ease (e.g. live voting and Q&A).

    For example, a popular time-saving strategy in virtual and hybrid meetings is to designate moderators or team members who can monitor the live chat and help answer repeat questions.

    “This means your Chairman won’t need to deal with the same questions over and over again, which can help to cut meeting times,” Alex explains.

    Another smart strategy is inviting shareholders to submit questions before the AGM, allowing the board to group similar themes and prepare insightful answers in advance.

    Comprehensive AGM support

    Comprehensive AGM support

    Planning and executing smooth and strategic AGMs can be a complicated task. By ensuring your board members are well-prepared and engaging the support of full suite share registry experts, you can ensure every meeting provides real value to shareholders and achieves strong compliance.

    BoardRoom leads the way for quality full suite share registry services in Malaysia, managing upwards of 350 AGMs and general meetings every year for a diverse range of clients. Our wealth of experience, deep knowledge of local regulations and high-level technological expertise make us the provider of choice for AGM support.

    According to Alex, many clients choose to partner with BoardRoom due to the unrivalled flexibility of our service.

    “Our tailored services have the agility to meet your unique business requirements as they evolve,” he says. “Lumi Global has the agility to accommodate various meeting modes and can be adapted to align with your company constitution.”

    BoardRoom also provides complementary company secretarial services as part of our suite of corporate services, making it quick and easy for clients to access quality support across business functions. Whether you’re a small startup or a sprawling multinational corporation, our qualified business specialists work together to help your business achieve its goals and thrive within Malaysia and beyond.

    Related Business Insights

    What to know about outsourcing payroll services: cost and benefits

    What to know about outsourcing payroll services_ cost and benefits

    What to know about outsourcing payroll services: cost and benefits

    boardroomsuperadmin

    As with many core business functions, the payroll landscape in Malaysia is undergoing rapid change. Amid technological advancement, evolving regulations and a robust employment environment, many businesses are now working with specialist third-party providers for support in bringing their payroll practices up to modern standards.

    Outsourcing payroll has proven to be an effective solution that not doing so may cost you your competitive edge. From enhancing your decision-making through data to strengthening your future planning and economic resilience, it offers a variety of advantages that can help you stay ahead of the curve.

    Read on as Ken Wong, BoardRoom’s Managing Director for Payroll, Asia, explores the key ways that quality outsourced payroll services can help your business succeed in Malaysia and beyond.

    Engaging a payroll agency or provider can help ensure compliance

    Payroll regulations in Malaysia are intricate and ever-evolving. Maintaining compliance can be complicated and time-consuming, especially if you’re unfamiliar with the local legislation or have limited resources to work with.

    According to Ken, recent changes to local regulations – geared towards ensuring the fair and equitable treatment of employees – have accelerated the shift towards outsourcing.

    “As of 1 January 2023, an amendment was made to the Employment Act, which has been in place for about half a century,” he says. “The changes introduced were quite significant in terms of what companies need to do to stay compliant.”

    Key changes introduced in the Employment (Amendment) Act 2022:

    • The Act now covers all employees, regardless of how much they are paid.
    • The maximum weekly hours an employee can work has reduced from 48 to 45.
    • There has been an increase in maternity leave from 60 to 90 days in accordance with international standards.
    • There has been an increase in paternity leave from 5 to 7 days.
    • Women cannot be fired due to pregnancy or sickness resulting from pregnancy.

    Bringing your payroll processing in line with legislative changes like these can be difficult, particularly if you’re new to the region. A payroll agency with strong local regulatory expertise can help you determine which of your employees will be impacted by new rules and how they will be affected. As a result, you can have confidence your payroll calculations are correct.

    Inaccurate payroll calculations are not worth the risk, as they can lead to compliance issues that incur significant financial penalties, damage your corporate reputation and erode employee trust.

    Ensure long-term business continuity

    In Malaysia’s competitive employment landscape, where retaining employees is a common challenge, specialist payroll providers can help with ensuring business continuity and safeguarding your long-term success.

    A major risk of managing payroll in-house is that key personnel can resign at any time, taking their skills and knowledge with them. Key personnel going on long, sick or maternity leave may also have a significant impact on payroll operations. Quickly finding and training a capable replacement may be tricky and expensive, leading to payroll issues that impact all employees. Payroll outsourcing removes this risk, as your provider will have the resources to ensure your payroll is consistently managed to a high standard, even when unexpected disruptions come your way.

    Outsourcing payroll can also facilitate greater flexibility as your business grows or changes. Whether you are undergoing rapid expansion, entering a new geography, or faced with the need to trim headcount, outsourcing your payroll not only allows you to effectively manage costs but also ensures compliance whilst fostering a positive employee experience.

    Additionally, it can help save on costs, allowing you to redirect funds that would have been spent on wages and training into activities that drive revenue growth.

    Ensure long-term business continuity

    Enhance efficiency through process improvement

    Another way payroll outsourcing can help future-proof your business and fuel its growth is by optimising internal processes.

