How to Start a SaaS Business in Malaysia (10 Steps)
- Chow Ping
- Dec 5, 2025
- 7 min read
Malaysia dumped RM 59.1 billion into digital investments in the fist half of 2025 alone — most of it flowing into AI, cloud services, and software.
While everyone defaults to Singapore or tries navigating complex ownership structures elsewhere, Malaysia offers a simpler setup for SaaS businesses.
100% foreign ownership allowed. Corporate tax as low as 0% with the right incentives. Active government support for tech companies.
The incorporation itself is straightforward. But there are decisions early in the process — around business structure, capital requirements, and incentive applications — that significantly impact your tax bill and hiring capabilities down the line.
Here are the 10 steps to get it right:
Step 1: Understand Malaysia Digital (MD) Status to Start SaaS Business
If you're Malaysian, you're clear to proceed. Skip to Step 2.
If you're a foreigner already in Malaysia with a valid work visa:
You can incorporate and operate. Just ensure your visa allows business activities.
If you're a foreigner outside Malaysia:
You have two pathways:
Option 1 - Malaysia Tech Entrepreneur Programme (MTEP):
Apply for a Professional Visit Pass (1 year, renewable)
Enter Malaysia, then set up your company
Higher tiers (based on experience) grant 5-year Residence Pass with dependent privileges
Best for: Founders who want to test the market first
Option 2 - Incorporate first, get Employment Pass later:
Apply for Employment Pass once company is registered
Processing time: 2-3 months
Critical requirement: RM500,000 paid-up capital OR Malaysia Digital status (which drops it to RM1,000)
Best for: Founders ready to commit
Most established foreign founders go with Option 2 and pursue Malaysia Digital status immediately to avoid the RM500K capital requirement.
Step 2: Apply for Malaysia Digital (MD) Status
If you're a foreigner, it’s helpful to get clear on what the MD status means for your capital requirements.
Standard requirements without MD status:
RM500,000 paid-up capital to get Employment Pass
Standard 17-24% corporate tax
With Malaysia Digital status:
RM1,000 paid-up capital (99.8% reduction)
0-10% corporate tax for up to 5 years
Fast-track Employment Pass processing
As you can see, having an MD status is smart. The difference is between USD 125,000 and USD 250 in required capital.
Who qualifies for MD status:
Tech or tech-enabled companies (cloud software, SaaS platforms, analytics, cybersecurity)
Must be Sdn Bhd structure
Demonstrate innovation/IP development
Show substantial Malaysian operations
Application timeline: 4-8 weeks through MDEC portal
Step 3: Choose Your Business Structure
Now you're ready to decide on structure.
You have two options: Sdn Bhd (Private Limited company) or Labuan Company (for offshore businesses).
Go with Sdn Bhd if:
You're serving Malaysian or regional customers
You need to hire Malaysian employees
You want Malaysia Digital incentives (remember that you need a Sdn Bhd structure if you want Malaysia Digital (MD) status)
You need Employment Passes for foreign team members
Only consider Labuan Company if:
100% of customers are outside Malaysia
You don't need local staff
You don't want government incentives
You want 3% flat tax rate
The reality: 95% of SaaS founders choose Sdn Bhd.
Why? Labuan locks you out of MD status, local hiring, and corporate banking convenience. The 3% tax sounds attractive until you realize what you're giving up.
For the rest of this guide, we're assuming Sdn Bhd.
Step 4: Register Your Sdn Bhd
What you need:
At least one resident director (Malaysian or foreigner with valid visa; can use nominee director if needed)
Minimum one shareholder
Company secretary (licensed professional, must appoint within 30 days)
Registered Malaysian address (virtual office works)
MSIC code (classifies your business activity—choose software development, cloud hosting, or digital services)
Paid-up capital declaration (RM1,000 minimum if pursuing MD status, otherwise RM500,000 for Employment Pass eligibility)
Timeline: 1-3 days once documents submitted to SSM (Companies Commission of Malaysia)
Costs:
SSM filing: RM1,010+
Company secretary (first year): RM800-2,000
Virtual office: RM600-1,500/year
Red flag: If a company secretary charges less than RM1,010 total, they're locking you into expensive multi-year contracts. Always ask about ongoing costs.
Step 5: Check If You Need Industry Licenses
Good news: Most SaaS businesses don't need special licenses.
Building B2B productivity tools, CRM systems, project management software, or general business applications? You're clear.
You DO need licenses if you're building:
IaaS/PaaS infrastructure: ASP(C) license from MCMC (Malaysian Communications and Multimedia Commission)
Fintech platforms: Approval from Bank Negara Malaysia or Securities Commission
Healthcare/medical SaaS: Clearance from Medical Device Authority (MDA)
Gaming or streaming apps: CASP license from MCMC
Operating from physical office: Composite license from Local Authority (PBT)
Most pure SaaS founders skip this entirely. But verify based on what your software actually does.
Step 6: Open Your Business Bank Account
This takes longer than expected, so start early.
Timeline: 2-4 weeks from application to activation
Reality check: Most Malaysian banks require in-person verification, even in 2025 (I know right).
Required documents:
Certificate of Incorporation from SSM
Company constitution
Director and shareholder IDs
Board resolution authorizing account
Business plan or description
Popular banks for tech startups:
Maybank (largest network)
CIMB (tech-friendly, good online banking)
Hong Leong Bank (responsive business banking)
RHB (competitive rates)
Pro tip: Your company secretary often has banking relationships that speed this up. Let them coordinate.
