Guide

Expanding to Malaysia

Whether you're a budding entrepreneur or an established business seeking to venture into the dynamic Malaysian market, there are several crucial aspects that require a deep understanding to avoid potential pitfalls. Below, you will find detailed information about each facet of expanding your business into Malaysia – from the prerequisites for setting up a business to the intricacies of managing manpower and human resources. This page serves as your comprehensive guide, providing the necessary information to make informed decisions when entering the Malaysian market.

How to set up a business in Malaysia?

Malaysia's dynamic market attracts businesses worldwide seeking to establish a presence in Asia Pacific countries. This Southeast Asian gem boasts a thriving economy, diverse markets, and a supportive environment for entrepreneurial ventures. Before you pack your bags, take a deep breath, and delve into the crucial steps involved in setting up a successful business there.

Things to consider for starting a Company in Malaysia:

Business Plan: A solid business plan is your roadmap to success. Research the current market landscape, identifying gaps, potential niches, and the appetite for your offering. Understand the competition, their strengths and weaknesses, and how you can carve your own unique space. Analyse potential profit margins, projected costs, and funding requirements. Remember, thorough research is key to making informed decisions and avoiding pitfalls.
Identifying Sales Channel/Partners: No business thrives in isolation. Navigating the local landscape, finding the right sales channels, and securing trusted partners are critical for success. Identify reliable sales partners, agents, or distributors who can connect you with the right customer base. Don't underestimate the importance of establishing a smooth and efficient supply chain with trusted logistics providers.
Local Labor Market Insights: Understanding local labour market dynamics, wage structures, and employee benefits is crucial for attracting and retaining top talent in Malaysia. You can craft competitive compensation packages that resonate with local expectations and acknowledge the value your workforce brings. You should also consider partnering with established recruitment agencies specialising in B2B placements. Their expertise helps navigate the intricacies of local regulations and connect you with skilled professionals familiar with nuances of your niche.
Networking & Support: Tap into local business networks like MICCI and AmCham for valuable partnerships and insights. Tech hubs like MATIIC offer collaborative spaces and expertise. Don't miss out on government initiatives like MDEC's Global Acceleration Facility and SME Corp's grants. This network of connections unlocks funding, guidance, and a supportive ecosystem to propel your B2B business journey in Malaysia.
Cultural & Language Considerations: Embrace local customs like handshakes and greetings like "Salam." Learn basic Malay phrases to show consideration and build rapport. Understand preferred communication styles – directness isn't always appreciated. By respecting these nuances, you build trust and pave the way for successful B2B interactions in Malaysia.
Infrastructure & Resources: Landing your B2B HQ in Malaysia isn't scary. Pick your perfect spot – from city towers to cosy co-working hubs. Utilities and speedy internet are a breeze with government help. Need things delivered? Local and global logistics experts are just a call away. And if you're a tech startup, government initiatives like MDEC offer funding and collab spaces to boost your journey.
Local Partner: Going solo in Malaysia's business world can be like getting lost in a bustling marketplace. Fear not! Partnering with a local expert is like having a trusty map and guide rolled into one. They'll help you avoid confusing legal twists, decode cultural riddles, and connect you to the right people. Think permits, taxes, even understanding how handshakes work – your local partner knows it all. So, grab their hand, navigate with confidence, and watch your Malaysian B2B adventure unfold like a beautiful tapestry!

How to Set up a Company in Malaysia?

Setting up your B2B company in Malaysia requires a clear roadmap. Here's a simplified guide to navigate the company setup process:

Business Structure: When choosing a business structure in Malaysia, you have several options, each with its own advantages and disadvantages:

Sole Proprietorship: Easy and inexpensive to set up, complete control over decisions. But cons like unlimited personal liability, limited access to funding, difficulty in attracting investors are there.
Partnership: Shared workload and risks, potential for combined skills and resources, but unlimited liability for all partners, potential for disagreements and conflicts.
Private Limited Company (Sdn. Bhd.): Separate legal entity with limited liability, easier access to funding and investors, professional image. But there are some cons as well like, more complex set-up and compliance requirements, minimum of one shareholder and director.
Public Limited Company (Berhad): Can raise capital through public share offerings, increased prestige and brand recognition. But cons like, most stringent regulation and compliance requirements, high operational costs, public disclosure of financial information are there.
Limited Liability Partnership (LLP): Combines features of partnerships and limited companies, limited liability for partners. But less common than other structures, specific regulations and requirements to adhere to.
Foreign Branch Office: Subsidiary of a foreign company operating in Malaysia, easier entry into the Malaysian market. But subject to specific regulations and reporting requirements, separate legal entity from the parent company.