    “If you have been conducting payroll in-house, you likely won’t have the systems that can help you manage data across different platforms nor the resources to streamline your processes,” Ken says. “When you engage a provider, they can implement the systems, so you can spend less time on manual tasks like data entry.”

    Compensation packages in the APAC region are evolving to accommodate diverse talent needs, global market competitiveness, and intricate regulatory landscapes, resulting in their increasing complexity. Examples of these include performance-based bonuses tied to both individual and company metrics, stock options vesting over several years, housing allowances, education allowances for dependents, retirement fund contributions and profit-sharing plans. As such, ensuring staff are paid accurately and on time is now often a tedious task that places unnecessary strain on resources. By improving the efficiency of your payroll function, payroll providers can help alleviate administrative burdens on staff, giving them more time to focus on higher-value strategic work, such as growing the company and enhancing its internal culture.

    Enhance efficiency through process improvement

    The possibilities of payroll data

    Payroll systems house a wealth of data that often goes underutilised. Professional payroll providers can help put systems in place to collate and distribute this data in real time, opening up possibilities for informed decision-making at a management level.

    Retrospective analysis of payroll data can provide a range of useful insights, such as employee compensation patterns and budget allocation trends. Business executives can leverage this information to make informed decisions and fine-tune strategies for enhanced efficiency.

    Payroll data can also be used for predictive analytics – a forward-looking approach that uses historical data to anticipate future needs – empowering you to mitigate risks and maximise opportunities in the workforce management space.

    “From a budget standpoint, payroll data analysis can assist with predicting your peaks and troughs so that you can plan for them,” Ken explains. “For example, the data might show that you experience high attrition at the end or start of the year. You can use this information to help with your future planning.”

    Proactive, data-driven planning helps with avoiding workforce issues that may hinder your business growth (eg. staffing gaps), while also enhancing the agility of your business so that it is more capable of adapting swiftly to ever-changing market dynamics.

    Award-winning payroll services

    Award-winning payroll services

    Payroll outsourcing can have valuable benefits for businesses of all sizes.

    A reputable, qualified firm that embraces technological innovation can assist with:

      Implementing a smooth payroll process
      Ensuring strict compliance with local rules and regulations
      Fostering a positive employer–employee relationship
      Responding to immediate or forecasted problems
      Accessing accurate, up-to-date payroll data
      Reducing the administrative load on key staff

      BoardRoom is a leading provider of reliable payroll services in 19 countries and regions in the Asia-Pacific.

      Powered by Ignite, our all-in-one cloud-based payroll and HRMS software, we offer a wealth of multi-country payroll expertise, making us the ideal partner for your expansion into the dynamic Asia Pacific region. Our dedication to compliance, commitment to customer-centric service and powerful human resources management system mean you can depend on us for outstanding payroll guidance and support.

      In 2022, our team was named Best Payroll Outsourcing Partner (Bronze) at the Malaysia HR Vendor of the Year Awards. BoardRoom has also achieved the International Standard on Assurance Engagements (ISAE) 3402 Type 1 attestation, an internationally recognised standard for auditing the internal control system of outsourcing service providers. These industry recognitions and our extensive experience and portfolio of success stories speak volumes of our proficiency in navigating the intricate payroll landscape in Malaysia and the Asia-Pacific region.

      If your company operates internationally, our globally-minded teams have the skills and knowledge to ensure the smooth running of complex cross-border payroll activities. We also provide complementary corporate services alongside payroll for comprehensive, seamless support across business functions.

      Contact us today to learn how our tailored payroll services can add value to your business.

      Contact BoardRoom for more information:

      Ken Wong

      Ken Wong

      Managing Director for Payroll for Asia

      E: [email protected]

      T: +60 3 7890 4800

      Related Business Insights

      SG-MY-Lumi Meeting Services : Optimising Hybrid AGMs

      Hybrid-Meetings-Tackling-the-Venue-Challenge-Banner

      SG-MY-Lumi Meeting Services : Optimising Hybrid AGMs

      boardroomsuperadmin

      In our recent webinar, ‘2023 AGMs and EGMS – What Have We Learned’, more than 50% of respondents identified cost as a major concern when considering hybrid meetings. Many believe that hosting hybrid meetings costs twice as much due to the need for physical venues and remote setup. While rising costs and logistical expenses pose challenges, they also create opportunities for creative solutions.

      One strategy is downsizing venues, prioritising quality over quantity. The key is to strike a balance between limited physical attendance and remote participation.

      Here are our tips on how you can maximise cost efficiency and engagement in your hybrid meetings.

      Download Resource

      Connect with our Meeting Services team today to discuss on how you can promote a dynamic and inclusive meeting environment that serves all stakeholders.

      Contact BoardRoom for more information:

      Richard Lee

      Share Registry Services, Sales Director, BoardRoom Malaysia

      E: [email protected]

      T: +60 3 7890 4700

      Related Business Insights

      A guide to the entities available for business registration in Malaysia successfully

      A guide to the entities available for business registration in Malaysia successfully

      A guide to the entities available for business registration in Malaysia successfully

      boardroomsuperadmin

      With its dynamic business environment, strategic location and excellent digital connectivity, Malaysia is an attractive destination for businesses looking to establish their presence in the Asia-Pacific region (APAC). Indeed, roughly 3,600 companies are formed in Malaysia every month.

