Compared to other off and mid-shore locations, re-domiciliation in Malaysia is very affordable. The location benefits from trade by sea and offshore services due to its advantageous location between China and India and several of ASEAN’s financial hubs.
If a foreign business owner is looking to establish in ASEAN countries and is looking for a jurisdiction with a low tax regime, low operating costs with access to skilled workers, reasonable prices for substance creation, and a stable political environment, he may want to consider Malaysia.
Liquidation of the company is not necessary because the company is simply changing jurisdiction, not closing.
WHAT IS RE-DOMICILIATION IN MALAYSIA?
APPROVAL AT ORIGINAL JURISDICTION PRIOR TO TRANSFER
When a business decides to shift its domicile to a different jurisdiction, there are a few steps that must be taken in the first jurisdiction before the transfer process may begin in the new jurisdiction.
In general, a firm in its original jurisdiction will need to get permission from the authorities there for such a transfer to happen. Also, the company must have gained the agreement of its shareholders and creditors and fulfilled its legal responsibilities with regard to corporate filings and tax returns. The company may also need to notify any other stakeholders or third parties with whom it interacts.
To ensure that potential stakeholders are given enough notice, several jurisdictions even require the firm to comply with an advertising requirement. To accomplish this, the company must publicly announce that it has started the process of moving its domicile to another jurisdiction.
APPLICATION PROCESS FOR TRANSFER OF DOMICILE INTO MALAYSIA
A company should first try to make an application to reserve the name of the company before making the formal application for the transfer of domicile to Malaysia.
If the company’s present name is not available for reservation, it should think about reserving a name that is similar.
As soon as the name has been reserved, the reservation is good for three months.
The corporation should subsequently submit an application to the Malaysia Financial Services Authority for permission in principle of the re-domiciliation.
Following approval, the business has a year to reapply for registration to remain a Malaysian corporation. The company may apply immediately for registration to continue as a Malaysia company once it is able to satisfy the conditions under the Malaysia company act or Labuan Companies Act 1990.
The business will then need to adopt the constitutional document’s form and content in accordance with the Labuan Companies Act 1990. The company’s original jurisdiction’s current constitutional papers will not be recognized.
In order to complete the transfer of domicile, the company must additionally designate an agent, typically Malaysia professional service provider such as Relin Consultants, and provide that agent the authority to carry out all necessary acts and to sign any documents on the company’s behalf.
Similar to a newly created Malaysia company, the Malaysia consultant appointed, which will also serve as the company secretary, will also prepare the required documentation for the transfer of domicile application.
The Permission to Act as a Director, Report on Particulars and Changes of Directors and Secretaries, as well as a Statutory Declaration of Compliance, are among the documents that must be prepared.
The Malaysia Financial Services Authority’s approval procedure will take two to three weeks after the complete application is submitted and no more documents are required by the authorities.
The Malaysia Financial Services Authority will issue the Certificate of Registration of a Foreign Business as Continuing in Malaysia following approval of the application (Form 8). The business must receive a deregistration certificate from the original jurisdiction within a reasonable amount of time, and it must give the Malaysia Financial Services Authority a certified true copy of that certificate.
Check to Malaysia Company Formation if you are interested in forming a new company in Malaysia.
DOCUMENTATION REQUIRED FOR APPLICATION – RE-DOMICILIATION IN MALAYSIA
- Directors’ Resolution of the Company
- Letter of Good Standing of the Company from the Registrar of Companies of country of origin.
- Letter of consent from shareholders, debenture holders and/or creditors of the Company
- Letter of Consent from the Registrar of Companies of the country of origin to allow the Company to migrate out.
- Certificate of Incorporation
- Memorandum & Articles of Association
- Latest Register of Members, Directors, and Secretaries
- Discontinuance of Deregistration Certificate from Country of Origin
- Letter of Declaration
WHY IS MALAYSIA THE IDEAL CHOICE FOR RE-DOMICILIATION?
- It is a highly regulated global financial and business hub that follows standards found around the world.
- It is governed by a common law framework, which provides a full range of laws that allow businesses to develop custom solutions for corporate growth and innovation.
- It offers reasonable tax rates that are mandated by law, including 3% of net audited revenue for Malaysia trading activity and zero tax on Malaysia non-trading activity when conditions like substance requirements are met.
- Indirect taxes, such as import charges, excise taxes, and sales and services taxes, do not exist in Malaysia.
