Expatriate Forums in Malaysia

Immigration Consultant

Malaysia is getting more attractive than ever when looking at finding a good compromise in terms of lifestyle where to settle down in the South-East Asia region and looking at the very encouraging economical statistics and figures.

But these facts are sometimes not sufficient for a company’s headquarter to decide to invest in a new country or even for an individual to set-up his own company to be able to settle down in Malaysia. An intermediate solution might be required and this is the time when a Representative/Regional Office comes as an option.

A Representative/Regional Office offers the opportunity for any foreign corporation in the manufacturing and trading sector to perform in Malaysia permissible activities for its head office/principal. The approval by the Malaysian Authorities (MIDA) is usually granted for two years and also includes work permit approval for expatriate representatives.

Before proceeding with the incorporation, you need to differentiate a Representative Office from a Regional Office:

A Representative Office is an office of a foreign company approved to collect relevant information on investment opportunities in the country especially in the manufacturing sector, develop bilateral trade relations, promote the export of Malaysian goods/products and carry out research & development.

A Regional Office is an office of a foreign corporation that serves as the coordination center for the corporation’s affiliates, subsidiaries and agents in S-E Asia and Asia Pacific. The Regional Office established is responsible for designated activities of the corporation within the region it operates.

Both Representative & Regional Office established are not allowed to carry out any business transaction nor derive income from their operations. They should be totally funded from sources outside Malaysia and they are not required to be incorporated or registered under the Companies Act 1965.

As such, there are no audited accounts & corporate taxes payable under such status. However, the expatriate (or local) representative shall still be liable to pay income tax on a personal basis, in accordance with his declared salary in Malaysia.

We believe that the Representative/Regional Office is a safe way to prospect Malaysia for any foreign companies that may have an interest in this market. On the other hand, it can also represent a solution for any foreigner looking to be employed by a company, by contacting even foreign companies to suggest them to be represented in Malaysia, as the work permit application process is less stringent than for a Private Limited Company.

To set-up the Representative/Regional Office, an application must be prepared to explain the reasons for the foreign company to market its products/services in Malaysia. The status is normally granted for a duration of 2 year renewable (subject to MIDA approval) – All is required is to keep MIDA up-to-date on the office activities. Considering that the logical scenario is that a company will be registered at a later stage, MIDA usually grants up to 4 renewals (or a total of 10 years) for the Representative/Regional Office to completely shift its operations into a Private Limited Company.

For further information, you may contact the MIDA as follows:

Malaysian Industrial Development Authority (MIDA)
1st Floor, Plaza Sentral
Jalan Stesen Sentral 5
Kuala Lumpur Sentral
50470 Kuala Lumpur
Malaysia

Tel: (603) 2267 3633
Fax: (603) 2273 4216
E-mail : services@mida.gov.my
Website: www.mida.gov.my

Strong Eagle · Posted: Thu Aug 11, 2005 8:28 pm Post subject:

Perhaps you can clarify a couple of things for me. I am a US/UK expat who owns a private limited company registered in Singapore (where I live).

I have an opportunity to do business in KL by supplying professional project services.

Under some circumstances, I want to import someone from Singapore for a limited term contract.

Under other circumstances, I want to hire a Malaysian citizen or PR to work under a limited term contract.

We really have no presence in Malaysia other than a bank account into which we can make RM deposits.

The company we would contract to is a multi national with offices in Malaysia.

Would this be a suitable vehicle for my activities or must I form a private limited company?

Many thanks.

steven · Posted: Fri Aug 12, 2005 11:33 am Post subject:

You are not giving sufficient amount of details here.
To set-up a representative office, one has to operate from a foreign company which has been in place for quite some time and has sufficient financial assets to support a cost center in Malaysia.
The authorities will also judge the potential of incorporating such representative office in a long run. Therefore, if your need to send the workforce is only for a short period of time and you cannot justify any potential long term work with this multi-national company, then you will have to think in a different way by setting up a private limited company for example.

dntforman · Posted: Thu Aug 25, 2005 11:59 pm Post subject:

What would be required if my company has a contract with a Malaysian company and we send people there for short periods of time? i.e. 5 people for 10 days, then return to our home country?

Also, what if we have a longer-term consultant in Malaysia working with the Malaysian company and working out of one of the Malaysian company's offices? (i.e. 1-2 people working 2-3 months, then returning home) Would we be required to establish an office? All people, including the consultant, would be paid in their home country, in their home currency and taxed accordingly. Best Regards.

Strong Eagle · Posted: Fri Aug 26, 2005 7:33 am Post subject:

I can tell you what I have found out to this point in time... and I qualify this by saying this information has been collected from several people... so if anyone spots an error, please correct me.

1) If you collect a check from a Malaysian client, drawn on a Malaysian bank, that check cannot be deposited into a Singapore bank account. Instead, you must have a Malaysian bank account (in the name that is on the check) in order to deposit the funds.

2) No account linking is possible between Singapore and Malaysia. Funds must be wire transferred between the accounts just as one would do with any two banks.

3) In order to open a company bank account, you must have a company duly registered in Malaysia, and without question, the private limited company is the way to go. You need to have two local directors. Several companies offer company setup services for about RM 2200, and offer directors for about RM 1500 per year.

4) Bringing foreign workers into Malaysia, even for a short period of time, requires a work permit. I don't know about short term permits but for a regular work permit, the company needs to be capitalized to the tune of RM 240,000 for each work permit. Capital can be moved in and out after the permit(s) are obtained but must be present at year end closing of books, after which it can be borrowed again, etc.

5) All foreign workers must pay tax on their earnings which I believe is 28 percent. Again, you must have a company that is duly registered so that records of salaries and taxes can be kept.