      Malaysia’s supportive government policies are particularly attractive for foreign investors, with the Malaysia Budget 2023 offering several business incentives to drive sustainable economic growth.

      Whether you wish to learn about registering a private limited company in Malaysia or explore the other entity options available, this article provides guidance for successful set-up. Read on as BoardRoom Director of Corporate Secretarial Malaysia Tan Ai Ning unpacks the process of business registration in Malaysia and offers expert advice for getting your venture off to a strong start.

      Entity options for business registration in Malaysia

      Businesses expanding or starting in Malaysia have a variety of structures available to them.

      Common entities formed are:

      • Sole proprietorship or partnership – Only available to Malaysian citizens (or permanent residents), this entity type is ideal for small business owners with either a sole proprietorship or up to 20 partners.
      • Limited liability partnership (LLP) – A hybrid between a company and a conventional partnership, an LLP provides the merits of the private limited companies (eg. limited liability) minus their cumbersome reporting requirements.
      • Company – Private limited or public limited companies are separate legal entities that can bind contracts, purchase assets and act as their own legal entity in court.
      • Private limited company – Many investors choose to register a Sendirian Berhad company (a private limited company) so they are able to conduct commercial activities, pursue long-term expansion, enjoy local tax benefits and obtain necessary grants and licences.
      • Foreign branch office – Ideal for short-term business expansion, this entity may only conduct business activities that align with the parent company.
      • Representative office – Valid for two years, and can be renewed, this entity type cannot generate revenue but allows foreign expatriates to explore business prospects and undertake product research locally.
      • Foreign LLP – Well suited to professional services, LLPs are a flexible, straightforward business structure investors can have full control over.

      Foreign investors can set up a sole proprietorship or partnership in Malaysia on the condition that they have permanent residency in Malaysia.

      Private versus public companies

      The registration process for private and public limited companies is similar, but some key differences exist.

      Private limited companies can be owned by Malaysian residents and foreign investors, but they can only have up to fifty shareholders and cannot offer shares to the public.

      If you wish to access public markets to raise funds, as well as the benefit of liquidity and generate further investment, you may consider registering a public limited company.

      Registering as a public limited company also provides the opportunity to apply for listing on the Malaysian stock exchange with the view to enhance your public profile, invite new business opportunities or promote expansion.

      Malaysian stock exchange

      LLP registration explained

      Popular among business partners, family-owned businesses, start-ups and small-to-medium enterprises, LLPs offer more flexibility than private limited companies in their formation, maintenance and termination.

      “Additionally, the compliance requirements for LLPs are less strict than they are for companies,” says Ai Ning.

      As LLPs are a separate legal entity from the owners, they can provide additional protection for partners’ personal assets and wealth. However, this also means they may incur higher taxes, as partners are individually taxed based on their share of the profits.

      “The tax bracket for individuals is higher than corporates in Malaysia,” Ai Ning explains. “When choosing between LLP and a company structure, several factors need to be considered. If the business is small and has a limited number of partners, LLP might be a better choice as it offers simpler compliance requirements. However, if you have a larger business that requires significant investments, a company might be a better choice as it offers greater flexibility in raising funds.”

      Registering a company in Malaysia

      How to register a company in Malaysia

      The process for registering a company can seem complex to foreign investors, given the country’s unique legal and regulatory framework and navigating through unfamiliar administrative procedures. However, with the assistance of experienced local consultants and a clear understanding of the requirements, this process can be streamlined, unlocking the vast potential and opportunities Malaysia offers.

      These steps include:

      1. Choose your entity type – Investigate the business structures available to you, and decide which will best suit your needs.
      2. Select a name – Choose a unique trade name that aligns with your marketing strategy and brand identity, then submit it for Companies Commission of Malaysia (CCM) approval.
      3. Organise your structure – You must nominate at least one resident director and a local company secretary. Private companies must also have at least one shareholder, while public companies must have at least two.
      4. Designate a local office address – This must be a physical address for receiving mail, such as legal and tax correspondence. If you do not have a registered office location, BoardRoom can provide one.
      5. Prepare your incorporation documents – You will need to collate a constitution, statutory declaration for directors, Declaration of Compliance, company name approval letter, and the identity card of every director and company secretary. Public limited companies must also supply an abridged prospectus for investors.
      6. Complete the online form – Visit the CCM website to submit your registration application.
      7. Pay the registration fee – The company registration fee is MYR 1,000.

      “In the absence of any issues or questions, the CCM will then issue a certificate of registration, and the company will be registered,” Ai Ning says. “All in all, this generally takes about five to seven working days.”