Step 7: Set Up Payment Collection
You need a way to get money from customers.
For Malaysian customers:
iPay88 (widely used, supports local payment methods)
eGHL (enterprise-focused)
RazerPay (startup-friendly, easy integration)
For international customers:
Stripe (best for global SaaS billing, excellent subscription support)
PayPal (higher fees, but customers trust it)
Key considerations:
Malaysian B2B clients expect invoices in MYR
Choose a gateway supporting multi-currency and recurring billing
Verify subscription payment capabilities — not all gateways support this
Timeline: 1-2 weeks for gateway verification
Start your application while waiting for bank account approval.
Step 8: Register for Taxes and Statutory Contributions
Within 3 months of incorporation, register with LHDN (Inland Revenue Board).
Corporate tax structure in Malaysia:
First RM600,000 annual profit: 17% tax
Profit above RM600,000: 24% tax
Submit CP204: Your tax estimate for the year. LHDN uses this to calculate installment payments.
SST (Sales and Service Tax): Most pure SaaS businesses are exempt if services are delivered entirely online. But if you earn RM500,000+ from taxable services, registration is mandatory.
When you hire employees, also register for:
EPF (Employees Provident Fund): Retirement savings
SOCSO (Social Security): Work injury insurance
EIS (Employment Insurance): Unemployment insurance
PCB (Monthly Tax Deductions): Income tax withholding
Do these BEFORE paying your first employee. Penalties for late registration aren't pleasant.
Step 9: Comply with PDPA (Data Protection Law)
If your SaaS collects, stores, or processes user data — which it almost certainly does — you must comply with the Personal Data Protection Act.
Requirements:
Obtain clear user consent before collecting data
Implement security measures (encryption, access controls)
Maintain a privacy policy explaining data usage
Allow users to access, correct, or delete their data
Register as a data user with JPDP (Personal Data Protection Department)
Penalties for non-compliance: Up to RM500,000 in fines or 3 years imprisonment for serious violations.
This isn't a "nice to have." Build PDPA compliance into your product from day one.
Data storage consideration: Local hosting isn't legally required, but clients in finance, healthcare, and government often prefer data stored in Malaysia or the region. AWS, Google Cloud, and Azure all have Southeast Asian data centers.
Step 10: Set Your Annual Compliance Calendar
Starting the company is one thing. Keeping it compliant is another.
Mark these dates or face penalties:
SSM (Companies Commission):
Annual Returns: Within 30 days of incorporation anniversary
Miss this? Penalties start at RM300 and increase with delay
LHDN (Tax Department):
Corporate tax filing: 6-7 months after financial year-end (June 30 if year ends Dec 31)
Tax estimate (CP204): Within 3 months of year-end
Audited Financial Statements:
First year: Within 18 months of incorporation
Subsequent years: Within 6 months of year-end
All Sdn Bhds must audit annually, regardless of size
AGM (Annual General Meeting):
Within 6 months of financial year-end
Annual operating costs to budget:
Company secretary: RM960-3,000
Audit: RM2,000-8,000
Tax filing: RM1,000-5,000
Accounting/bookkeeping: RM6,000-24,000/year
Total: RM10,000-40,000 annually
LHDN doesn't negotiate. They don't accept excuses. Set calendar reminders. Or hire professionals (like us) to do it for you.
Common Pitfalls That'll Cost You
1. Registering with RM2 paid-up capital as a foreigner
Then discovering you need RM500K for Employment Pass. Increasing capital later requires paperwork and filings. Plan ahead or pursue MD status immediately.
2. Choosing company secretaries based on price alone
Below RM1,010? They're trapping you in expensive long-term contracts. Always ask about total costs, including ongoing fees.
3. Assuming your SaaS doesn't need licenses
Verify based on what your software does. Fintech, healthcare, gaming, and infrastructure providers all face different regulations.
4. DIY accounting to "save money"
Professional accounting: RM500-2,000/month.
LHDN audit from mistakes: RM10,000+ in penalties plus months of stress.
What do you think?
5. Not planning Employment Pass timeline
Applications take 2-3 months. Start when you decide to hire, not when your new hire needs to relocate.
6. Ignoring PDPA until a customer asks
By then, you're non-compliant and facing potential penalties. Register as a data user from day one.
Your Action Plan
Week 1-2:
Clarify your visa/legal status in Malaysia
Assess Malaysia Digital eligibility (if foreigner)
Gather incorporation documents
Week 3-4:
Engage company secretary
Submit Sdn Bhd incorporation to SSM
Apply for MD status (if applicable)
Week 5-8:
Open business bank account (start early, it takes time)
Set up payment gateway
Register with LHDN for corporate tax
Week 9-12:
Implement PDPA compliance
Register for employer contributions (if hiring)
Set up compliance calendar with deadlines
Timeline for foreigners: Add 2-3 months for Employment Pass processing after company registration.
Final Word
Starting a SaaS business in Malaysia isn't complicated — but it is detailed.
The opportunity is legitimate: Low operating costs, strong tax incentives (especially with MD status), full foreign ownership, access to Southeast Asian markets.
The execution requires precision: Proper visa planning, strategic structure selection, timely registrations, ongoing compliance.
Miss one compliance step, and you're either locked out of opportunities (like MD Status and Employment Passes) or facing penalties from authorities who don't negotiate.
Do it right from the start. Or even better, have professionals like Douglas Loh & Associates do it for you. We'll make sure you don't miss the steps that cost you later.
Want to focus on your business while we manage the boring paperwork for you?
Or if you prefer WhatsApp...
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