How to Set Up a Business in Malaysia

Planning to Set Up a Business but Not Sure Where to Begin?

Malaysia’s labour demand experienced the highest growth to 9.21 million jobs. They reflect a sustained and deliberate policy environment that has made Malaysia one of the most consistently active investment destinations in Southeast Asia.

For professionals evaluating where to establish or expand operations in the region, the investment record is one data point in a broader picture. The regulatory framework is defined, the government incentive architecture is documented, and the agencies responsible for each stage of the business setup process are accessible and, by regional standards, efficient. What the numbers confirm is that a significant number of foreign investors from the United States, Germany, China, Singapore, and beyond have already done the analysis and acted on it.

This guide sets out what professionals need to know about starting a business in Malaysia: the tax benefits, the available business structures, and the step-by-step registration process.

What are the Key Benefits of Starting a Business in Malaysia?

Malaysia has spent the better part of three decades building an investment environment that is, by measurable standards, among the most deliberate and structured in the region. For professionals evaluating their next operational base, the record is worth examining closely. Here is what the policy framework and the regulatory architecture actually show:

• Malaysia’s Corporate Tax Rate is a Competitive Advantage for Business Setup

Malaysia’s standard corporate income tax rate stands at 24%, but the full picture is more nuanced. Small and medium enterprises with a paid-up capital of RM 2.5 million or less qualify for a reduced rate of 15% on the first RM 150,000 of chargeable income. The Malaysian government has consistently used its tax framework as a tool to attract foreign investment, and the SME rate schedule reflects that stated priority in concrete terms.

• Malaysia Principal Hub Incentive for Regional Headquarters

The Principal Hub incentive, administered by the Malaysian Investment Development Authority (MIDA), offers preferential corporate tax rates of 0%, 5%, or 10% to companies that establish their regional or global headquarters in Malaysia. Companies that commit to higher levels of economic activity, hire more skilled workers, and anchor more business functions locally receive the most favourable treatment. It is, in effect, a structured negotiation between investor ambition and government priorities.

• Malaysia’s Double Taxation Agreements and Strategic Location for International Business

Malaysia has signed double taxation agreements with jurisdictions across Asia, Europe, the Middle East, and the Americas. The agreements are legally binding treaties that govern how cross-border income is taxed, and for professionals operating across jurisdictions in consulting, technology licensing, or financial services, they provide a defined and enforceable framework that prevents the same income from being taxed twice in two separate countries.

• Malaysia Digital (MD) Status: Tax Incentives for Technology and Digital Businesses in Malaysia

Technology and digital businesses have access to a specific incentive framework through the MSC Malaysia status, granted to qualifying companies operating within designated Cybercities and Cybercentres, including Cyberjaya, the flagship planned technology district south of Kuala Lumpur. MSC Malaysia companies are eligible for 100% income tax exemptions for up to ten years, unrestricted employment of foreign knowledge workers, and explicit government commitments around intellectual property protection and the freedom to source capital globally.

 

What are the Different Types of Business Structures Available in Malaysia?

The table below discusses the different types of business structures available in Malaysia:

Business Structure	Governing Law	Minimum Paid-Up Capital	Liability	Best Suited For	Foreign Ownership Allowed
Sole Proprietorship	Registration of Businesses Act 1956	None	Unlimited personal liability	Malaysian citizens and PRs only	No
Partnership	Registration of Businesses Act 1956	None	Unlimited personal liability for all partners	2–20 Malaysian partners	No
Limited Liability Partnership (LLP)	Limited Liability Partnerships Act 2012	None	Limited to the capital contributed	Professional service firms	Yes, with conditions
Private Limited Company (Sdn. Bhd.)	Companies Act 2016	RM 1	Limited to shareholding	SMEs, startups, foreign investors	Up to 100% in most sectors
Public Limited Company (Bhd.)	Companies Act 2016	RM 50,000	Limited to shareholding	Large enterprises seeking public listing	Up to 100% in most sectors
Branch Office	Companies Act 2016	None	Parent company bears full liability	Foreign companies testing the market	100% foreign-owned
Representative Office	Guidelines by MIDA	None	Parent company bears full liability	Market research and liaison activities only — cannot conduct revenue-generating activities	100% foreign-owned
Labuan Company	Labuan Companieses Act 1990	USD 1	Limited to shareholding	International trading, holding structures, and financial services	100% foreign-owned

 

What is the Step-by-Step Process to Set Up a Business in Malaysia?