      The benefits of professional corporate services

      Expanding into a new international market can be equally exciting and nerve-wracking. Consider engaging the support of a reputable corporate services firm who can assist with:

      • applying for government schemes and grants you may be eligible for;
      • opening a secure bank account;
      • meeting your compliance obligations (including obtaining necessary licences and permits);
      • helping your company thrive post-incorporation.

      At BoardRoom, our highly credentialed Company Incorporation experts can help you register a business in Malaysia with confidence. Thanks to our deep knowledge and extensive network of trusted professionals, we can guide you on the most advantageous structure for your business, considering the types of activities you wish to conduct in Malaysia and the goals you aim to achieve.

      We can then support you through the entire incorporation process so that you can make informed decisions every step of the way.

      “When foreign investors want to establish a presence in Malaysia, they usually want to know about the local financing schemes, grants and compliance requirements they should be aware of once the incorporation process is finished,” Ai Ning says. “That is why we’re here – BoardRoom has the technology, international presence and professional advice to assist during incorporation and beyond.”

      Our suite of end-to-end corporate services is designed to support you with all aspects of running a successful business, including corporate secretarial, tax, accounting, payroll, share registry, Employee Stock Options Plans and Environmental, Social and Governance.

      Benefits of professional corporate services

      Comprehensive support for business growth in Malaysia

      A leading provider of corporate services in APAC, BoardRoom is ready to support and guide your regional or global business expansion journey. Our personalised, prompt and reliable service delivery helps ensure efficient, stress-free business registration in Malaysia.

      “With a 60-year history of delivering outstanding corporate services, we have a strong track record, we anticipate problems, and we inspire action,” Ai Ning says. “Our full suite of services means we can support our clients throughout the entire business lifecycle, from the date of incorporation to the end.”

      Contact us today to find out more about setting your new business up for success.

      Contact BoardRoom for more information:

      Tan Ai Ning

      Corporate Secretarial services Director, BoardRoom Malaysia

      E: [email protected]

      T: +60 3 7890 4800

      Related Business Insights

      Choosing between a physical or virtual AGM meeting: what works best for you?

      Choosing between a physical or virtual meeting_ what works best for you Banner

      Choosing between a physical or virtual AGM meeting: what works best for you?

      boardroomsuperadmin

      With recent changes in regulatory requirements and shareholder activism, we have observed significant differences in how listed companies conduct their meetings to ensure regulatory compliance and meet shareholders’ expectations. Adoption of technology such as AGM webcasts and ESG factors have also influenced the way companies conduct their meetings. How do you decide on a suitable format for your next AGM?

      We have compiled valuable insights reflecting the dynamic shifts that have taken place in the world of Annual General Meetings (AGMs) for the January-June period in Malaysia. Whether you’re an investor or a company executive, our infographic helps you understand the dynamics of virtual and physical AGMs in Malaysia. We help you weigh the pros and cons of each format and show you the contributing factors to a successful meeting.

      Download our AGM Trends Infographic today to find out how you can make the right decision for your AGM strategy.

      Download AGM Trends Infographic

      Related Business Insights

      Should my company consider outsourcing accounting and bookkeeping services?

      Should my company consider outsourcing accounting and bookkeeping services?

      boardroomsuperadmin

      Bookkeeping and accounting are essential functions of any business, but they can be time-consuming and complex as your business expands and you spend more time on revenue-generating activities. Depending on the country and industry that your business operates in, companies are required to comply with the approved accounting standards. In Malaysia, companies are required to prepare financial statements that comply with standards established by the Malaysian Accounting Standards Board (MASB).

      Why outsource accounting services?

      When selecting an accounting and bookkeeping services provider, one with vast experience, regional presence and network is especially beneficial as it has in-depth knowledge of local business environments throughout the region. It can help you consolidate multinational taxes and manage cross-border accounting to ensure strong financial compliance & reporting, reduce your risk and enhance your efficiency.

      In this article, we’ll take a look at the top 5 reasons why companies should outsource your accounting function, and why outsourcing is becoming an increasing trend, according to the Global Finance And Accounting Business Process Outsourcing Market Report, 2023 published by Research and Markets.

      1. Reduce cost and saves time

      With bookkeeping and accounting done in-house, companies are faced with situations of employee resignations, which results in time and cost required to train new staff. When employees leave a company, they also take with them a wealth of knowledge and insights. This loss can have a significant impact on your business’s operations, productivity and continuity. But by entrusting these services to an outsourcing partner, you can safeguard against such knowledge gaps and ensure undisrupted and seamless operations.

      By outsourcing your bookkeeping and accounting at a monthly fee, companies gain access to a team of experienced accountants who can provide services such as monthly bookkeeping, invoicing, accounts payable management, financial statement preparation, and cash flow forecasting. With these operational tasks taken care of by the vendor, companies can then focus on your core competencies and growth.

      Reduce cost and saves time

      2. Staying compliant with accounting standards

      Not staying compliant with local rules and regulations can be costly in terms of financial penalties, not to mention the time spent on dealing with the auditors and regulators. As your company expand its scale across multiple regions and countries, the tediousness and complexity of keeping up with the paperwork for accounting and tax reporting intensifies. In order to avoid any blunders, a proficient accounting firm that is well versed in both local and international accounting frameworks and financial reporting standards like GAAP and IFRS can be the perfect companion to give you the assurance of legal compliance.

