INVESTING IN MALAYSIA · 2020. 10. 5. · MAP OF MALAYSIA A total of 72.3% of % Malaysia’s total...
Transcript of INVESTING IN MALAYSIA · 2020. 10. 5. · MAP OF MALAYSIA A total of 72.3% of % Malaysia’s total...
MALAYSIAINVESTING IN
2020
Contents
04
05
08
0912
13
14
Demographics
Economics and FDI in 2019
Free Trade Agreements
Doing Business in Malaysia
Employment
Taxes and Incentives
Labuan International Business and Financial Centre
4INVESTING IN MALAYSIA 2020
POLITICAL SYSTEM
Parliamentary democracy with constitutional monarchy
POPULATION
32.73 million (as at first quarter 2020)
CAPITAL
Kuala Lumpur
CURRENCY
Ringgit Malaysia (RM)
MIDSHORE CENTRE
Labuan International Business Centre
NATIONAL LANGUAGE
Malay
STATES
13 states and 3 federal territories
TIME ZONE
GMT +8
AREA
330,000 km2 (rounded)
2019 GDP GROWTH
4.4%
BORDERING COUNTRIES
Thailand, Singapore, Indonesia, Brunei, Philippines
LABOUR FORCE
15.71 million (as at May 2020)
AVERAGE ANNUAL INCOME
RM7,901 per household
01Demographics
MYANMAR
LAOS
THAILAND
CAMBODIA
VIETNAM
PHILIPPINES
BRUNEI
SINGAPORE
INDONESIA
MALAYSIAKuala Lumpur
Labuan International Business Centre
SARAWAK
SABAH
JOHOR
PAHANG
TERENGGANUKELANTAN
PERLIS
KEDAH
PENANG
PERAK
SELANGOR
MELAKANEGERI SEMBILAN
5INVESTING IN MALAYSIA 2020
02Economics and FDI in 2019
2008 -2019 Foreign Direct Investment in Malaysia (RM Billion)
Source: Department of Statistics, Malaysia
Net FDI Flows
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
5.1
47639.7
691.6
23.9
30.7 31.7
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
0.0
Foreign Direct Investment Income by Main Sectors
2018
2019
Services
Manufacturing
Mining & quarrying
Others
RM15.4bRM15b
RM0.3bRM0.6b
RM17bRM2.4b
RM5.1b
RM7.2b
Source: Department of Statistics, Malaysia
2019Largest Foreign Direct Investment by Country
Japan
Hong Kong
Netherlands RM3.9b
RM8.6b
RM10.4b
Source: Department of Statistics, Malaysia
FDI in 2019
RM31.7 billion
FDI Growth Rate
3.1%
Ease-of-doing-business rank (Doing Business Report 2020, World Bank)
12
GDP in 2019
RM1,510.7 billion
GDP Growth Rate
4.4%
GDP per capita
USD11,414.8
Total Exports in 2019
RM986.38 billion
Source: Department of Statistics Malaysia, World Bank
6INVESTING IN MALAYSIA 2020
RM986.38 billion RM849.07 billion(by Country)Total Export Total Import (by Country)
2019
2019Total Imports by Products
2019Total Exports by Products RM986.38 billion RM849.07billion
Source: Malaysia External Trade Development Corporation (MATRADE)
Source: Malaysia External Trade Development Corporation (MATRADE) Source: Malaysia External Trade Development Corporation (MATRADE)
EquipmentRM38.56 billion
Palm OilRM38.03 billion
Crude PetroleumRM26.35 billion
Rubber ProductsRM25.63 billion
Manufactures of MetalRM41.49 billion
LNGRM41.54 billion
4.2%
4.2%
Electrical &Electronic Products
RM372.67 billion
Chemicals &Chemical Products
RM57.01 billion5.8%
Petroleum ProductsRM71.49 billion 7.2%
37.8%
Machinery,Equipment & Parts
RM41.39 billion4.2%
3.9%
3.9%
2.7%
2.6%
Other ProductsRM232.22 billion23.5%
Iron & Steel ProductsRM31.19 billion
Crude PetroleumRM25.24 billion
EquipmentRM24.18 billion
Processed FoodRM20.28 billion
Manufactures of MetalRM47.10 billion
Machinery,Equipment & Parts
RM69.64 billion
5.5%
8.2%
Electrical &Electronic Products
RM245.47 billion
Petroleum ProductsRM77.51 billion 9.1%
Chemicals &Chemical Products
RM81.55 billion9.6%
28.9%
Transport EquipmentRM40.78 billion 4.8%
3.7%
3.0%
2.8%
2.4%
Other ProductsRM186.14 billion21.9%
RM139.61 billion
RM136.89 billion
RM95.78 billion
RM66.54 billion
RM65.24 billion
RM55.81 billion
RM37.55 billion
RM36.95 billion
RM34.73 billion
RM33.76 billion
14.2%
13.9%
9.7%
6.7%
6.6%
5.7%
3.8%
3.7%
3.5%
3.4%
OTHERS28.7%RM283.52 billion
ROK
VIETNAM
TAIWAN
INDIA
THAILAND
JAPAN
HONG KONG
USA
SINGAPORE
CHINARM175.59 billion
RM89.55 billion
RM68.67 billion
RM63.58 billion
RM57.03 billion
RM44.23 billion
RM38.80 billion
RM38.80 billion
RM26.75 billion
RM24.29 billion
20.7%
10.5%
8.1%
7.5%
6.7%
5.2%
4.6%
4.6%
3.1%
2.9%
OTHERSRM221.79 billion
INDIA
GERMANY
INDONESIA
ROK
THAILAND
TAIWAN
JAPAN
USA
SINGAPORE
CHINA
26.1%
7INVESTING IN MALAYSIA 2020
Source: Department of Statistics Malaysia
2019Total Exports to ASEAN
2019Performance of GDP by State
INDUSTRY FOCUSMAP OF MALAYSIA
A total of 72.3% of Malaysia’s total GDP
was contributed by 6 main states.
