How to Set Up an Entity in Malaysia

Malaysia has positioned itself as a sophisticated, high-value hub for digital services and regional headquarters, with a multilingual workforce proficient in English, Malay, and Mandarin, and a strategic location bridging ASEAN, China, and India. However, the regulatory environment is undergoing a profound transformation, with modernized tax frameworks and stricter compliance standards.

The most common legal entity is the Private Limited Company, known as Sendirian Berhad, which allows limited liability, no formal minimum capital, and flexible ownership. The process of setting up an entity is relatively straightforward digitally but becomes bureaucratically complex when navigating banking and immigration. Despite these administrative hurdles, the benefits of 100% foreign ownership, a separate legal personality, and strong investor protections make it a robust jurisdiction for expansion.

Disclaimer: This content is for informational purposes only and does not constitute legal, tax, or financial advice. Always consult official sources before acting.

What does “opening an entity” mean in Malaysia?

In Malaysia, opening an entity primarily refers to incorporating a Private Limited Company, locally known as a Sendirian Berhad (Sdn Bhd). This process creates a separate legal personality distinct from its shareholders, allowing the entity to own property, enter contracts, and sue in its own name. While Representative Offices and Branch Offices exist, the Sdn Bhd is the standard for foreign investors as it offers limited liability and is the only vehicle suitable for scalable commercial operations and invoicing.

Entity overview in Malaysia

The registration process is centralized under the Companies Commission of Malaysia (SSM) and is largely digital via the MyCoID system, though foreign directors often require a local Company Secretary to facilitate the submission.

Step-by-step guide: How to open an entity in Malaysia

Step 1: Choose the right structure

For the vast majority of foreign investors, the Private Limited Company (Sdn Bhd) is the only viable vehicle. Unlike a Representative Office, which cannot generate revenue, or a Branch Office, which exposes the parent company to unlimited liability, the Sdn Bhd provides a separate legal personality, making it the standard for scalable operations.

Step 2: Verify business name availability

Before incorporation, you must conduct a Name Search via the SSM online system to ensure your proposed name is not undesirable, offensive, or identical to an existing entity. Once approved, the name is reserved while you prepare the incorporation documents.

Step 3: Prepare incorporation documents

You must gather specific statutory declarations and identification documents. Because of the digital submission process, physical forms are rarely used, but the data from these documents is required for the "Superform" (Section 14).

• Section 14 (Superform): The primary application containing business codes (MSIC), addresses, and shareholder details.
• Section 201 (Director’s Consent): A declaration confirming the director is not bankrupt and has no criminal record.
• Proof of Address: Residential address proof for all directors.
• Corporate Shareholder Docs: If owned by a foreign company, a Board Resolution and Certificate of Incorporation from the parent company.

Step 4: Register with SSM (Companies Commission of Malaysia)

The incorporation is submitted via the MyCoID platform. However, foreign directors without a Malaysian ID usually cannot register on the portal directly due to biometric verification hurdles. Therefore, the process is typically handled by an appointed Company Secretary who acts as the "Lodger." Upon payment of the RM 1,000 fee and approval, SSM issues a "Notice of Registration" (Section 15), which serves as conclusive evidence of incorporation.

Step 5: Register for tax and social security

Post-incorporation, register with the Inland Revenue Board (LHDN) to obtain a Tax Identification Number (TIN), and with the Employees Provident Fund (EPF) and the Social Security Organization (SOCSO).

Step 6: Open a corporate bank account

Once the company exists and has basic registrations, it will typically open a corporate bank account with a Malaysian bank. This is often the most time-consuming step. Malaysia’s strict AML/KYC laws usually require the physical presence of directors and authorized signatories at the bank branch for an interview. Banks will request the full set of certified statutory documents (Section 14, 15, 201), a resolution of the board, and often a business plan or letter of comfort from the parent company.

Step 7: Set up payroll and employment compliance

Before hiring, the company should have its EPF, SOCSO, and tax employer registrations in place. If the company intends to hire foreign expatriates (Employment Pass), it must register with the Expatriate Services Division (ESD). This step often requires the company to prove it has a paid-up capital of at least RM 500,000 (for 100% foreign-owned firms).