      3. Fosters International business growth

      Companies exist for a reason – to grow. An accounting services provider can be an invaluable business partner on your growth journey. They can provide detailed advice and accurate data at any time so you can make timely strategic business decisions.

      For large businesses, an accounting partner can also help to establish internal accounting controls at your headquarters and roll these out within other branches. Having consistent internal controls in place across your regional locations means you can easily generate accurate group-wide data at any time of the year.

      Fosters International business growth

      4. Maximise tax benefits and tax deduction

      Companies may be unaware of tax exemptions that you can benefit from, especially with the many changes and incentives announced during Malaysia’s annual budget each year. There are many types of taxes that MNCs and small business owners should be aware of, such as Malaysia Corporate Tax, Digital Tax, Stamp Duty, Service Tax (SST) and Withholding Tax.

      Eligibility for deductions for the different taxes can be difficult to grasp due to the complexity of the requirements. The intricacies of numerous tax treaties may also be difficult to comprehend, resulting in unnecessary double taxation. An experienced accounting service provider can help you prevent such occurrences and take advantage of the appropriate tax benefits. This enables your company to maximize profits, at the same time ensuring tax compliance with accurate tax filing and advisory services. This also reduces the risk of an audit by tax authorities.

      5. Move to digitalisation – Cloud accounting software solutions

      The emergence of digital transformation has unlocked endless opportunities to turn data into actionable insights, but it has also left businesses struggling to maintain the skills necessary to achieve success in this new era.

      An accounting services vendor with expertise in cloud accounting software like Xero, can help free up finance professionals’ time so they can pursue strategic business goals. Besides the convenience of accessing data real-time anytime and anywhere, cloud accounting has gained popularity due to its low cost as it eliminates the need for expensive on-premises software installations. Instead, with a SaaS model, companies only pay for the resources they use, allowing for scalability as their needs evolve.

      Cloud accounting providers also have in place robust security measures to protect sensitive financial information from unauthorized access, loss, or hardware failure. This ensures a higher level of security protection compared to traditional on-premises solutions.

      Move to digitalisation – Cloud accounting software solutions

      Choosing the right accounting and bookkeeping services provider for your business

      A full-service accounting and bookkeeping firm goes beyond transactional processing. It should be able to take over all aspects of your accounting and bookkeeping, from your accounts receivable and payable to your general ledger and financial reporting. An experienced vendor will be able to quickly and easily identify effective solutions for any accountancy challenges and ensure that your company has followed all the correct protocols for audit. They will also be able to provide business support in other additional areas such as cash flow management to help your company reach its goals.

      No matter where your business is on the growth journey, by partnering with an expert accounting service provider, you can save time and money, access immediate expertise, ensure compliance and ultimately improve your business performance.

      BoardRoom’s world-class accounting and tax services can support you in reaching your business objectives and maintaining a competitive edge. And don’t just take our word for it – see what our clients say about our service!

      Contact us for a complimentary consultation now.

      Related Business Insights

      Understanding ESOS and tax implications in Malaysia

      Understanding ESOS and tax implications in Malaysia

      Understanding ESOS and tax implications in Malaysia

      boardroomsuperadmin

      Employee share option schemes (ESOS) have become increasingly popular among companies in Malaysia as a way to retain top talent and boost productivity. They offer employees the option to purchase company shares at a discounted price, which can result in a significant financial gain if the company performs well.

      In this article, we will discuss the fundamentals of ESOS and why they are a valuable tool for employers. We will also examine the tax implications of ESOS in Malaysia; the regulatory bodies and laws governing ESOS taxation; and best practices for companies and C-suite leaders to achieve compliance and minimise tax liabilities.

      What are ESOS?

      ESOS are a form of employee compensation that allows employees to purchase company shares at a discounted price. These schemes are designed to incentivise employees to work productively and contribute meaningfully to the company’s success, as their financial gain is tied to the company share price movement. The higher the increase in share price, the larger the financial gain to the employees.

      ESOS typically have a vesting period, meaning that employees must wait a certain amount of time before they can purchase shares. This period is intended to encourage employees to remain with the company longer and to align their interests with those of the company.

      ESOS versus Employee Stock Ownership Plan (ESOP)

      An ESOS (Employee Stock Option Scheme) and an ESOP (Employee Stock Ownership Plan) are both employee benefit programs that involve providing employees with a stake or ownership in the company.

      However, there are some differences between the two:

      • Nature of ownership
      • Purpose
      • Structure and funding
      • Control and governance

      Plan types such as restricted share plans and performance share plans all have different objectives but can all be categorised under long-term incentive plans.

      Employee Benefits

      Tax implications of ESOS in Malaysia

      One of the most critical factors companies must consider when implementing ESOS is the tax implications for the business and their employees.