Registration Process: Here are some steps required to register a company in Malaysia

Name Quest: Find your unique flagbearer! Conduct a company name search and secure it online.
Gather Gear: Assemble essential documents like articles of association and director details.
Online Voyage: Plot your course through the Companies Commission of Malaysia's portal. Submit application and fees.
Local Checkpoints: Secure industry-specific licences and permits. Each market has its hidden checkpoints!
Tax Compass: Register for relevant taxes and understand standard rates and potential incentives.
Open Your Doors: Choose a reliable business bank account and explore funding options like loans, grants, and venture capital.

Though costs of company registration vary based on company type and complexity, you can expect fees for name search, registration, and licences.

Local Regulations: Ensuring compliance with all local regulations positions your business to function at full capacity and achieve success without encountering legal hurdles. Here are a few laws and regulations in Malaysia for your consideration.

Business & Industry Permits: Secure industry-specific licences and permits to operate lawfully. From construction permits to financial services licences, each sector has its checkpoints. (Companies Commission of Malaysia & relevant government agencies)
Employment Compliance: Uphold fair labour practices by adhering to minimum wage, social security, and overtime regulations outlined in the Employment Act 1955 and Industrial Relations Act 1967. (Social Security Organization & Employee Provident Fund)
Intellectual Property Protection: Safeguard your innovations and creations through trademark, patent, and copyright registration with the Intellectual Property Corporation of Malaysia (MyIPO). Secure exclusive rights and legal recourse.
Tax Optimization: Navigate the corporate tax landscape, understanding the standard 24% rate and exploring potential incentives offered by the Malaysian Investment Development Authority (MIDA). Timely filing with the Inland Revenue Board of Malaysia (IRB) is crucial.
Data Privacy & Cybersecurity: Prioritise customer data security by complying with the Personal Data Protection Act 2010 (PDPA). Implement robust data protection measures and obtain informed consent. Breaches can incur significant penalties.

Banking & Finance: Navigate Malaysia's vibrant B2B scene with a trusted banking partner! Compare major banks like Maybank, Public Bank, and CIMB based on your industry and growth needs. Streamline account opening with eKYC, then unlock a world of financial services - trade finance, cash management, even venture capital. Embrace secure online platforms and watch your B2B journey flourish!

How do I go about manpower and human resources?

Managing manpower and human resources (HR) effectively is crucial for any business venture in Malaysia. The Expatriate Services Division ( ESD) is one of the agencies that issue Employment Passes for foreign nationals in Malaysia. Malaysia Digital Economy Sdn Bhd (MDEC) is another channel that also processes Employment Passes for Information Communication Technology (ICT) companies and companies registered for Multimedia Super Corridor Malaysia (MSC Malaysia)

‍

Here are some key things that you should consider:

Work Permits/Visas: Navigating the work permit and visa landscape in Malaysia can be tricky. Check out some key considerations below.

Choose the Right Permit:
- Employment Pass (Category I): Ideal for high-skilled professionals with at least RM10,000 monthly salary and relevant qualifications. Offers long-term stays (up to 60 months) and multiple entry visas.
- Employment Pass (EP Category II): Ideal for high-skilled professionals with at least RM5,000 monthly salary and relevant qualifications. Offers long-term stays (up to 24 months) and multiple entry visas.
- Employment Pass (EP Category III): Prior approval from the Ministry of Home Affairs (MOHA) is essential to qualify for an exemption from the RM5,000 minimum salary requirement. Ideal for high-skilled professionals with at least RM3,000 monthly salary and relevant qualifications. Offers long-term stays (up to 12 months with maximum 2 times of renewal) and multiple entry visas.
- Professional Visit Pass (PVP): A Professional Visit Pass (PVP) is granted to foreign talents with acceptable professional qualifications or skills. The validity of the pass is subjected to the requirement and conditions of Immigration rules and policies for a period not exceeding 12 months.
Essential Prerequisites:
- EP requires an approved job offer from a registered Malaysian company.
- Specific educational qualifications and years of experience may be needed for certain professions.
Streamlining the Process:
- Utilise the Immigration Department of Malaysia's online portal for efficient application submission.
- Consider engaging specialised agencies or legal counsel for expert guidance and document preparation.
Additional Considerations:
- Dependent's passes may be available for spouses and children of EP I & II holders.
- Visa-free entry agreements exist with certain countries, simplifying the process for citizens of those nations.
- Stay updated on evolving regulations and policies, as requirements may change.