RM136.89 billion
RM55.81 billion
RM34.73 billion
RM30.8 billion
RM18.2 billion
RM7.67 billion19.7%
10.9%SINGAPORE
THAILAND
VIETNAM
INDONESIA
PHILIPPINES
OTHERS
23.2%
48.2%
6.4%
2.7%
Exports to ASEAN amounted to
RM284.03billion, constituting 28.8% of
Malaysia’s totalexports.
Modern Agriculture Manufacturing & Design
Tourism
Logistics
Education & Health
Northern Corridor InvestmentAuthority (NCIA)
Tourism
Oil & Gas
Manufacturing
Education
East Coast Economic Region Development Council (ECERDC)
Iskandar Region Development Authority (IRDA)
Financial Services
Petrochemical and Maritime
Healthcare
Tourism and Logistic Industry
Manufacturing & Services
Agro-based Industry
Tourism
Logistics
Manufacturing
Sabah Economic Development Investment Authority (SEDIA)
Regional Corridor DevelopmentAuthority (RECODA)
Resource Based Industry
Aluminum, Glass, Steel, Oil-based Industry, Palm Oil, Fishing & Aquaculture, Livestock, Timber-based, Marine
Energy
Tourism
SARAWAK
SABAH
PENINSULAR MALAYSIA
Source: Malaysian Investment Development Authority (MIDA)
9.4 %
6.7%PULAU PINANG
W.P. KUALA LUMPUR16.4%
SELANGOR24.2%
JOHOR
SARAWAK9.6%
6.0%SABAH
8INVESTING IN MALAYSIA 2020
03Free Trade Agreements
Source: Ministry of International Trade and Industry
9INVESTING IN MALAYSIA 2020
04Doing Business in Malaysia
Types of entities
Process to establish a company in Malaysia
Separate Legal Entity Authority Features Approval time
Representative Office No Malaysian Investment
Development Authority
Non-profit generating activities such as collecting information on investment opportunities in Malaysia, enhance bilateral trade relations, promote the export of Malaysian goods and services and carry out research and development
30 days
Regional Office No Malaysian Investment Development Authority
Non-profit activities such as acting as coordination centre for the foreign company’s affiliates, subsidiaries, and agents in South East Asia and the Asia Pacific
30 days
Company Yes Companies Commission of Malaysia
Types of companies include companies limited by shares, limited by guarantee, unlimited companies, public companies, private companies, and branch of a foreign company
2 to 7 working days
Partnership No Companies Commission of Malaysia
All partners are personally liable for the liabilities of the partnership
2 to 7 working days
Limited Liability Partnership Yes Companies Commission
of Malaysia
All partners are only liable up to the capital committed into the partnership as stated in the partnership agreement
2 to 7 working days
Sole Proprietorship No Companies Commission of Malaysia
The sole proprietor is personally liable for the liabilities of the partnership
2 to 7 working days
Labuan entities See page 14 on entities incorporated in Labuan
Process to establish a company in Malaysia
STEP 1 Appoint company secretaryTime depends on onboarding process of each company secretarial firm
STEP 2 Reservation of Name
STEP 4 Receive notice of approval and registration (legal entity established)
STEP 3 Submit incorporation documents
STEP 5 Filing of statutory documents, apply business licences, labour and tax registration, set up bank accountSetting up bank account requires clearing of each bank’s KYC procedures, which could take up to a few months
10INVESTING IN MALAYSIA 2020
Other Considerations when Setting Up a Company in Malaysia
There are no foreign ownership restrictions for incorporating a local company or registering a foreign company in Malaysia. Investments are encouraged through the incremental liberalisation of equity conditions by various government agencies based on the provisions of the Promotion of Investments Act 1986. However, limits on foreign ownership do remain in place across what the authorities consider strategic sectors such as telecommunications, oil & gas, tourism, wholesale and retail redistributive trade, and financial services. Such equity conditions are mostly set out in ministerial guidelines.
