Establish a Holding Company in Malaysia – Overview
A holding company in Malaysia is established for controlling and managing another company’s investment policies and assets. A holding company in Malaysia is a type of companies that don’t offer any services, nor produce any goods on their own. These types of companies instead, earn an income from managing the assets and investments of other companies.
As a representative of the parent company for the other business, a holding company in Malaysia can own voting rights in even more companies. This is in addition to the voting rights that it already holds with the parent company of the other business. Establishing a holding company in Malaysia is incorporated with the main intent of owning various property types in copyright fields and real estate.
What You Need to Know About Establishing a Holding Company in Malaysia
Before incorporating a holding company in Malaysia, you need to familiarise yourself with the provisions listed under the Companies Act.
Before setting up your holding company in Malaysia, there will be a few other rules to observe. As per the Companies Act, a business can only be considered as a holding company in Malaysia if it has access to the following rights:
- You will need to observe the foreign ownership conditions and general guidelines for operating this type of business stipulated in the Companies Act and Tax Act in Malaysia.
- You must own more than half the voting rights in another company.
- You must own more than 50% of the share capital of the subsidiary company.
- The holding company has controlling rights over the board of directors.
A Malaysian holding company is only considered an attractive investment if:
- Its profits are exempted from capital gains tax.
- Its income derived from dividends are repatriated by the subsidiary to the parent company.
- Its dividends paid out by the subsidiary to the holding company are exempted from withholding tax.
Holding companies in Malaysia will also need to observe the local rules for annual reporting and taxation.
What Are the Advantages of Establishing a Holding Company in Malaysia?
Malaysia has always been an attractive business destination from investors all over the world, thanks to its strategic location and benefits of incorporating a company in Malaysia. Among the main advantages investors stand to gain by establishing a holding company in Malaysia include:
- It’s strategic location in the heart of South East Asia.
- Access to a growing economy.
- The holding company can be used to further expand their business within the Asian region.
- The holding company has a right to appoint directors in the other company (subsidiaries will not be able to act on this without the consent of the holding company).
What Types of Activities Are Permitted for A Holding Company in Malaysia?
By establishing a holding company in Malaysia, you will be permitted to conduct the following activities:
- Hold investments in securities.
- Hold investments in stocks.
- Hold investments in shares.
- Hold investments in deposits.
- Hold investments in loans.
- Hold investments in immovable properties.
- Perform management services (related to accounting or support).
Establishing Membership in A Holding Company in Malaysia
A corporation cannot be accepted as a member of the respective company, and the transfer of shares from the holding company to one of its subsidiaries is not permitted in Malaysia. This is prescribed under the Companies Act. If a subsidiary comprises of a personal representative or a trustee, then the above legislation is not applicable.
Establishing an Investment Holding Company in Malaysia
An investment holding company in Malaysia’s basic activities involved the holding of investments in other legal entities. If at least 80% of the company’s gross income is derived from these types of investments, the company is described as an investment holding company.
As per the Inland Revenue Board of Malaysia’s Public Ruling, an investment holding company will only be allowed to develop specific types of business activities. This type of holding company can venture into activities related to the real estate sector, renting of real estate properties and activities related to providing support and maintenance services related to the property in question.
Tax Requirements for Investment Holding Companies in Malaysia
The tax requirements for an investment holding company in Malaysia will depend on whether the company in question is listed on Bursa Malaysia. If a company is listed on the Malaysian stock exchange, they will be regulated under the Income Tax Act Section 60 FA. Non-listed companies are regulated under the Income Tax Act Section 60F.
For more information about establishing a holding company in Malaysia, contact 3E Accounting, the first and foremost experts in company formation related matters in Malaysia.