Starting a business in Malaysia requires a structured process that is administered by the Companies Commission of Malaysia. For foreign professionals, understanding each step in the correct order reduces delays and avoids the compliance gaps that typically arise from working through the process without a clear sequence. Here’s the step-by-step guide to setting up the business in Malaysia:

• Step 1: Choose the Right Business Structure in Malaysia

The first decision is the choice of business structure. For foreign investors and professionals, the Private Limited Company (Sdn. Bhd.) is the most commonly used vehicle, offering limited liability and up to 100% foreign ownership in most sectors. The structure selected at this stage determines the registration pathway and the regulatory bodies involved throughout the process.

• Step 2: Register Your Company With the Companies Commission of Malaysia

Registration is filed with the Companies Commission of Malaysia (SSM) through its online portal MyCoID, covering name approval, submission of the company’s constitution, and appointment of at least one director ordinarily resident in Malaysia. For a Sdn. Bhd., the minimum paid-up capital is RM 1, though sector-specific requirements may apply. SSM registration, once all documents are in order, is typically completed within one to three working days.

• Step 3: Apply for Licenses and Incentives in Malaysia

SSM registration does not, by itself, authorise the company to operate in regulated sectors. Manufacturing and selected services fall under MIDA, financial services under Bank Negara Malaysia, with each authority setting its own licensing requirements and timelines. Companies seeking tax incentives, MD Status from MDEC, and the Principal Hub incentive from MIDA must apply to the relevant authority separately, with documentation covering business activities, employment commitments, and capital investment levels.

• Step 4: Register for Taxes and Employer’s Obligations

Every company must register with the Inland Revenue Board of Malaysia (LHDN) for a corporate tax reference number and file annual returns regardless of profitability. Companies with employees are required to register with the Employees Provident Fund (EPF), the Social Security Organisation (SOCSO), and the Employment Insurance System (EIS). For companies holding tax incentive status, compliance with incentive conditions must be maintained throughout the exemption period. 

 

What are the Legal and Compliance Requirements for Starting a Business in Malaysia?

The table below discusses the compliance requirements for setting up a business in Malaysia:

Compliance Requirement	Governing Authority	Applicable to	Key Obligations	Deadline
Company Registration	Companies Commission of Malaysia (SSM)	All business entities	Register legal entity and maintain statutory records	Before commencing operations
Corporate Income Tax Registration	Inland Revenue Board (LHDN)	All registered companies	Obtain tax reference number and file annual tax returns	Within 3 months of incorporation
Corporate Income Tax Filing	Inland Revenue Board (LHDN)	All registered companies	File Form C annually; pay estimated tax via CP204	CP204 due 30 days before the financial year begins
Goods and Services Tax Registration	Royal Malaysian Customs Department	Companies with an annual taxable turnover exceeding RM 500,000	Register for Sales and Service Tax (SST) and file bi-monthly returns	Within 30 days of reaching the threshold
Employer EPF Registration	Employees Provident Fund (EPF)	All employers with at least one employee	Contribute 13% (employer) of employee’s monthly salary to EPF	Monthly, by the 15th of the following month
SOCSO Registration	Social Security Organisation (SOCSO)	All employers with at least one employee	Contribute to the Employment Injury Scheme and the Invalidity Scheme	Monthly, by the 15th of the following month
EIS Registration	Employment Insurance System (EIS)	All employers with at least one employee	Contribute 0.4% of the employee’s monthly salary (employer and employee each)	Monthly, by the 15th of the following month
Annual Return Filing	Companies Commission of Malaysia (SSM)	All registered companies	File an annual return confirming company particulars and shareholding	Within 30 days of the anniversary of incorporation
Audited Financial Statements	Companies Commission of Malaysia (SSM)	All Sdn. Bhd. and Bhd. companies	Submit audited accounts prepared by a licensed auditor	Within 6 months of the financial year end
Business License Renewal	Relevant Local Authority (PBT)	All businesses operating from a physical premises	Renew the annual business premises licence	Annually, by 1 March each year
Transfer Pricing Documentation	Inland Revenue Board (LHDN)	Companies with related-party transactions	Maintain contemporaneous transfer pricing documentation	Ready by the tax filing deadline each year
Economic Substance Requirements	Labuan Financial Services Authority (Labuan FSA)	Labuan entities	Meet minimum substance requirements, including local staff and expenditure	Ongoing, assessed annually

