What Determines If Your Sdn Bhd Is An Investment Holding Company In Malaysia?

  • Post category:Malaysia

A business is considered to be an investment holding company if other legal investments account for 80% of its total gross investment.  These kinds of holding companies are permitted to develop a specific range of commercial activities in Malaysia.

Unmovable asset renting, real estate investing, accounting services for client firms, and maintenance and support services for client business organizations are just a few of these particular industries.  The Inland Revenue Board of Malaysia, a governmental organization in Malaysia, is in charge of and keeps an eye on this type of holding company.

What Determines If Your Sdn Bhd Is An Investment Holding Company In Malaysia

THINGS TO BE CONSIDERED FOR INCORPORATING A HOLDING COMPANY IN MALAYSIA

  • Concentrate on the specific industry one needs to enter to create the holding company.
  • Establish a reliable corporate entity for the business world.
  • Make plans and strategies for the company you wish to launch in Malaysia.
  • Create a company that expresses your planned approach in detail.
  • Establish a strong network to find business prospects.
  • Set up enough funding for the many investments that a holding company needs to take into consideration.
  • Keep your company’s great reputation, goodwill, and commercial trust with the parent firms.
  • Keep up with the annual reports, legal profiles, and financial statements.

Under PR 10/2015 of the Income Tax Act (ITA), two main requirements must be met to determine if JFE is an Investment Holding Company in Malaysia. JFE’s income would be taxed differently from that of a typical Sdn Bhd if it were determined to be an Investment Holding Company since its expenses that can be deducted from taxes are different.

Purpose

If a business holds investment assets and its primary activity is to generate income from these assets, it is referred to as an IHC (Investment Holding Company) in Malaysia. These investment assets include, among others, real estate, shares of publicly and privately traded corporations, unit trusts, fixed deposits, and cash.

The 80% Gross Income Rule

A corporation would only be considered an IHC (Investment Holding corporation) in Malaysia after passing the first requirement and generating at least 80% of its gross income from investment assets. It comprises rental revenue subject to Section 4(d) tax as well as interest and dividend income subject to Section 4(c) tax. 


SOME OTHER THINGS THAT DETERMINE IF SDN BHD IS AN INVESTMENT HOLDING COMPANY ARE:

  • Investment Portfolio – The balance statement of the company should disclose a large amount of investments in the form of shares, stocks, or other financial instruments. These investments are often held for a long time, and their value is frequently decided by the value of these assets.
  • Generating passive income – Investment holding firms primarily derive their revenue from passive sources, such as dividends from their stock holdings, interest from fixed-income investments, and rental income from real estate. They often don’t trade actively or offer services that generate a lot of operational revenue.
  • Limited Operational Activities – Investment holding companies frequently conduct only a handful of operational activities. Their top priorities are the management of their investment portfolio and the strategic choices they make with it. It’s possible that they don’t work in sectors like manufacturing, trade, or services.
  • Subsidiary companies – Investment holding companies may be the owners of subsidiary companies that engage in a range of economic activities. The investment holding company’s main purpose is to own shares in these subsidiaries and profit from their operations rather than actively participating in these operations. 

STEPS TO FORM A HOLDING COMPANY IN MALAYSIA

  • Planning and establishing the business structure, in the beginning, is required.
  • Choose and research the company you wish to represent.
  • According to the advice of the Malaysian company authorities, a business application must be submitted.
  • Establishing a bank account properly in the holding company’s name.
  • Investing appropriately in the new holding company.
  • Regular record-keeping and financial status reporting.

Refer to Investment Holding Company Malaysia for further information.

Reach out to us at Relin Consultants for more information.