      Failure to comply with tax regulations can result in significant financial penalties and reputational damage. Therefore, it is crucial that companies fully understand the tax requirements of ESOS in Malaysia and take steps to ensure compliance.

      ESOS tax implications for employers and employees

      ESOS can have different tax implications for both employers and employees.

      For Malaysian employers, ESOS are usually considered a non-deductible expense for a company. Employers are required to report the value of the options granted to employees as an expense on their financial statements under Malaysian Financial Reporting Standard (MFRS) 2. The employer would also be required to deduct income tax from the amount of gain realised by the employee on the exercise of the option.

      Employees who exercise their options to purchase shares are subject to income tax on the difference between the market value of the shares at the time of exercise and the option exercise price paid. The individual income tax rate in Malaysia varies depending on the chargeable income of the individual, with rates ranging from 0–30%.

      Calculating ESOS tax liabilities

      Companies must accurately calculate the tax liability associated with share options for both the employer and employee to ensure compliance.

      Under MFRS 102, companies are required to recognise the fair value of the share-based payment as an expense in their financial statements. The fair value of the share-based payment is determined at the grant date, taking into account the exercise price, the term of the option, the current price of the underlying share and the expected volatility of the share price.

      Once the fair value of the share-based payment has been calculated, it is recognised as an expense over the vesting period.

      Tax Liabilities

      How to ensure ESOS compliance

      In Malaysia, the regulation of ESOS is overseen by several government bodies, including the Securities Commission Malaysia and the Inland Revenue Board of Malaysia (IRBM).

      Under Malaysian law, ESOS tax treatment varies depending on whether the option is granted to a local or foreign employee. Local employees are subject to Malaysian tax on the gain from exercising the option. In contrast, foreign employees are taxed only on the portion of the gain attributable to work done in Malaysia.

      Penalties for non-compliance with ESOS taxation regulations can be severe. Companies that fail to comply with ESOS regulations may face fines, penalties and legal action from the authorities.

      Best practices for C-suite leaders

      C-suite executives can support ESOS compliance while minimising tax liabilities by implementing the following best practices in their organisation:

      • Engage with tax experts who can provide guidance on the tax implications of ESOS and assist in accurately calculating tax liabilities for your business and your employees.
      • Ensure compliance with all regulations and laws governing ESOS taxation in Malaysia.
      • Develop a comprehensive understanding of the accounting for share options under MFRS 102. This accounting involves measuring the fair value of the options, recognising an expense in the income statement and recognising a liability in the balance sheet.
      • Keep accurate records of all ESOS transactions and ensure that all employees are adequately informed and educated about the tax implications of their share options.
      Best Practices

      Common pitfalls to avoid

      Despite the importance of compliance and accurate tax calculation, there are some common pitfalls that companies and C-suite leaders can encounter when it comes to ESOS taxation, including:

      • failure to accurately calculate the tax liability associated with share options, which can result in underpayment or overpayment of taxes;
      • incorrectly accounting for share options under FRS 102, which can lead to misstated financial statements and regulatory compliance issues; and
      • failure to meet ESOS reporting obligations.

      Woon Chee says it is not enough to ensure your company pays its ESOS taxes on time; it is also important to be aware of and fulfil the reporting requirements that follow. For example, she notes that “upon launching the ESOS, the employer has to notify the IRBM within 30 days after the expiry date of the period of acceptance of the offer.”

      How to avoid pitfalls

      To avoid these mistakes, it is crucial for companies to engage with an expert ESOS provider who:

      Offers a comprehensive platform for ESOS management that gives your employees and HR professionals full visibility of the details and status of each scheme
      Possesses a deep knowledge of local tax laws within the jurisdictions your organisation operates, a wealth of ESOS management and relevant professional qualifications
      Specialises in an integrated suite of corporate services alongside ESOS management, including taxation, accounting and payroll (so that all the expertise you need is easily, quickly accessible via one point of contact)

      Woon Chee urges businesses not to underestimate the power of an innovative ESOS management platform.

      “A good ESOS platform shows you all the details of every ESOS, so it’s easy for you to keep track of them and will largely reduce your tax liability,” she says.

      It also takes the guesswork out of tax calculations so you can have confidence in your regulatory compliance.

      Unlock the power of ESOS

      ESOS is a powerful tool for retaining talent and boosting productivity, but C-suite leaders need to have a comprehensive understanding of the tax implications and regulatory requirements for ESOS in Malaysia.

      By engaging with tax experts, staying up to date with regulatory requirements and following best practices for compliance and accurate tax calculation, companies can minimise tax liabilities and ensure that their ESOS programs successfully achieve their intended goals.

      At BoardRoom, we offer expert accounting and tax advisory services across the Asia-Pacific region. By engaging our tax professionals, you receive access to specialist guidance and support to ensure compliance with all regulatory requirements and minimise tax liabilities related to ESOS.

      Additionally, we can connect you with trusted consultants to support you with plan design, prior to implementing, so that your schemes are tailored to your needs.

      Please contact us to find out how our world-class ESOS services can benefit your business.

