INVESTMENT HOLDING COMPANY IN MALAYSIA

A holding company in Malaysia is commonly registered with the sole objective and intention of controlling and managing the assets and investment policies of another company. 

Such structures are usually set up by a parent company for specific purposes and holding shares of other businesses. 

A holding company does not offer services or produce goods on its own. Holding companies will usually earn their income from managing the assets and investments of other companies.

It is common in Malaysia to establish a holding company with the main intent of owning various property types in copyright fields and real estate.

What Exactly Is A Holding Company In Malaysia?

According to Lembaga Hasil Dalam Negeri Malaysia (LHDN), an investment holding company (IHC) is a company whose primary activities are the holding of investments. At least 80% of its gross income, other than the gross income from a source consisting of a business of holding of investment (whether exempt or not), is based on the holding of those investments.

Holding companies generally oversee and control the investment plans of other companies. Malaysian holding businesses are no exception. These businesses do not provide self-service. They don’t even have any things to manufacture. These companies are simply engaged on a contractual basis by another parent or host company to handle the investment plans of the other company and maintain track of the client company’s assets.

Why Incorporate A Holding Company In Malaysia?

Financial accessibility

• In contrast to the requirement of three years of financial accounts for a typical running company, an IHC is legally permitted to ask for financing and loans as soon as it is incorporated.
• Individuals may also be eligible for financial advantages, particularly if they are regarded to have a high capital risk due to existing financial problems.
• By moving current assets to a properly created IHC, the individual may find themselves in a more advantageous position when applying for future funding.

Tax advantages

• LHDN-allowed expenses can be deducted against rental revenue from business sources, which would otherwise count against an IHC’s gross income limits.
• Consider that the capital rate of taxes for corporations with less than RM2.5 million in the capital, which applies to IHCs under this level, is now 17%.
• This contrasts with the 21% tax rate for individual incomes between RM50,000 and RM70,000, and the 24%-30% tax band for individual earnings over that number.
• Depending on the IHCs and individuals’ specific income and earnings levels, this might result in tax savings.

Risk mitigation

Person A and Person B would own a property (and maybe a home loan) under their joint names in a typical joint ownership property transaction. Person B would have to go through the laborious legal processes to secure ownership of the property if Person A died.

An IHC avoids these issues. With an IHC, Person A’s death would only have a direct impact on the company’s shareholding, rather than its property ownership. Person B would still be in charge if not for the delays and difficulties caused by lengthy bureaucratic formalities connected to inheritance and property ownership.

What are the permitted activities for a holding company in Malaysia?

• Hold assets in securities. 
• Hold assets in stocks. 
• Hold assets in shares. 
• Hold assets in deposits. 
• Hold assets in loans. 
• Hold assets in immovable properties. 
• Offer management services that are related to accounting or support.

TYPES OF HOLDING COMPANIES IN MALAYSIA

There are two types of investment holding companies, each with its own set of rules under the Income Tax Act of 1967.

• Listed investment holding company

Section 60FA says that an IHC is assumed to be a listed IHC if it is listed on Bursa Malaysia for any period throughout the base period for a year of evaluation. The revenue of the mentioned IHC will be considered as company income, and the expenses will be tax deductible in full. On the other hand, unabsorbed losses and capital allowances will not be carried forward.

• Unlisted investment holding company

Section 60F of the Income Tax Act of 1967 stated that an IHC is permitted to claim a deduction for a percentage of your administrative expenditures, such as director’s fees, wages and allowances, management fees, secretarial, audit, accounting fees, and other incidental expenses related to office upkeep. However, such a deduction will be limited to a maximum of 5% of total gross income, which includes dividends, interest, and rent. Any unabsorbed expenditures will be forfeited and will not be carried forward.

How Is A Holding Company In Malaysia Taxed?

• The income tax will be based on the company’s status. That means if the company is enlisted in the Malaysian stock exchange, the company will be considered under Section 60FA of the Income Tax Act.
• However, if the company is not listed on the stock exchange, it will fall under Section 60F of the Income Tax Act of Malaysia. In both cases, the taxation for holding companies will depend on the fact that whether the holding company is listed on Bursa Malaysia or not.
• A holding company in Malaysia incorporated outside of Labuan is also not subjected to the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2018.

Interested to form a holding company in Malaysia? If the answer is yes, call us at +65 8756 2027 to set an appointment with our agents. Here at Relin Consultants, we have a lot of experience in helping our clients to set up a holding company in Malaysia, and we would love to help you out as well.