Malaysia

Ease of Doing Business Rank: 15 

Overview 

Geographic location 

Malaysia is a country in Southeast Asia with two parts. A portion lies in the Malay Peninsula and the rest on the island of Borneo. The Malacca Strait, South China and sea and Gulf of Thailand border the country. 

Thailand, Cambodia, and Vietnam lie to the north, India and Sir Lanka to the west, the Philippines and Indonesia to the east, and Singapore and Australia to the south. 

Spoken language 

Malay is the official language of Malaysia. East Malaysian languages include Iban, Dusunic, and Kadazan. 

English is widely understood and spoken and taught in school. In some areas, such as the states of Sabah and Sarawak, it is also the official working language. There is also a significant Chinese community in Malaysia, so Mandarin and Cantonese are also commonly spoken. 

Population 

The 2019 population is approximately 32.41 millionMost people live in peninsular Malaysia (22.5 million) and the balance in East Malaysia. 

Kota Bharu and Kuala Lumpur are the largest cities, followed by Klang, Kampung Baru Subang, Johor Bahru, Subang Jaya, and Ipoh. Almost all major cities hug the coastline. 

Popular industries 

The top industries in Malaysia are rubber, oil palm processing and manufacturing, light manufacturing, pharmaceuticals, medical technology, electronics, tin mining and smelting, logging, timber processingconstruction, and automotive. 

Education 

The Times Higher Education World Rankings lists 9 Malaysian universities in the top 1,000 in the world.  

Popular entity types 

The most common business entities in Malaysia are Sole Proprietorship, Limited Liability Company, Limited Liability Partnership, Company Limited by Shares, and Unlimited Company. 

The most commonly incorporated entity in Malaysia is the Limited Liability Company. 

Malaysian incentives for business 

Malaysia has many tax incentives for foreign business including income exemptions or allowances that can be carried forward against future earnings. 

Qualifying companies in the industrial or commercial sector may also be eligible for Pioneer status or an investment tax allowance. Pioneer status provides a 70% exemption on income for five years 

Investment tax allowances provide a 60% reduction on qualifying capital expenditures which can be applied against 70% of income. The government also enhances these allowances if projects are of national importance or target particular industries. 

Malaysia also offers a substantial reinvestment allowance for expansion, modernization, diversification, and automation for companies that have operated in the area for over 3 years.  

Qualifying companies may also receive incentives for transportation, communications, utilities, and services. 

Manufacturing and agricultural companies that export their products may also qualify for export incentives. 

Additionally, locally incorporated companies that use Malaysia as their principal hub may enjoy tiered tax rates for up to ten years, upon approval. 

Qualifying international trading companies may also receive tax exemptions under certain conditions. 

Islamic banking, insurance, and fund management services may also qualify for a full income tax exemption for ten years. 

The financial district in Kuala Lumpur also offers incentives to accelerate the development of their Tun Razak Exchange (TRX), including stamp and income tax exemptions, building and capital allowances, reduced taxes on rentals, and a relocation deduction.  

Real estate investment trusts and property trust funds may also enjoy total income tax exemption, under certain circumstances. Foreign fund management and venture capital companies may also qualify for deductions. 

Special incentives are also available for the petroleum, information and communication technology, green tech, waste management, and bio tech sectors. 

Malaysia also offers many incentives in special economic regions to encourage regional growth and development. They also offer some research and development incentives, including support for commercialization of R&D findings. 

History & Features 

 

Main cities for business 

Malaysia has many large business districts including George Town, Johor Bahru, Kota Kinabalu, Kuala Lumpur, Kuching, Petaling Jaya, and Shah Alam. 

Kuala Lumpur is the capital city and financial center of Malaysia. 

Popular historical & tourist attractions 

Malaysia is a blend of tradition and modernism. From the ultra-modern twin Petronas Towers in Kuala Lumpur to the UNESCO World Heritage historic cities of the Straits of Malacca, Malaysia offers a blend of the old and new. 

The country also features a cultural mix. Ornately decorated Hindu temples such as the Sri Mahamariamman highlight the country’s rich and varied past. Jamek Mosque is a perfect example of Moorish architecture. 

Visit Chinatown in Kuala Lumpur or Istana Negara, the palace of former Malaysian kings. The Thean Hou Temple is a Buddhist marvel with Confucian, Tao, and Buddhist decorations. 

World-class shopping, outstanding cuisine, and the buzzing nightlife in the Golden Triangle of Kuala Lumpur clearly demonstrate a modern infrastructure, complete with all the amenities. 

Contrasting this modern vibe are areas of unspoiled natural beauty throughout the country. The pristine rainforest of Danum Valley offers lush tropical greeneryjungle trails, and orangutan in their natural habitat.  

Sipadan Island in Borneo is marine sanctuary with more than 3,000 species of fish and countless species of corals. 

Mulu National Park includes countless caves, rock pinnacles, cliffs and gorges. It is also home to 2 million bats that exit the caves at dusk. 

The Bario and Kelabit Highlands in Borneo are a step back in time, complete with natives living in traditional stilted huts amid tropical forestsMalaysia is home to the oldest rainforest in the world, easily seen in Taman Negara National Park. 

History 

Farmers using bronze and iron came to Malaya around 1000 ADDuring the second and third centuries, Malayans became very civilized due to Indian influence through trade. Buddhism and Hinduism also came to Malaya at that time. 

