Contact us now for more details
Subsidiary vs Branch vs Representative Office
The table below compares 3 common registration options for foreign companies/expatriates looking to start a new business in Malaysia. The tax and compliance requirements depend on the type of entity you choose to set up.
As company formation experts, our goal is to help company owners make the best choice when setting up in Malaysia. Please feel free to contact us via email info@gmc2u.com or phone +603 7890 6663 .
外国公司注册类型 | 子公司 | 分公司 | 代表处（RO） |
|---|---|---|---|
Entity name | It does not have to be the same as the parent company | Must be the same as the parent company | Must be the same as the parent company |
Permitted activities | All commercial activities are available * | Must be the same as the parent company | Can only conduct market research or coordinate activities |
Suitable object | Local or foreign companies looking to expand their business in Malaysia | Foreign companies looking to expand their business in Malaysia in the short term | Foreign companies wishing to set up a temporary intermediary in Malaysia to conduct investigations and act as a liaison office without conducting actual business transactions |
ownership | It can be 100% foreign * or local owned | 100% owned by the parent company | non-ownership |
Separate legal entity | have | none | none |
Maximum number of members | Up to 50 people | not applicable | not applicable |
Minimum establishment requirements | – At least one shareholder, or solely owned by a corporate body (100% local or 100% foreign*) | ||
一名本地董事，该名人士不一定是马来西亚人，但必须持有有效的工作准证，并在大马境内拥有主要住址 | |||
A practising company/qualified secretary, public accountant or solicitor who has registered with the Companies Commission of Malaysia (SSM) can provide assistance with registration documents and other requirements | |||
At least one Malaysian resident acting as agent | – The recommended operating expenditure must be at least RM300,000 per year | ||
The source of funds shall be outside Malaysia | |||
Limited Liability | have | No, the responsibility lies with the parent company | No, the responsibility lies with the parent company |
Audit of accounts | Yes | Yes | No |
Submit accounts to SSM and LHDN | have | have | none |
Annual declaration | The audit report of the subsidiary shall be submitted | Audit reports of the branch and parent company must be submitted | not applicable |
Tax treatment | - Pay taxes as a resident entity in Malaysia and enjoy local tax benefits | ||
Profits generated in Malaysia (adjusted for tax purposes) are taxed at 25%. Smes are taxed 20% on the first RM500,000 of taxable income | |||
Depending on the type of activity performed, eligible individuals may enjoy tax benefits | - Pay taxes as a non-resident entity and are not eligible for local tax benefits | ||
Profits attributable to branches (subject to tax adjustment) are taxed at 25% | |||
Service fees collected by the branch in Malaysia will be subject to 10% + 3% withholding tax | |||
There are usually no tax benefits | inapplicability | ||
Supervisor Appointment | Must appoint at least one local resident as director | At least one local resident must be appointed as agent | not applicable |
Employee Recruitment | No restrictions on hiring local or foreign employees | No restrictions on hiring local or foreign employees | – Foreign employees will be assigned, the number of which will depend on the functions and activities of the representative office. Foreign employees can only hold management and technical positions
– The assigned foreign employees must be employed by the applicant company or its subsidiaries/groups |
With the liberalization of Malaysia's equity policy, foreign investors can generally hold 100% of the shares in most industries, except for strategic industries related to national interests such as water resources, telecommunications, ports, and energy. Each industry has specific regulations issued by relevant government departments, which include possible restrictions on the company's foreign equity ratio, higher paid-in capital requirements, and the need to obtain regulatory approval before commencing operations (i.e. special approval, business license, permit or registration).
A Malaysian branch is considered a non-resident company for tax purposes and cannot enjoy tax benefits like a start-up company or a resident company. In addition, service fees collected in Malaysia will be subject to a 10% + 3% withholding tax. Therefore, most foreign companies choose to set up a subsidiary rather than a branch.
Representative offices are suitable for foreign companies that wish to collect information on investment opportunities in Malaysia (especially in the manufacturing and service industries), strengthen bilateral trade relations, promote the export of Malaysian goods and services, and conduct research and development (R&D). Representative offices cannot carry out any commercial activities and can only perform designated functions on behalf of the head office/person in charge.