How to Set Up a Subsidiary Company in Malaysia
- Chow Ping
- 6 hours ago
- 4 min read
Malaysia is Southeast Asia's golden child, if we may say so ourselves.
Strategic location, business-friendly government, and 100% foreign ownership allowed. It’s the perfect location to set up your company subsidiary.
Here’s what you need ot know:
There are specific regulatory requirements to navigate — SSM registrations, Sdn. Bhd. structures, and Foreign Investment Committee approvals for certain ownership levels.
Let's walk through exactly how to do it.
What is a Subsidiary Company in Malaysia?
A subsidiary company in Malaysia is a separate legal entity owned by a parent company holding more than 50% of its shares. The most popular form is the Sendirian Berhad, or Sdn. Bhd. — a Private Limited Liability Company.
Unlike branch offices, subsidiaries are treated as local companies for tax purposes. Your subsidiary operates independently, files its own taxes, and maintains its own financial records.
Most importantly, the parent company is NOT liable for the subsidiary's debts or legal issues.
Quick comparison:
Subsidiary: Separate legal entity, limited liability, treated as local company
Branch Office: Extension of parent company, parent is fully liable
Representative Office: Cannot engage in commercial activities
If you're serious about doing business in Malaysia, a subsidiary is your best bet.
Why Set Up a Subsidiary in Malaysia?
Beyond the obvious appeal, here are the concrete advantages:
100% foreign ownership allowed — Malaysia welcomes foreign investors. You can own 100% of your subsidiary in most sectors without hunting for local partners. Exceptions exist in banking, energy, education, and agriculture.
Treated as a local company — Your subsidiary gets all the perks of being Malaysian. It's taxed like a local company, can access local incentives, and builds credibility in the market.
Limited liability protection — Your parent company's assets are shielded. If something goes wrong, liability stops at the subsidiary level.
Strategic location — Malaysia sits at the heart of Southeast Asia with free trade agreements giving you preferential access to massive markets.
Tax incentives — Standard corporate tax is 24%. Qualifying SMEs are taxed at 15% (first RM150k), 17% (next RM450k), then 24% thereafter. The government offers Pioneer Status, Investment Tax Allowance, and other incentives that can significantly reduce your tax burden.
Before You Start: Important Considerations
Malaysia is multicultural with Chinese, Indian, and Malay influences woven into business life.
Peninsular Malaysia and East Malaysia have distinct differences that impact how business is conducted. Understanding these nuances helps you decide where to base operations.
Do you need 100% foreign ownership or would a local partner make strategic sense?
Some sectors require Foreign Investment Committee approval if foreign ownership exceeds 30%. At least one director must have a residential address in Malaysia, which means work permits if you're bringing in foreign management.
Malaysia Subsidiary Law You Must Know
Foreign ownership is generally allowed up to 100%, but some sectors are subject to regulator approvals and equity conditions (sector-specific).
Here's the incorporation process from start to finish:
Step-by-Step Process to Set Up a Subsidiary Company in Malaysia
Step 1: Choose and Reserve Your Company Name
Submit your proposed name to SSM. The name search costs RM50 and remains valid for 30 days if approved. Follow SSM's naming guidelines and avoid prohibited or sensitive words.
Step 2: Prepare Your Incorporation Documents
Gather these essentials:
Memorandum and Articles of Association (M&A) or Constitution
Directors' and shareholders' identification (passport/NRIC)
Proof of residential address for directors
Parent company's Certificate of Incorporation
Board resolution approving subsidiary formation
Step 3: Submit Incorporation Application to SSM
File through SSM's online portal. Incorporation fee is RM1,000 for companies with authorized share capital up to RM100,000. Processing time varies; typically a few working days to a couple of weeks, depending on completeness and queries.
You'll receive a Notice of Registration (Section 15) as proof of incorporation.
Step 4: Register Your Office Address
Your registered office address is set in the incorporation particulars; any change must be notified to SSM within 14 days.
You may lease physical space or use a virtual office arrangement that complies with SSM requirements.
Step 5: Appoint a Company Secretary
Deadline: 30 days from incorporation. Your company secretary ensures statutory compliance and keeps you out of trouble with authorities.
Step 6: Open a Corporate Bank Account
At least one director must be present. You'll need SSM incorporation certificate, directors' identification, board resolution, and proof of office address.
Step 7: Register for Tax & Statutory Contributions
Six mandatory registrations:
LHDN (Inland Revenue Board) — Tax reference number and Form CP204 within three months
SST (Sales and Service Tax) — Mandatory if annual revenue exceeds RM500,000
EPF (Employees Provident Fund) — Required when hiring employees
SOCSO (Social Security Organization) — Social security protection for employees
PCB (Monthly Tax Deduction) — Withholding tax on employee salaries
Industry-specific licenses — F&B, construction, professional services may need additional permits
Step 8: Apply for FIC Approval (If Applicable)
If foreign ownership exceeds 30%, submit your FIC application. Expect 4-8 weeks processing time.
How long will the incorporation process take?
Incorporation takes two weeks. Add statutory registrations, office setup, and Foreign Investment Committee approval (if applicable), and you're operational in 4-8 weeks.
What Comes Next After Incorporation?
Your compliance obligations begin immediately.
Annual Compliance Requirements
Annual Returns (SSM) — Within 30 days of incorporation anniversary
Audited Financial Statements — Within 18 months (first year), then annually
Tax Returns (LHDN) — By June 30 if financial year ends December 31
SST Returns — Bi-monthly if registered
Employee Statutory Contributions — Monthly before the 15th
Annual General Meeting — Within 18 months of incorporation, then annually
Missing these deadlines creates expensive problems.
Special Considerations for Different Industries
Your industry determines both ownership flexibility and available incentives. Here's what applies to key sectors:
Manufacturing — Access Pioneer Status and Investment Tax Allowance for significant tax savings
Food Production — Tax deductions and exemptions up to 10 years on new projects
Banking, Energy, Education, Agriculture — 50% Malaysian ownership typically required
Tech and R&D — Various grants and tax incentives available for innovation
Ready to Set Up Your Malaysia Subsidiary?
Douglas Loh & Associates has 32 years working with businesses like yours. We help companies successfully establish and maintain subsidiaries in Malaysia with end-to-end incorporation and compliance services.
Need certainty that your subsidiary meets all regulatory requirements?
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