      Related Business Insights

      Streamline business growth by transitioning to outsourced accounting services in Malaysia

      Streamline business growth by transitioning to outsourced accounting services in Malaysia Banner

      Streamline business growth by transitioning to outsourced accounting services in Malaysia

      boardroomsuperadmin

      If you have ambitions to expand throughout the Asia-Pacific region (APAC), outsourced accounting services can help your firm grow smoothly in a challenging economic climate.

      Business owners sometimes feel intimidated by the thought of working with an outside team because of the complexity of the accounting function. So, can accounting be outsourced? This article covers how outsourcing supports an intelligent business model and what you can do to make the transition go smoothly.

      Why outsource accounting?

      APAC firms are increasingly choosing to outsource accounting services because of the many benefits they offer. According to a 2020 global study, over half of finance and accounting professionals are considering outsourcing additional tasks.

      There are three primary reasons for this trend.

      1. Access to knowledge and expertise

      Firstly, outsourcing makes it possible to hire experts with high levels of specialised knowledge and experience – professionals that are sometimes difficult to find through traditional hiring processes.

      According to Yang Shuzhen, Accounting Director at BoardRoom, “Often, companies outsource because they’re looking for specialists who can improve their processes.”

      The typical daily responsibilities of operational teams and supervisors are intensive and leave little time to objectively analyse procedures and spot improvement areas. An external team can help in many areas, and this is one such area.

      Shuzhen notes that many people returned to their home countries after the COVID pandemic. As such, many organisations need help finding the essential skills and experience required to fill positions due to the tight labour market this has caused.

      2. Fast and trustworthy service

      Secondly, accounting outsourcing offers immediate, effective assistance when the turnover rate for financial personnel is significant.

      “A lot of financial professionals want to take a break or try a totally new industry,” says Shuzhen. “So people are leaving, and in many cases, businesses are not able to replace them quickly enough.”

      Worker shortages and poor handovers can lead to transactions and procedures going awry. Thus, businesses encountering these difficulties will seek the assistance of an external firm with a pool of qualified, experienced accountants available to evaluate the problem and swiftly support with processing.

      “They require experts who have the knowledge to guide them in the future in addition to taking over their accounting duties,” says Shuzhen. “Standard operating procedures and internal controls, which are essential for success, can be established with the aid of an external team.”

      Fast and trustworthy service

      3. Digital transformation support

      The accounting sector is going through a period of significant change due to increased digital transformation, creating opportunities to turn data into valuable business insights. In addition to executing transactional activities, the finance department is now expected to advance strategic company goals. As a result, the required skill set for finance professionals is changing.

      To fulfil finance’s new position as a strategic business partner, organisations must mix human and machine-based skills while also exhibiting the four characteristics of future-ready companies: analytical, adaptable, agile and anticipatory. This is according to a 2020 Deloitte study.

      The technical know-how and data analytics capabilities necessary to accomplish this can be challenging to maintain internally. This is why many organisations turn to premium accounting firms as a solution.

      The effects of the COVID-19 pandemic have pushed outsourcing demand even further. By 2026, it is predicted that the worldwide finance and accounting outsourcing market will be worth USD 53.4 billion by 2026. This is primarily because corporate services companies can meet the industry’s demand for efficient solutions and stability during difficult times.

      Challenges associated with in-house accounting

      Businesses in the APAC region are turning away from in-house accounting for two main reasons.

      It can be labour-intensive

      It takes time to find, train and manage a financial team, and it also takes time to expand the team as your company grows.

      “A company that is fast growing will see a lot of resources going toward educating the staff, maintaining morale and ensuring the team is performing properly,” says Shuzhen. “This is crucial because timely reporting and accurate financial information help the company when stakeholders are making decisions.”

      But resignations can be demanding on a team. Businesses may invest time in providing the new team with adequate handoff and training, but because there will be a learning curve, it is doubtful they will have the same immediate impact as the last team. Additionally, there is no assurance that the employees will be around for a long time.

      Shuzhen says that “Deliverables may be impacted by frequent transitions and short handover times.”

      It can be challenging to adapt to technological change

      Internal teams are under pressure to embrace new accounting systems that are more complicated than conventional ones due to the digital advancements occurring throughout APAC.

      Although this adaptability is crucial for sustained productivity, the Great Resignation’s workforce shortages mean that there is often not enough time to guarantee that new processes are properly implemented. As a result, the new software can become more of a burden than a benefit, adding to the delays and costs.

      A skilled accounting partner can connect with software providers to guarantee that new systems are customised to suit your company. Thanks to their ability to plan a systematic and trouble-free implementation of the latest software, they can ensure that the most crucial fixes are performed first, saving you time and reducing costs.

      Accounting outsourcing: here are the steps

      We recommend taking the following actions for an easy transition to outsourced accounting services in Malaysia:

      1. Consider the challenges you are faced with and the problems you are hoping outsourcing can help you with.
      2. Analyse the available funding for accounting outsourcing.
      3. Make contact with a premium accounting services company. They will converse with you to understand your current situation, assist you in compiling all the relevant data and provide guidance on what to do next.
      4. Ask about the accounting software options the company offers to get the best solution for your company.