 

What are the Best Market Entry Strategies for Doing Business in Malaysia? 

Here are seven strategies on how to set up a business from the ground up as an entrepreneur:

• Research and Define Your Business Idea

Every great idea is futile if it lacks the foundation on which to stand. Entrepreneurs need to be in a position to articulate that foundation to potential investors. Every attribute of a business plan must be considered: competition, target customers, primary objectives, and marketing strategies, among others, before starting. Seeking the answers to these questions not only provides a solid overview of the company but also paints a compelling picture to the investors.

• Formulate a Solid Business Plan

A business plan is a structured document that outlines the company’s goals and directs the business from Point A to Point B. For those looking to set up a business in Malaysia, ensure the following are included:

• customer analysis
• competitor analysis
• executive summary
• marketing analysis
• financial projection

With the groundwork already established, translating those ideas into a structured business plan becomes a more straightforward process.

• Set Up a Registered Business Address in Malaysia

In this time and age where online business is on its ascendancy, setting up an office may not be regarded as an option. Setting up a company like a construction company may find it necessary compared to an e-commerce enterprise. Maintaining a physical office creates the legitimacy of the business and gives potential customers, suppliers, and investors greater confidence in the operation.

Again, certain government regulations require that you register for an office and address so that they can be sending your correspondences and notice at your premises. This does not mean you cannot work remotely in a short period to come. Online project management and workflows platforms have now made it easier to communicate and work remotely.

• Market Your Business in Malaysia

Having a product or service at your premises is one thing, but marketing is another ball game altogether. In fact, most successful entrepreneurs will tell you as a fact that marketing is one of the pillars of succeeding in business. The fundamental question for any new business is how potential customers will become aware of its products or services. Prior to launching, businesses should explore promoting through strategic partnerships by sharing mailing lists, distribution outlets, and suppliers that sell complementary products or services.

• Build a Highly-professional Team and Culture

You need the right team of professionals to push your agenda. But merely hiring a brilliant, successful group of individuals is only half the battle. And, therefore, it’s imperative to unearth proven professionals as well as icons-in-the-making that will get into your vision while inspiring and challenging one another.

With that said, it calls for taking the recruiting process to incredibly meticulous levels. The bars must be set much higher. When setting up a company, the people you’re bringing on board can brush up against their capabilities, and their potential for success is high.

• Legal Compliance and Business Registration in Malaysia

A fair share of brilliant ideas may not see the light of day if you’re operating illegally. And, so decide on the legal structure you want to set up and register your business name. Do some research on the laws that govern the kind of business you’re planning to set up. Go further by engaging those who are already in your type of business and learn from them. In case you find it time-consuming to do the registration, you may seek the services of business solution providers for professional advice. Ensure that your business has a permit, and it’s crucial to take taxation laws seriously by being tax–compliant.

 

Conclusion

The process of setting up a business in Malaysia is structured, transparent, and for professionals who approach it with the right preparation, entirely manageable. The regulatory framework is defined, the incentive architecture is documented, and the government agencies responsible for each stage of the process are accessible. What determines the outcome, in most cases, is the quality of the groundwork laid before the first filing is made.

3E Accounting Malaysia provides end-to-end corporate services for professionals and foreign investors setting up a business in Malaysia, covering company incorporation, SSM registration, tax compliance, employment obligations, and applications for government incentive programmes, including MD Status and the Principal Hub incentive.

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