Business Operations in Malaysia (Portfolio 7230)

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The Business Operations in Malaysia Portfolio begins with a general introduction to Malaysia and its governmental, financial, and economic institutions. This is followed by a consideration of the various forms of doing business in Malaysia, and the structure and regulation of foreign investment and trading. The legal framework of taxation in Malaysia as it applies to corporations and individuals, residents and nonresidents, is analyzed in this Portfolio.

The Worksheets include sample Articles of Association and selected tax forms for both resident and nonresident companies and individuals who carry on business in Malaysia. A list of the comprehensive double taxation agreements and related protocols and the applicable withholding rates under all treaties are also included.


Bloomberg BNA Portfolios are written by leading tax professionals who set the standard as leaders in their fields. The Business Operations in Malaysia Portfolio was authored by the following attorneys.  
Anand Raj

Anand Raj has been a partner of Shearn Delamore & Co. since 2003. He is Chair of the Bar Council's Tax Subcommittee and Chair of the Tax Committee of the American Malaysian Chamber of Commerce (AMCHAM). He has been consistently recognized as Tax Counsel in successive editions of the International Tax Review, Asia Pacific Legal 500, Asialaw Profiles, Asialaw Leading Lawyers and Chambers Asia Pacific over the last decade. Shearn Delamore & Co. has been recognized as the leading tier-one tax law practice by the same directories over the same period. Anand has also been recognized in the Global Competition Review and The International Who's Who of Competition Lawyers & Economists 2013.


Credentials / Anand received his LL.B (Hons), University of London, 1994; Advocate & Solicitor of the High Court of Malaya since 1996. 

Irene Yong

Irene Yong has been a Member of Shearn Delamore & Co.'s Tax and Revenue Practice Group from 1999 to 2002 and from 2004. She is also a member of the firm's Personal Data Protection & Privacy Laws Practice Group. Irene has been a partner of Shearn Delamore & Co. since 2008. She is featured in the “Tax” section of the Asia Pacific Legal 500 (2011/2012 and 2008/2009 editions) and the 2011/2012 and 2009/2010 editions of the International Tax Review rankings. Irene is a member of the International Fiscal Association, Malaysia Branch.


Credentials / Irene received her LL.B (Hons), University of London, 1997; Certificate of Legal Practice, 1998. MBA, Warwick Business School, UK, 2003; Advocate & Solicitor of the High Court of Malaya since 1999.

Cynthia Lian

Cynthia Lian has been a member of Shearn Delamore & Co.'s Tax and Revenue Practice Group since 2005 and is a member of the firm's Competition Law & Antitrust Practice Group. She has been recognized as Tax Counsel in the 2009/2010 and 2011/2012 editions of the International Tax Review.


Credentials / Cynthia received her LL.B (Hons), University of Northumbria, 2003; Certificate of Legal Practice, 2004; Advocate & Solicitor of the High Court of Malaya since 2005. 



Pui Chi Foong

Pui Chi Foong has been a Member of Shearn Delamore & Co.'s Tax and Revenue Practice Group since 2007 and has been recognized as Tax Counsel in the 2010/2011, 2011/2012 and 2012/2013 editions of the International Tax Review.


Credentials / Pui received her LL.B (Hons), University of London 2005; Certificate of Legal Practice, 2006; Advocate and Solicitor of the High Court of Malaya since 2007. 