      A capable provider will focus on the most important jobs first. Whether this means creating solutions for immediate problems or troubleshooting existing issues, your primary concerns will be addressed before moving on to the next steps. Once these issues are under control, they will collaborate with you to develop a comprehensive end-to-end accounting system that works for your company and offers you individualised support.

      It is also important to think about who within your organisation would be the best to communicate with your supplier on a one-on-one basis to facilitate effective and seamless communication.

      The essential factor is that the appointed person has excellent financial knowledge and can discuss financial topics in detail. The chosen individual might be a finance manager, CEO, firm owner or director. Additionally, it will guarantee that the merging solutions are specific to your needs.

      Accounting outsourcing

      Choosing the best provider for your company

      Just as an in-house team would, your accounting services provider should seamlessly integrate with your company. Once we have gained a deep understanding of your issues, we can provide all of the benefits of an in-house team while removing all the disadvantages.

      From your accounts receivable and payable to your general ledger and financial reporting, a full-service business can handle all facets of your accounting and bookkeeping. To assist your organisation in achieving its objectives, they will also be able to offer business support in other areas, such as cash flow management.

      “At BoardRoom, our accounting service extends beyond transactional processing,” says Shuzhen. “Financial data can be valuable, and we utilise this data to the fullest extent when advising our customers.”

      It is important to choose an experienced provider because they will be able to quickly and easily pinpoint workable solutions to any accounting problems you may be experiencing. Also, you will be able to trust that your business has adhered to all regulations the next time it is audited.

      Accounting outsourcing pitfalls you need to avoid

      Avoid postponing your decision if you are thinking about switching to accounting outsourcing. Businesses frequently waste resources trying to address accounting difficulties on their own when an external services provider could have stepped in much sooner and implemented solutions much faster.

      Even a small organisation can have a build-up of financial problems and commitments. For this reason, involving an outside provider from the beginning is vital if you are establishing a new business or branch in a neighbouring country. They will ensure that the proper accounting procedures are in place from the start.

      The more you wait to outsource, the more difficult and time-consuming it can be to manage your funds, potentially exposing your business to unnecessary risks.

      What to avoid when outsourcing your accounting

      The ways outsourcing can accelerate business growth

      An accounting services provider can be a crucial business partner on your growth journey if your firm has expansion goals.

      They will be able to help you by:

      Giving you thorough guidance and reliable data at any time (so you can make timely decisions)
      Creating reports for possible investors
      Creating financial ratios so you can have timely conversations with banks

      An accounting partner can assist with setting up internal accounting controls at your corporate headquarters and implementing them within the finance departments of other countries. You can quickly provide reliable group-wide statistics at any time of the year if you have similar internal controls in place throughout your regional sites.

      Maintain compliance across multiple countries

      Accounting partners also help businesses thrive by guaranteeing complete regulatory compliance, including creating and filing statutory reports.

      Concerning your Malaysian requirements, they will ensure that all Malaysia Financial Reporting Standards are satisfied and SST returns are submitted on time. Different regulatory frameworks, some highly onerous and complicated, may also be present in other APAC areas. Therefore, having a provider that supports multiple regions is essential.

      Begin your transition to outsourced accounting

      No matter where you are in your expansion process, setting up your accounts is essential for guaranteeing a straightforward and successful course.

      Please contact us to learn more about the premium accounting and bookkeeping services that BoardRoom offers, and our complementary payroll outsourcing and tax advisory services.

      Contact BoardRoom for more information:

      Yang Shu Zhen

      Yang Shuzhen

      Director, Regional Accounting

      E: [email protected]

      T: +60-3-7890 4800

      Related Business Insights

      Malaysia Budget 2023

      Malaysia 2023 Budget Key Tax Highlights Membangun Malaysia MADANI (Re-tabled on 24 February 2023)

      Malaysia Budget 2023

      boardroomsuperadmin

      Malaysia’s 2023 Budget, which was re-tabled on 24 February under the new Unity Government, totaled RM388 billion. Almost 75% of its budget has been allocated to Operating Expenditure, signaling the Government’s commitment to drive its reform agenda and revitalise Malaysia’s economy.

      Several tax incentives were announced as part of the Government’s strategy to drive an inclusive and sustainable economy. To find out how the tax measures announced will implicate your tax planning, download our Malaysia 2023 Budget Report today.

      If you have any questions relating to the information contained in this report or require tax advisory services, please email our tax advisors at [email protected].

      DOWNLOAD THE FULL MALAYSIA BUDGET 2023 REPORT
      Malaysia Budget 2023 Main Highlights Preview Updated

      Should you have any questions regarding the information provided in the report, please do not hesitate to reach out to your respective BoardRoom client managers or email us at [email protected].

      Best regards,

      BoardRoom Team

      DOWNLOAD THE FULL MALAYSIA BUDGET 2023 REPORT

      Related Business Insights