Guide to Setting up of Representative Office/Regional Office in Malaysia
Unless otherwise indicated, the Representative Office/Regional Office stated in this article refers to the office established in Malaysia by a foreign company/organisation to perform permissible activities related to economics, trade and investment for its head office/principal. The setting up of Representative Office/Regional Office requires the approval by Malaysia Investment Development Authority (MIDA).
Expanding business operations internationally can be an exciting challenge, and Malaysia’s strategic location, growing economy and tax incentives presents itself as an attractive destination for foreign companies looking to establish a presence in Southeast Asia. One common approach to enter the Malaysian market is through the establishment of a Representative Office/ Regional Office. The Representative Office/Regional Office serves as temporary establishment to assess business viability prior incorporating permanent business entity in Malaysia.
A Representative Office is an office of a foreign company/organisation to collect relevant information on investment opportunities in Malaysia especially in manufacturing and services sectors, enhance bilateral trade relations, promote the export of Malaysian goods and services and carry out research and development.
A Regional Office refers to an office of a foreign company/organisation that serves as the coordination centre for the company’s/organisation’s affiliates, subsidiaries and agents in South-East Asia and Asia Pacific. This office is responsible for the designated activities of the company/organisation within the region it operates.
A company can establish a Representative Office/Regional Office for a minimum of two (2) years and extended period may be considered subject to additional commitment on operating expenditure and based on the merits of each case. For Government agencies, the duration of establishment will be based on the requirement of the applicant.
There is no capital requirement for setting up a Representative Office/Regional Office in Malaysia and no tax will be imposed on a Representative Office/Regional Office.
- Advantages of Setting Up a Representative Office/Regional Office
The benefits of setting up a Representative Office/Regional Office in Malaysia are as follows:
(1)
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Compliance with the rules and regulations set by local authorities is relatively straightforward and requires less compliance compared to other types of business entity;
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(2)
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Offers foreign companies a convenient and quick process to obtain working visas for their employees to carry out non-commercial activities; and
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(3)
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The expenses associated with setting up and operating are minimised as there is no immediate need to establish a company.
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- Eligibility Criteria
The requirements of a Representative Office/Regional Office are as follows:
(1)
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Eligible Sectors:
(a) Manufacturing sector;
(b) Services sub-sectors promoted by MIDA and other services sub-sectors on case to case basis; or
(c) Government sector and foreign organisation.
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(2)
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Type of applicants:
(a) Foreign Government Agencies;
(b) Foreign Organisation, Universities and Institutions; or
(c) Foreign Companies (Conglomerates and Non-Conglomerates).
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(3)
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The name of the Representative Office/Regional Office must be the same as to the parent’s entity.
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(4)
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Representative Office/Regional Office is allowed to operate in commercial premises only and is allowed to undertake activities within the permissible activities.
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(5)
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The minimum operational expenditure for new establishment of the Representative Office/Regional Office is RM300,000 per annum or as proposed by the applicant, whichever is higher.
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(6)
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Representative Office/Regional Office should be financed by funds emanating from sources outside of Malaysia.
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- Permissible Activities
A Representative Office/Regional Office is allowed to carry out the following activities:
(1)
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Gathering and analysis of important information or undertaking feasibility studies on investment and business opportunities in Malaysia and the region;
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(2)
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Planning or coordination of business activities;
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(3)
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Identifying sources of raw materials, components or other industrial products;
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(4)
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Undertake research & product development;
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(5)
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Act as a coordination centre for the corporation’s affiliates, subsidiaries and agents in the region; and
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(6)
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Other activities which will not result directly in actual commercial transactions.
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- Non-Permissible Activities
A Representative Office/Regional Office is not allowed to carry out the following activities:
(1)
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Engaged in any trading (including import and export), business or any form of commercial activity;
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(2)
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Lease warehousing facilities; any shipment/transshipment or storage of goods shall be handled by a local agent or distributor;
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(3)
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Sign business contracts on behalf of the foreign corporation or provide services for a fee; and
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(4)
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Participate in the daily management of any of its subsidiaries, affiliates, or branches in Malaysia.
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- Expatriate Posts
A Representative Office/Regional Office is eligible to apply for expatriate posts and the number allowed will be depending on its functions and activities. The proposed expatriate must be currently employed by the applicant company or its subsidiary or within the group.
Expatriates will only be considered for managerial and technical posts and must be paid a minimum basic salary of RM5,000 per month. The total number of employees of the Representative Office/Regional Office should reflect the ideal composition of 2 expatriates to 1 Malaysian.
An employment pass for the approved expatriate is valid for one (1) year and requires renewal on an annual basis.
An expatriate working with a Representative Office is subject to normal income tax while the expatriate working with a Regional Office is taxed based on the portion of their chargeable income attributed to the number of days that they are in Malaysia.
- Materials Required for the Registration of a Representative Office/Regional Office
To set up a Representative Office/Regional Office in Malaysia, the following information/documents will be required:
(1)
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Certificate of incorporation of the parent company;
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(2)
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Audited financial statements for the last two (2) years of parent company;
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(3)
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Company profile of parent company; and
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(4)
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Information on the background of the parent company, purpose of establishment, the activities of the proposed Representative Office/Regional Office, the benefits the Representative Office/Regional Office will bring to Malaysia, the estimated cash flows, human resources and/or expatriate posts requirements.
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If the application for the establishment of Representative Office/Regional Office is applied together with the expatriate posts, the following additional documents are required:
(1)
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Certified passport of the expatriate;
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(2)
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Certified certificate of academic qualifications of expatriate; and
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(3)
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Resume of the expatriate.
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- Continuous Obligation of Malaysia Representative Office/Regional Office
Upon registration, every Representative Office/Regional Office must comply with the requirements as set out below:
(1)
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Progress Report/Annual Activities
Progress report/annual activities for the Representative Office/Regional Office must be submitted to MIDA every 12 months and before application for extension of Representative Office/Regional Office is approved.
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(2)
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Extension Application for Representative/Regional Office
If the foreign company wishes to apply for the extension of Representative Office/Regional Office, the application for the extension must be submitted to MIDA at least three (3) months before the expiry date. However, the approval for extension shall be considered subject to the compliance of imposed conditions. |
Kaizen, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professionals in Kaizen for further clarification.
See also：
Procedure and Fee for Registration of Representative Office/Regional Office in Malaysia
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