Table of Contents

Portfolio 7230-1st: Business Operations in Malaysia

Portfolio Description


Technical Advisors




Detailed Analysis

I. Malaysia — The Country, Its People and Economy

II. Operating a Business in Malaysia

A. Foreign Investment Regulations

1. Opportunities and Restrictions

2. Incentives

a. Pioneer Status

b. Investment Tax Allowance

c. Reinvestment Allowance

d. Pre-packaged Tax Incentive Scheme

e. Multimedia Super Corridor

f. Regional Economic Corridors

g. Double Deduction of Certain Expenses

h. Research and Development Incentives

i. Industrial Building Allowance

j. Operational Headquarters Incentive

k. International Procurement Centre Incentive

l. Regional Distribution Centre Incentive

m. Incentives in the Labuan International Business and Financial Centre

n. Exemption from Import Duty and Sales Tax on Machinery and Equipment

o. Exemption from Import Duty on Raw Materials or Components

p. Drawback of Import Duty, Sales Tax and Excise Duty

q. Sales Tax Exemption

B. Currency and Exchange Controls

C. Trade and Commerce Regulations

1. Imports and Exports

a. Licenses and Quotas

b. Custom Duties and Other Taxes on Imports or Exports

(1) Customs Duties

(2) Rates of Customs Duties

c. Other Taxes

(1) Sales Tax

(2) Excise Duty

d. Documentation

2. General Regulation of Business

a. Monopolies

b. Mergers

c. Price Controls

d. Securities Regulation

3. Licensing and Franchising in Malaysia

a. Patents

b. Trademarks and Trade Names

c. Knowhow

d. Copyright

D. Immigration Regulations

1. Passport and Visa Requirements and Application

2. Work Permit Requirements

a. Employment Pass

b. Visit Pass (Temporary Employment)

c. Visit Pass (Professional)

E. Labor Relations

F. Financing the Business

1. Banking System

2. Capital Markets

III. Forms of Doing Business in Malaysia

A. Principal Business Entities

1. Sole Proprietorship

2. Joint Stock Corporation

3. Partnership

4. Limited Liability Partnership

5. Branch of a Foreign Corporation

6. Representative Office and Regional Office

B. Joint Stock Corporation

1. Formation

a. Purpose Clause

b. Corporate Name

c. Promoters

d. Articles and Memorandum of Association

e. Share Capital

f. Incorporation Procedure

g. Costs of Incorporation

2. Operation

a. Licenses

b. Amendment of Articles

c. Increases and Reductions of Capital Stock

d. Acquisition of Own Stock

e. Corporate Officers

f. Shareholders' Meetings

g. Directors' Meetings

h. Books and Records

i. Financial Statements

j. Dividends and Other Distributions of Profits

k. Reserves

3. Statutory Merger

4. Dissolution

a. Voluntary Winding-Up

b. Winding-Up by the Court

c. Section 176 of the Companies Act 1965

5. Liquidation

6. Reconstruction or Amalgamation

C. Other Corporate Entities

1. Joint Venture

2. Co-operative

D. Branch of a Foreign Corporation

1. Registration

2. Liability

3. Books and Records

IV. Malaysian Tax Law — An Overview

Introductory Material

A. Income Tax

1. Banks

2. Insurance Companies

3. Shipping Companies and Airlines

4. Chargeable Period, Tax Rates and Administration

B. Single-Tier Tax System

C. Goods and Services Tax

D. Service Tax

E. Sales Tax

F. Real Property Gains Tax

G. Stamp Duty

H. Customs Duty

I. Excise Duty

J. Municipal Taxes

K. Petroleum Income Tax

L. Development Tax

V. Taxation of Companies

A. What Is a Company?

B. Corporate Income Tax

1. Taxation on a Territorial Basis

2. Residence

3. Accounting

a. General

b. Foreign Companies

c. Accounting Periods

d. Accounting Methods

e. Inventory

4. Calculation of Gross Income

a. General

b. Capital Gains

c. Dividend Income

d. Income from Foreign Sources

e. Other Inclusions in Gross Income

f. Exclusions from Gross Income

5. Business Expenses

a. General Principles of Deductibility

b. Organizational Expenses

c. Travel and Entertainment Expenses

d. Interest and Royalties

e. Taxes

f. Depreciation and Amortization

g. Obsolete Equipment

h. Charitable Contributions

i. Casualty Losses

j. Reserves and Provisions

k. Bad Debts

l. Inventory Write-downs

m. Rents

n. Salaries and Wages

o. Other Deductions from Gross Income

6. Capital Expenditure

a. General

b. Leasing Transactions

c. Controlled Transfers

7. Loss Carryovers and Carrybacks

a. General

b. Group Relief

8. Relief for Error or Mistake

9. Tax Credits

a. Foreign Tax Credit

b. Investment Tax Credit

c. Other Tax Incentives and Credits

10. Tax Rates and Calculation of Taxable Income

a. Calculation of Taxable Income

b. Section 5 of the Income Tax Act 1967: Manner in Which Chargeable Income Is To Be Ascertained Under the Income Tax Act 1967