During the 7th and 8th centuries, the state of Srivijaya of Sumatra dominated the coasts of Java, the Malay Peninsula, part of Borneo, and the Malacca Straits. These straits were the main passage between the Indian Ocean and China Sea and as a result the region flourished. The Srivijaya’s power gradually declined between the 11th and 13th centuries. 

The Melaka overtook the Srivijaya and their settlement prospered and grew due to trade with Arab, Chinese and Indian ships. The wealth of the city-state caught the attention of the Portuguese who sent an expedition and captured it in 1511 

The son of the Sultan of Melaka escaped and founded Johor. They tried to retake Melaka, but failed. Eventually, the Melaka formed an alliance with the Dutch, also an enemy of the Portuguese. 

The Dutch tried to capture Melaka in 1606 and 1608 and finally succeeded in 1641, with the assistance of Johor. They remained allies and dominated the area through most of the 17th century, despite several incursions. In 1699, the assassination of the Sultan Mahmud weakened Melaka reign. 

Shortly after, the Bugis arrived from Sulawesi, Indonesia to settle peacefully in Johor territory. After a series of plays for power, including assassinations, the Bugis triumphed. 

During the late 18th century, the British traded and controlled much of India. They came to know Malaya due to the heavy Indian trade in the area. In 1786, the British occupied Penang and founded Georgetown. In 1800, they took Province Wellesley on the Malay Peninsula and established Singapore in 1819. 

The Anglo-Dutch Treaty of 1824 finally settled longstanding territorial issues between the British and Dutch. The British assumed control over Melaka and the Dutch received Sumatra and the areas below the Malay Peninsula. 

In 1853, the British stopped charging duty on tin imports. Malaya was rich in tin and exports boomed. The demand for tin for steamships and greater travel due to the opening of the Suez Canal in 1869 further boosted their exports. Chinese workers flocked to the tin mines and Malaya’s plantations. 

Eventually, the death of the sultan and Chinese struggles over tin mine control led to an export disruption. The new ruler signed the Pangkor Agreement, which legitimized British control of the Malay rulers and paved the way for British imperialism in Malaya.  

In the early 20th century, Malayan industry boomed. Rubber and oil drew many Chinese to the area. However, the Great Depression ended immigration. 

In 1941, the Japanese invaded Malay Peninsula and in 1942 they took Borneo. When the Japanese lost the war, the British tried to unify the Malayan states, but they resisted. In 1948, they formed their own federation instead. 

Malayan nationalism grew as did communist activity for a few years. In 1955, the Reid Commission prepared the first constitution for Malaya and by 1957 they were an independent state. 

However, the 1960s were a time of great tension between Malays and non-Malays. After the 1969 elections, two days of violence ensued and the government declared a state of emergency. Fortunately, calm returned.  

During the next three decades, Malaysia switched from an agricultural economy to an industrial one. The standard of living rose dramatically and today Malaysia has the 3rd largest economy in Southeast Asia and one of the strongest, most diversified, and fastest-growing. 

Other relevant facts 

Malaysia has many religious affiliations including Islamic (61.3%), Buddhist (19.8%), Christian (9.2%), Hindu (6.3%), and traditional Chinese (3.4%). 

The Malaysian population consists of 50.1% Malay, 22.6% Chinese, 11.8% indigenous Bumiputra groups other than the Malays, 6.7% IndianNon-citizens account for 8.2% of Malaysia’s resident population.  

Additional Information for Business 

According to Forbes’ 2019 Best Countries for Business, Malaysia is the 35th best country in the world for conducting business.  

The 2019 Index of Economic Freedom rates Malaysia 22nd globally and states, The trade regime is relatively open. There is no mandated minimum wage, and labor regulations are not rigid.  

World Bank’s “Doing Business” rankings rate Malaysia 15th for ease of doing business in the world. 

Malaysia Entity Support Services by Blueback Global

Blueback Global provides a one-stop integrated solution to managing all aspects of your global operations. We can take the burden off you or your company’s internal resources by managing Entity Setup, Local Payroll, Accounting, Tax Reporting, HR Admin and Regulatory Compliance matters associated with operating in a foreign country. Our services are designed to be flexible and customized, so whether you are starting from entity registration, or have already registered but need support in setting payroll or hire employees, we can help at every point of the process.

The common scenarios that may give rise to the need for Blueback Global’s services include the following:

With our integrated approach, you can expect the following experience:

We have an initial complimentary meeting to discuss the scope, objectives and plans for your expansion plan into Malaysia. After this meeting, you can expect a follow-up proposal from Blueback Global within 1 to 3 business days, that outlines that the approach, scope of work and expected deliverables and outcome. Thereafter, our implementation team will then work closely with your team to register the local entity, set up payroll, accounting process, employee social security and benefits. We will then develop a mutually agreed timeline and approach for ongoing payroll, accounting, tax reporting and HR support. Blueback Global will set up a compliance calendar so that you know exactly what and when compliance items such as tax reporting and payroll returns are due. We will of course facilitate all of these, so you do not have to keep track of the compliance dates.

Our goal is to make the process as smooth, simple and successful as possible, and remove the anxiety of operating in a foreign location, to deliver a great customer experience.

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