Private companies require a minimum of one director, whereas public companies require a minimum of two directors. A company may have foreign directors but the minimum number of directors must ordinarily reside in Malaysia by having a principal place of residence in Malaysia.
Minimum number of shareholder is one. Shareholders are classed based on the type of shares held, i.e. ordinary or preference shares. Generally, the rights of ordinary shareholders are set out in the Companies Act 2016, unless otherwise provided in the constitution of a company. These include the rights to vote in general meetings and equal shares in distribution of assets and dividends. Preference shares carry no voting rights, and the rights attached to preference shares are required to be set out in the constitution of a company.
Shareholder’s meetings are termed as “general meetings” in the Companies Act 2016. General meetings allow shareholders the opportunity to attend and vote. There are three types of general meetings recognised by Malaysian law:• annual general meetings• extraordinary general meetings• class meetings
Since the coming into effect of the Companies Act 2016 on 31 January 2017, private companies are no longer obligated to convene annual general meetings. However, shareholders have the right to request for the directors of the company to convene a general meeting. This right is subject to several conditions.
The appointment of an auditor is mandatory. However, the Registrar may exempt private companies from adopting an auditor where the company is dormant, a zero-revenue company or a threshold-qualified company. Companies that elect to be exempted from audit must still lodge unaudited financial statements and the required statutory certificates with the Registrar of Companies.
Malaysia houses a number of special economic zones, i.e.• East Coast Economic Region (ECER)• Iskandar Regional Development Authority (IRDA) for Iskandar Malaysia in Southern Johor• Northern Corridor Implementation Authority (NCIA) for the North Corridor Economic Region
(NCER)• Sabah Development Corridor• Sarawak Corridor of Renewable Energy
There are no restrictions on repatriation of profits and capital from Malaysia.
Yes
FOREIGN OWNERSHIP RESTRICTIONS
DIRECTORS
SHAREHOLDERS
SHAREHOLDERS’ MEETINGS
FINANCIAL AUDITS
SPECIAL ECONOMIC ZONES
REPATRIATION OF PROFIT AND CAPITAL
MEMBER OF NEW YORK CONVENTION
11INVESTING IN MALAYSIA 2020
Setting Up a Manufacturing Plant (Factory) in Malaysia
1 Incorporation of company
2Identify location of factory and execution of lease documents / land ownership documents
3
Application for licences / approvals / permits- Check if a manufacturing licence is required from the
Malaysian Investment Development Authority (MIDA) under the Industrial Co-ordination Act 1975
- Applications to Department of Occupational Health and Safety (DOSH) for permits and approvals on operations of the factory, installation of machinery etc under Factories and Machinery Act 1967 and its regulations;
- Applications to the Department of Environment Malaysia (DOE) for permits and approvals under the Environmental Quality Act 1974 and its regulations, including scheduled wastes
- Depending on the industry, other possible permits /approvals include licences, permits, approvals required under the Poisons Act 1952, the Sale of Drugs Act 1952 and the Control of Drugs and Cosmetics Regulations 1984, to name a few.
- Import / export licences- Business premise licences- Explore available tax incentives
4Work permits and labour requirements (please refer to page 12)
12INVESTING IN MALAYSIA 2020
05Employment
Scope of the Employment Act 1955 (“EA”)The EA governs employees who earn a monthly salary of not more than RM2,000.00 OR who perform or supervise manual labour regardless of the salary that the employees earn. The EA stipulates the provision of certain minimum benefits to employees falling within its ambit. The terms and benefits afforded to employees falling outside the ambit of the EA are not statutorily regulated and may be decided mutually between the parties.
Overriding Provisions of the EAThe EA affords the following benefits to all employees regardless of their monthly pay:(a) Maternity leave (All female employees will be eligible for 60 consecutive days (including
Public Holidays, Saturdays and Sundays) of unpaid maternity leave in respect of each confinement. The employee must fulfill certain conditions for this entitlement.)