11. Assessment, Filing and Penalties

12. Reduced Tax Rate for Small and Medium Companies

13. Consolidated Returns

14. Treatment of Losses and Unabsorbed Capital Allowances Following a Reorganization

a. Change of Legal Form

b. Liquidation

15. Advance Rulings

16. Disputed Assessments and Appeals

a. In General

b. Appeal Procedure

C. Dividends (Single-Tier Tax System and Imputation System)

D. Transactions Between Related Parties

E. Statute of Limitations

VI. Taxation of Foreign Corporations

A. Withholding Tax

1. General

2. Interest and Royalties

3. Technical Assistance Fees

4. Contract Payments

5. Rents and Other Payments for the Use of Movable Property

6. Miscellaneous Income

B. Permanent Establishment

VII. Taxation of a Branch

A. Determination of Taxable Income

B. Method of Taxation

C. Subsidiary v. Branch

VIII. Taxation of Partnerships

A. Conventional Partnerships

1. General

2. Tax Returns and Filing

3. Taxation of Partnerships

a. General

b. Partnership is a Partner in Another Partnership (Section 57 of the Income Tax Act 1967)

c. Nonbusiness Income of a Partnership (Section 58 of the Income Tax Act 1967)

d. Changes in Partnership — Old and New Partnerships

e. Capital Allowances

B. Limited Liability Partnerships

1. General

2. Taxation of Limited Liability Partnerships

a. General

b. Tax Rates

c. Tax Deductions, Losses and Capital Allowances

d. Tax Returns and Filing

IX. Taxation of Other Business and Nonbusiness Entities

Introductory Material

A. Trade Associations

B. Clubs, Associations and Other Similar Institutions (Other Than Trade Associations)

C. Co-operative Societies

X. Taxation of Individuals — Residents

A. Scope of Taxation

B. Residence

C. Determination of Gross Income

1. General

2. Stock Options or Share Options

D. Allowable Allowances, Deductions and Credits

1. Allowances and Deductions

2. Foreign Tax Credits

3. Rates and Calculation of Taxable Income

4. Assessment and Filing

XI. Taxation of Individuals — Nonresidents

A. General

B. Business Income

C. Investment Income

D. Capital Gains

E. Method of Taxation

XII. Taxation of Estates

A. Estate Duty

B. Testacy and Intestacy

C. Liability of Executor

D. Returns and Tax Rates

E. Assessment of an Estate Under Administration

F. Foreign Income of an Estate

G. Gift Tax

XIII. Intercompany Pricing

A. Scope of the Intercompany Pricing Provision


B. Determination of Arm's-Length Price

C. Other Transfer Pricing Provisions

1. Transfer Pricing Documentation

2. Advance Pricing Agreements

3. Thin Capitalization

XIV. Labuan Foreign Family Foundations, Trusts and International Business and Financial Centre

A. Foreign Family Foundations

B. Trusts

C. Labuan Islamic Trusts, Foundations and Partnerships

D. Labuan Limited Partnerships and Limited Liability Partnerships

E. Labuan Financial Institutions

F. Labuan International Business and Financial Centre

XV. Anti-Avoidance

XVI. Avoidance of Double Taxation

A. Foreign Tax Credits

1. Bilateral Credit

2. Unilateral Credit

B. Tax Treaties

1. Taxation of Business Income

a. Permanent Establishment

b. Industrial or Commercial Profits

c. Minimizing Taxation of Business Income Under Malaysia's Tax Treaties

2. Taxation of Investment Income

a. What Is Investment Income?

b. Withholding Rates

3. Tax Treaty Relations with the United States

a. General

b. Income Tax Treaty

c. Shipping and Air Transport Income Tax Treaty with the United States

Working Papers

Working Papers

Table of Worksheets

Worksheet 1 Sample Articles of Association (from Regulations for Management of a Company Limited by Shares Interpretation)

Worksheet 2 Form C — Return Form of a Company

Worksheet 3 Form R — Statement of Revised 108 Balance

Worksheet 4 Form B — Tax Resident Individuals Who Carry on Business

Worksheet 5 Form BT — Tax Resident Individuals Who Are Knowledge or Expert Workers

Worksheet 6 Form BE — Tax Resident Individuals Who Do Not Carry on Any Business

Worksheet 7 Form M — Nonresident Individuals

Worksheet 8 Form MT — Nonresident Knowledge Workers

Worksheet 9 Tax Rates at a Glance

Worksheet 10 Forms

Worksheet 11 List of Comprehensive Double Taxation Agreements and Related Protocols Signed by Malaysia July 1, 2013

Worksheet 12 Table of Withholding Tax Rates as of July 11, 2013

Worksheet 13 Transportation Tax Treaty (1989)