- Malaysia is a great option for international transactions since it has access to more than 70 signed double-tax treaties with Malaysia, which has one of the largest double-tax treaty networks in Asia.
- It is centrally situated and has access to all important Asian markets.
- It is the perfect location for Asian firms because it is in the same time zone as most of Asia.
- With the Malaysia Financial Services Authority as a one-stop regulator, doing business is made simple.
- Backed by a cutting-edge, extensive infrastructure network
- Everywhere in Malaysia, a business entity may set up marketing offices.
- As long as adequate substance is maintained in Labuan, banks and insurance companies are permitted to open additional operating offices (also known as “co-located offices”) anyplace in Malaysia. In the meanwhile, Kuala Lumpur will serve as the location for holding companies’ co-located offices.
- In Malaysia, there is a sizable pool of highly qualified workers that are fluent in English, Mandarin, and Bahasa Malaysia. There are options for a work permit and dependent visa(s) to remain in Malaysia.
- Much reduced operation and maintenance expenses than in other countries, such as office rent, professional, legal, and accountant fees, as well as company registration and renewal.
Reach out to us at Relin Consultants for more information.
Can a company be domiciled in two countries?
It is generally not possible for a company to be domiciled in two countries simultaneously. The concept of a company’s domicile refers to its legal home or base. It is typically determined by the country where it is incorporated or where it has its principal place of business.
However, a company may have operations or subsidiaries in multiple countries, and it may be subject to the laws and regulations of those countries. In such cases, the company may be required to comply with the laws and regulations of each country where it operates. It may have legal obligations and responsibilities in each of those countries.
In some cases, a company may also choose to establish a presence in multiple countries by setting up subsidiaries or branches in those countries. Each subsidiary or branch would be subject to the laws and regulations of the country where it is located, but the overall company would still be domiciled in the country where it is incorporated or where it has its principal place of business.
Can a foreigner be a director in Malaysia?
Yes, a foreigner can be a director of a company in Malaysia. The Companies Act 2016 does not impose any restrictions on the nationality or residency of company directors.
However, foreign directors must meet certain requirements and comply with relevant regulations. For example, foreign directors must have a valid work permit or other appropriate documentation that allows them to work in Malaysia. Additionally, the Companies Commission of Malaysia (SSM) requires that at least one director of a company must be a resident of Malaysia. A resident director is defined as an individual who is a Malaysian citizen or who has a permanent address in Malaysia.
Can foreigners own companies in Malaysia?
Yes, foreigners can own companies in Malaysia. The Companies Act 2016 allows for 100% foreign ownership of companies in most industries and sectors, subject to certain restrictions and regulations.
Foreigners can choose to set up a new company in Malaysia or acquire an existing one. Several types of companies can be established in Malaysia, including private limited companies, public limited companies, and foreign branches or representative offices.
Foreign-owned companies must comply with all relevant laws and regulations, including company registration requirements, employment and immigration regulations, and tax laws. Depending on the nature of the business and the industry, there may be additional regulations and requirements to consider.
Foreign investors may also be eligible for various incentives and benefits under Malaysia’s investment policies and programs. These may include tax incentives, grants, and other forms of assistance to encourage foreign investment and promote economic growth.
What does Redomiciliation mean?
Redomiciliation refers to the process by which a company changes its domicile or legal home from one country to another. This process allows a company to transfer its operations, assets, and liabilities to a new jurisdiction without having to liquidate or dissolve the existing company and form a new one in the new jurisdiction.
Redomiciliation is typically used by companies that want to take advantage of more favourable business environments, tax laws, or regulatory frameworks in another jurisdiction. By changing their domicile, companies can access new markets, reduce their tax burden, or streamline their operations, among other benefits.
How to open a branch office in Malaysia?
Setting up a branch in Malaysia involves the following general steps:
- Decide on the type of branch you want to establish.
- Register with the Companies Commission of Malaysia (CCM) and provide the necessary documents, including certified copies of your parent company’s certificate of incorporation and memorandum and articles of association, board resolution authorizing the establishment of the branch in Malaysia, and a statutory declaration confirming the company’s solvency.
- Obtain necessary licenses and approvals from the relevant authorities.
- Register with the Inland Revenue Board of Malaysia and obtain a tax identification number.
- Open a bank account in Malaysia and deposit the minimum required capital.
- Obtain any necessary visas and work permits for your staff.
- Find suitable office space and hire employees.
- Comply with all Malaysian laws and regulations related to your business activities.
You can refer to Malaysia Branch Office Set Up for more information.