We concluded that it is not practical to bring foreign workers into Malaysia for short periods of time because of the hassle, expense, and captial requirements. We've opted to find local talent or someone who already has the right to work.

steven · Posted: Fri Aug 26, 2005 5:45 pm Post subject:

Strong Eagle · Posted: Fri Aug 26, 2005 6:26 pm Post subject:

Hello Steven,

OK. Here is more detail. My company offers project management services in the IT arena, primarily in infrastructure implementation, solutions integration, and brand rescue. We also do some business strategy consulting. We could provide hardware from time to time, but this is a very small potatoes thing, mostly to handle emergencies that come up... for example, sourcing and buying an extra unanticipated piece of communications equipment like a router.

We are incorporated as a private limited company in Singapore. The majority of our clients are multi national corporations with a registered presence all over APAC, including Singapore and Malaysia.

We have been contracted by a major multi-national hardware manufacturer to supply project management services for the installation of the hardware it sells in Malaysia. The hardware provider is incorporated in Malaysia. We are paid by the hardware provider but are actually working on the client site in KL. A typical contract lasts 8 to 20 weeks, full time. We are paid in Ringgit drawn on a Malaysian bank at 30 day intervals for work we bill.

We are also trying to obtain a contract that would last about 18 months, a major infrastructure implementation, again in KL. Similar situation with respect to companies and clients as above.

The employees working for us as project managers can be either contracted to us for short term (they themselves are independent contractors), and we will also have full time employees working for us who live in KL.

The teams that do the actual implementation work either belong to the client's customer or we source them locally. That is, no hardware guys or software programmers are on our payroll, only project managers, and I would not expect to go out of country for this type of commodity labor. We could receive a fee for sourcing and managing certain teams, and we could receive a fee for sourcing hardware.

In the near future, we will also be offering managed services for the infrastructure that we install. This may involve operations, maintenance, and help desk functions, to be performed onsite by an employee who works for us and lives in KL.

My experience is that importing Singapore project managers is too expensive, especially with per diem costs involved so I am thinking of either hiring Malaysian nationals or PR's or importing project managers from India or other lower cost countries.

So, it was my understanding that a representatives office cannot actually conduct income earning business, nor employ local people. It was also my understanding from reading a few web sites that two directors had to be at least work permit holders, if not nationals.

What I need to be able to legally do is:

Place people in various companies in Malaysia, under contract terms, with payments made to me directly by the client or by the hardware manufacturer. The companies will pay in Ringgit and they need to pay to a Malaysian address.

Pay those people salaries and benefits, or in the case of contractors, pay their per diem rates.

Transfer the money I earn in Malaysia to my Singapore bank account (maybe not all of it).

Inject the minimum amount of paid up capital necessary (while still keeping an eye on the need to import project managers).

Do all of this while minimizing my tax consequences, both in Malaysia and Singapore. This includes tax on profits that I might need to pay.

I've found to date:

a) Even accounting/secretarial firms in KL have different understandings of the law (at least the ones I have talked to).

b) No body seems to have a good handle on the international scene with respect to tax issues (I made have to spend more money for a larger accounting firm... I don't know).

And yes, I expect to generate costs. And I am working to keep a lid on them. A great starting place would simply be to find a competent accounting/secretarial firm, geared towards the needs of a professional services small business.

Your assistance and knowledge is greatly appreciated.

Wayne

steven · Posted: Fri Aug 26, 2005 7:04 pm Post subject:

Dear Wayne,

What you are actually asking for is real consultancy, as it is required to look at the costs and sales forecast to evaluate what decision would be best.

Same goes for the work permit issues, it is hard to define without knowing the exact number of foreigners you will need to work in Malaysia on a full-time basis.

You can PM me if you want to meet and discuss further matter. But for now, I see either one of the 3 possibilities with below in italic the pros and cons:

1- Since you are looking at hiring quite a few foreign staffs on a project basis and your activity field matches the requirements, you can be looking at setting up a Malaysia Super Corridor (MSC) status company. But that comes with a big list of requirements and application is not so easy.
Offers the flexibility you need for yr activity especially in terms of visas, tax free for 5 years / Expensive to set-up, big list of requirements to fulfil

2- To obtain the two required work permits, you can set-up a representative office. The accounting of such structure works as a cost center, so no profits can be made. However, you are still allowed to create aside a registered company to be able to invoice. Two work permit holders can be share holders of such company.
Cheap to set-up and run, 2 work permits will be approves right away / the parent company in S'pore must fulfil requirements through audited accounts, need to set-up a company to be able to invoice from Malaysia

3- Register your company by making sure you fulfil the paid-up capital requirements for the work permits purpose.
The simpliest way to work / paid-up capital

Hope this helps

omicron · Gender: Joined: 21 Sep 2005 Posts: 1 Home Country: spain

Can representative and/or regional offices of a small European company have bank accounts in Malaysia? My aim, as the company's owner and man on the spot, is to make purchases for the office, to buy samples and pay for prototypes to be made which will be sent to Europe. At the moment I'm hampered by the fact that neither my company nor I, as non-resident entities, are able to set up bank accounts into which can be put money from accounts in Europe for the purpose of paying for my administrative and developmental work. At the moment, I'm using my credit cards!

JazzMatt · Posted: Wed Sep 21, 2005 5:46 pm Post subject:

The rep office can have bank accounts to pay staff and to make purchases crucial to the functioning of the office. I think buying samples, etc falls under development, and is therefore allowed.

However, the rep office is NOT allowed to engage in any form of trading. However people get around this by billing clients directly from their home offices (in Europe, US, etc).