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Post-registration obligations

After incorporation, companies in Malaysia must stay compliant with local governance, tax, and employment laws. Typical requirements include:

• Tax Filings: Submit tax estimates (CP204) 30 days before your financial year starts, and file the final return (Form C) within 7 months after it ends.
• Company Secretary: Appoint a secretary within 30 days of incorporating to handle your Annual Return to SSM.
• Financial Statements: Circulate financial reports within 6 months of your year-end and lodge them with SSM.
• Licenses: Renew local council permits and, if applicable, your WRT license (for retail/trade).
• Record Keeping: Keep all accounting and tax documents for at least 7 years.
• HR Compliance: Follow the Employment Act, specifically noting new 2025 rules for foreign worker EPF and SOCSO rates.
• Ownership Updates: Update the Beneficial Ownership register within 14 days of any changes.

Taxes and financial considerations

• Corporate income tax: 24% standard rate. Note that foreign-owned subsidiaries generally do not qualify for the lower SME rates (15-17%).
• SST (Sales & Service Tax): 8% Service Tax (increased in 2024/2025) applies to most digital and professional services; Sales Tax varies by product (5-10%).
• Payroll/social contributions: Starting October 2025, employers contribute 2% to EPF for foreign workers (phased coverage). For locals, employer contributions are approx 12-13%. SOCSO is capped at a salary ceiling of RM 6,000.
• Accounting standards: Companies must prepare financial statements in accordance with MPERS (for private entities) or MFRS (IFRS-equivalent), and audits are generally mandatory for foreign-owned subsidiaries.

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Expand internationally with Deel

Whether you’re hiring through an EOR or establishing your own local entity, Deel’s all-in-one platform gives you everything you need to expand into Malaysia—quickly, compliantly, and with confidence. From market entry to ongoing operations, Deel helps you hire, onboard, and manage teams seamlessly from day one.

With Deel, you can:

• Test new regions using Deel’s local entities through our Employer of Record service—hire employees compliantly, delegate payroll and taxes, and access localized employment contracts.
• Open entities with Deel Entity Setup, where our team manages everything—from incorporation and tax registration to coordination with local experts.
• Centralize your compliance and records with Deel Entity Management, including automated filings, calendar reminders, and visibility across all entities.
• Integrate with Deel Payroll and Deel HR for compliant payments, benefits, and workforce oversight—all in one platform.

For companies transitioning from the EOR model to owned entities, Deel ensures a smooth handover and consistent compliance every step of the way. Enter new markets, onboard talent, and manage your global workforce—all through one unified platform.

FAQs

How long does it take to open an entity in Malaysia? Incorporation takes 3–5 days, but full operational readiness (banking and visa accounts) typically takes 4–8 weeks. Find out how long setup takes with our Entity Setup Calculator.

What is the minimum capital required? The statutory minimum is RM 1. However, 100% foreign-owned companies usually require RM 500,000 to sponsor work visas (Employment Passes).

Can foreign companies own 100% of an entity in Malaysia? Yes, 100% foreign ownership is allowed in most sectors.

Do I need a local director or representative? Yes, at least one director must "ordinarily reside" in Malaysia. Foreign companies often use a Nominee Director service initially until their own expatriate staff obtain residency/visas.

How much does it cost to register an entity? Initial setup costs range from RM 13,500 to RM 31,000, covering government fees, company secretary appointments, and registration. Find out the setup cost with our Entity Setup Calculator.

Can I hire employees before the entity is fully registered? Typically, no. You need the entity to register for EPF and SOCSO. However, Deel’s Employer of Record (EOR) lets you hire and pay talent immediately while your entity setup is in progress.

Can Deel help me open an entity in Malaysia? Yes. Deel Entity Setup manages the end-to-end process — from registration to payroll compliance—in over 100 countries. Deel’s local experts handle documentation, filings, and legal requirements on your behalf.

Does Deel offer ongoing compliance and payroll support? Yes. Deel offers both managed services and self-service tools to help you stay compliant. If you’re using Deel Entity Management, Maintenance, EOR, or Payroll, our team handles payroll, benefits, filings, and compliance obligations on your behalf.

For teams managing their own entities, Deel Compliance Hub makes staying compliant simple by providing real-time regulatory updates, risk alerts, and workforce insights across 150+ countries. Proactively manage compliance with our Compliance Monitor, Workforce Insights, and an AI-powered Worker Classifier, staying ahead of changing employment laws.