(b) Inquiry into complaints of sexual harassment(c) Requirement to keep and maintain registers containing information regarding each
employee for not less than 6 years
Work Permits
Type Type of employee Highlighted requirements
Visit Pass (Temporary Employment)
Foreign Worker aged 18-45 years
For the following sectors and depends on nationality of the foreign worker:1. Manufacturing2. Plantation3. Agriculture4. Construction5. Services
Employment pass
Expatriate Applied by the Malaysian company intending to hire the expatriate. Such Malaysian companies need to fulfill the minimum paid-up capital requirements as follows:• 100% local owned company: RM250,000• Joint venture company: RM350,000• 100% foreign owned company: RM500,000• Foreign owned companies (51% and above)
operating in the wholesale, retail and trade sectors: RM1,000,000
Terms of termination of work permits
Expiration of permit
Termination of employment contract
Breach of conditions of the work permit
Withdrawal of permit by regulatory authority
Change of employer for employment pass requires the filing of a new application
13INVESTING IN MALAYSIA 2020
06Taxes
Malaysia’s Major Taxes
• Company with paid up capital not more than RM2.5 million- 17% on first RM600,000- 24% on subsequent balance
• Company with paid up capital of more than RM2.5 million- 24%
Goods manufactured locally by a registered manufacturer and on taxable imported goods- 5% to 10%
Taxable services provided inMalaysia by a registered person- 6%
• Interest - 15%• Royalties - 10%• Dividends - nil
(Note exemptions given by the Malaysian government during the COVID-19 pandemic)
• Disposal by a company within 3 years - 30%
• During the 4th year - 20%• During the 5th year - 15% • 6th year onwards - 10%
For resident individuals - 1% to 30% depending on income brackets
Available Reliefs include life insurance premiums, EPF contributions, private retirement scheme contributions and deferred annuity scheme premium, insurance premiums on education or medical benefits, expenses on medical treatment, special needs, or carer expenses for parents, education fees, lifestyle relief, and others.
Corporate Taxes 1 2 3
4 5 6
Sales Tax Services Tax
Withholding Tax Real Property Gains Tax Personal Income Tax
Double Taxation Agreements (DTA)*
Tax IncentivesMalaysia has in place tax incentives for various types of industries, including incentives for hotel and tourism projects, green technology, research and development, healthcare travel, integrated logistics services, manufacturing, agriculture, aerospace, environmental management, training, information and communication technology, approved service projects and manufacturing related services. Companies may apply for a pioneer status and investment tax allowances under the Promotions of Investments Act 1986.
Effective DTAs
DTAs under negotiation
Gazetted DTAs (not yet in force)
75
25
6*As at 21 June 2019, Source: Inland Revenue Board Malaysia
14INVESTING IN MALAYSIA 2020
07Labuan International Business and Financial Centre
There is a distinct set of laws applicable to financial activities carried out in the Labuan International Business and Financial Centre (“Labuan IBFC”), in the Federal Territory of Labuan. All financial activities in Labuan IBFC are supervised and regulated by the LFSA, the sole authority in Labuan. The following are structures which can be established in Labuan:
Labuan
Labuan entities are considered non-residents under the Malaysian foreign exchange control regulations and under the National Land Code. Labuan entities are required to carry on business in, from, or through Labuan. Therefore, Labuan entities are mainly used as holding entities, such as investment holding companies, leasing companies, private funds and mutual funds, family offices. Other types of entities include financial services companies (insurers, reinsurers, banks, brokers, securities licensees with operations within the region).
Tax RateLabuan entities that carry on a Labuan trading activity and comply with the relevant economic *substance requirements shall be subject to tax at the rate of 3% on its chargeable profits.
A Labuan entity that does not carry on a Labuan business activity, or in carrying on a Labuan business activity, does not have the adequate number of full time employees in Labuan, or adequate amount of annual operating expenditure in Labuan, will be subject to tax under the Malaysian Income Tax Act 1967.
*Substance requirements: The Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2018 (“2018 Regulations”) came into operation. The 2018 Regulations specify the (i) minimum number of full time employees required in Labuan and (ii) minimum amount of annual operating expenditure required in Labuan for each type of Labuan entity.
Labuan companies (limited by shares, limited by guarantee, unlimitedcompanies, protected cell companies)
Labuan limited partnerships and limited liability partnerships;
Labuan trusts (including purpose trusts and special trusts);
Labuan foundations;
Labuan mutual funds and private funds.
1
2
3
4
5
15INVESTING IN MALAYSIA 2020
As the apex business chamber, the Singapore Business Federation (SBF) champions the interests of the business community in Singapore in trade, investment and industrial relations. Nationally, SBF acts as the bridge between businesses and Singapore government to create a conducive business environment. Internationally, SBF represents the business community in bilateral, regional and multilateral fora for the purpose of trade expansion and business networking.
In 2020, SBF launched GlobalConnect@SBF to partner Singapore companies looking to expand overseas. With a focus on ASEAN, frontier and emerging markets, FTA education and outreach, and markets along the Belt and Road, GlobalConnect@SBF supports companies’ business expansion plans to new markets.
160 Robinson Road#06-01 SBF CenterSingapore 068914
6701 1133
For more information about SBF, visit www.sbf.org.sg
For more information on GlobalConnect@SBF, visit https://globalconnect.sbf.org.sg
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