Payroll Administration: Lay the groundwork for trust and satisfaction by meticulously complying with key requirements. Register with EPF, SOCSO, and IRB, assuring your commitment to employee well-being. Master the art of precise salary calculations, factoring in taxes, deductions, and regulations. Issue clear, detailed payslips – transparency fosters loyalty. Embrace HR software as your tech ally, automating tasks and erasing errors. Consider outsourcing for expert guidance and compliance confidence.

Tax and Social Security Management: Understanding Tax compliance, Employees Provident Fund (EPF) and Social Security Organization (SOCSO) is crucial for building a stable and compliant workforce.

Tax Compliance: Navigate corporate tax rates, incentives, and reporting deadlines. Register with the Inland Revenue Board (IRB) and prepare for smooth sailing.
Employees Provident Fund (EPF): This mandatory savings scheme secures your employees’ retirement. Both employer and employee contribute a percentage of monthly salary. Registering new employees, calculating and submitting contributions, and maintaining accurate records are key responsibilities.
Social Security Organisation (SOCSO): A safety net woven with your contributions. It provides financial protection against work injuries, invalidity, and even unemployment. Registering all employees and making timely contributions are essential.

Malaysian Employment Laws: Compliance with the essential employment laws in Malaysia is necessary to fuel a successful B2B business journey. Here are some key provisions of the Malaysian Employment Act that you should comply with.

8-hour workdays, 45-hour workweeks: Ensure healthy routines and rest.
Minimum wage: Adhere to industry-specific minimums, currently ranging from RM1,100-1,500.
Overtime pay: Time and a half for weekday overtime, double for weekends and holidays.
Paid leave: Guarantee annual leave, sick leave, maternity/paternity leave, and public holidays.
Termination: Follow strict procedures for retrenchment or dismissal, respecting employee rights.

Other Employer Costs & Insurance: Beyond SOCSO & EPF contributions, Employer costs in Malaysia include health insurance, workers' comp, training, retirement supplements, travel/entertainment, performance incentives, relocation aid, legal fees, flexible leave (maternity/family/compassionate) & employee assistance programs.

‍

Should I set up my own entity or outsource to a local expert?

HR & Payroll Outsourcing in Malaysia can be a strategic move for companies seeking to lighten their backpacks and sharpen their efficiency. Consider your company's size, the complexity of your payroll jungle, and your access to HR expertise. Whether you choose full or partial outsourcing, the right partner can streamline your processes. Moreover, Work Permit application, Taxes, EPF contributions, SOCSO, and other deductions can be a tangled mess of vines and roots. An experienced partner can handle these calculations with the precision of a jungle tracker, ensuring timely payments to relevant authorities and avoiding compliance pitfalls. This frees you up to focus on scaling your business, rather than getting entangled in the intricacies of payroll calculations.

Factor	Outsourcing HR & Payroll	Managing HR & Payroll In-House
Cost	Generally cheaper, especially for small teams. Payroll software and hardware expenses are avoided.	More expensive due to salary costs for in-house HR and payroll staff, plus potential software and hardware expenses.
Expertise	Access to experienced HR and payroll professionals who specialise in Malaysian regulations and compliance.	Requires hiring and training qualified in-house staff with knowledge of Malaysian HR and payroll practices.
Time Commitment	Less time spent on HR and payroll tasks, freeing up internal resources for core business activities.	Significant time commitment to setting up and managing in-house HR and payroll functions.
Flexibility	Easier to scale HR and payroll services up or down as needed.	May be less flexible, especially with fixed-cost salaries for in-house staff.
Language and Cultural Understanding	Local experts better address language & cultural nuances	In house team may not have that level of expertise
Compliance	Outsourcing provider handles compliance with Malaysian regulations and provides guidelines to ensure you remain in compliance.	Full responsibility for ensuring compliance with Malaysian HR and payroll regulations.

Innovare: Your Partner in managing Payroll, Compliance & More

Innovare, with its extensive partnership and network, can assist you with company setup, initial market research as well as manage your HR matters in a compliant manner for your new company. We recognize the challenges new businesses face as they embark on their entrepreneurial adventure. We can alleviate the burden of payroll, compliance, immigration and more from day one, allowing you to focus on growth with complete peace of mind. Think of us as your experienced guide, helping you clear the path, avoid the pitfalls, and reach your destination with success. Partner with Innovare to navigate the intricacies of business setup in Malaysia and get your payroll & HR managed compliantly & seamlessly.

‍

Sources