Business practicalities in Malaysia

Land and property rights

Starting a business in Malaysia requires a valid address. Office or factory space can be found independently or through a local real estate agent. Foreigners can purchase most types of property in Malaysia. However, all properties must have a minimum purchase price of MYR 1 million (AUD 350,347) and must not fall under any of the following categories under Malaysia’s National Land Code:

1. Residential units under the category of low and low-medium cost determined by the State Authority
2. Properties built on Malay reserved land
3. Properties allocated to Bumiputera interest in any property development project as determined by the State Authority.

Most transactions require buyers to obtain Foreigner Consent from the Economic Planning Unit (EPU). Foreigners must also seek consent from the State Authority that controls the area where the property is located. Processing time for these approvals takes at least two months and varies between states. Businesses are recommended to seek professional advice before commencing any property transactions.

Cybersecurity

In 2024, a new Cybersecurity Act was developed to safeguard the nation's cybersecurity. It requires companies operating in critical industries to comply with certain measures, standards and processes in the management of cyber security threats and cyber security incidents. If an Australian firm wants to operate in Malaysia as a cybersecurity service provider NACSA licensing requirement applies. The firm would need to register and apply through NACSA’s online portal, submit required documentation to legally provide such services in Malaysia. Entities deemed critical include security, defence, foreign relations, economy, public health, public safety, related to the public order of Malaysia or on the ability of the Federal Government or any State Government to carry out its functions effectively.

Intellectual property (IP)

Malaysia has brought its intellectual property framework in line with World Intellectual Property Office (WIPO) standards and most types of IP are now protected under Malaysian law. Malaysia strengthened IP protections and modernised its dispute resolution processes with the introduction of the Trademarks Act in 2019. Malaysia has also ratified the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP), both of which require adherence to WIPO standards.

Data sovereignty laws in Malaysia also mean that data such as intellectual property, financial data, or personal information that is collected in Malaysia should be stored in Malaysia. Australian companies using Amazon Web Services, Google Cloud or Microsoft will be able to mitigate this requirement as such vendors have established data centres or cloud infrastructures in Malaysia, but any companies working with data should be aware of the need to meet this requirement.

The Intellectual Property Corporation of Malaysia (MyIPO) oversees Malaysia’s IP framework. MyIPO aims to promote the importance of IP, strengthen its protections, provide information and advisory services, and administer IP legislation.

Six types of intellectual property can be registered in Malaysia: trademarks, patents, industrial designs, integrated circuit layout designs, geographical indications and copyright. The following mechanisms are used for registering IP through MyIPO:

Violation of IP and enforcement options:

Despite significant improvements in the strength of Malaysia’s IP framework, violations persist. Businesses or individuals who seek to enforce their IP rights in Malaysia have several options:

• Customs seizures
• Criminal enforcement
• Civil litigation
• Mediation via legal professionals.

Malaysia introduced IP-specific courtrooms in 2007 to ensure that judges are equipped to handle cases of IP violation. IP courts sit in the High Court and Sessions Court, where they are permitted to impose injunctions but damages are usually assessed following a trial for an IP case. More information can be found on MyIPO. Businesses can also consult IP Australia for advice.

Import duties and tariffs 

Malaysia is a founding member of the World Trade Organisation (WTO). However, it maintains a complex tariff regime that features several tariff peaks on products in sensitive sectors, along with tariff rate quotas, import controls and outright import prohibitions on some goods.

As the central pillar of the economic relationship, the Malaysia-Australia Free Trade Agreement (MAFTA) ensures that most Australian products can enter Malaysia tariff free. Market access for Australian services exporters can be conducted on a cross-border basis, which removes unnecessary administrative barriers. The two countries are also party to the RCEP and CPTPP.

To find the tariff rate for specific goods from Australia, visit DFAT's FTA Portal at ftaportal.dfat.gov.au.

Calculations and payments 

Malaysia follows the WTO Valuation Agreement on imported goods. The import duty is calculated by multiplying the imported good’s dutiable value by the corresponding import duty rate. The dutiable value of imported goods is typically based on the cost, insurance and freight (CIF) level under the International Commercial Terms (incoterms).

Other taxes and charges

Imported goods are subject to the same Sales and Service Tax (SST) as domestically produced goods. The SST is either 5 or 10 per cent for goods and either 6 or 8 percent for services, depending on the product. Certain petroleum products are subject to a higher rate. There is also an excise tax levied on 386 products deemed inessential or harmful to the public health, including tobacco, alcohol, sugar-sweetened beverages and motor vehicles.

Export duties

Malaysia levies export duties on 123 products. Most carry ad valorem duties that range from 5 to 20 per cent and are levied on palm products, live animals and plants, seeds, timber and metals.

Import and export regulations

The Royal Malaysian Customs Department, under the Ministry of Finance (MoF), is responsible for trade facilitation enforcement and revenue collection. The Ministry of Investment Trade and Industry oversees the negotiation of international trade agreements and rules. The Inland Revenue Board of Malaysia is also involved in matters related to the Malaysia Sales and Service Tax (SST).

Certain goods in Malaysia are subject to import restrictions for health, safety or security reasons. A list of controlled imports and exports for Malaysia is available on the Royal Malaysian Customs website.

To import or export goods which require a license, including agricultural products, animals, foodstuffs heavy equipment and plants, businesses must first register with the Companies Commission of Malaysia. Once registered, a company must then apply for a license from MITI.

Malaysia has a National Single Window system for trade declaration, called TradeSwift. This platform provides a single point of entry for submission of electronic permit applications. All required steps for registration can be found on TradeSwift, or DagangNet.

Halal certification: Halal certification is required for all processed meat imports into Malaysia, as well as most other food and beverage products. It will also be gradually introduced for a range of other products, including cosmetics. Certification from the Department of Islamic Development Malaysia (JAKIM) or an approved certification body in Australia is required. Australian abattoirs must also be physically inspected and approved. Austrade and Malaysia’s Halal Development Corporation signed a MoU in 2022 to help streamline and grow exports of Australia halal products to Malaysia.

The Inland Revenue Board of Malaysia (LHDN) administers all direct taxes in Malaysia, including income tax (both corporate and personal), withholding taxes and capital gains tax. Indirect taxes such as sales and service tax and excise, import and stamp duties are overseen by the Royal Malaysian Customs Department (RMCD). Property taxes are paid to local/ municipal and state authorities.

This section provides an overview of the taxes Australian businesses may face when operating in Malaysia. Not all applicable taxes are covered in this guide and the information provided is general in nature. It is beneficial to seek professional tax advice regarding the specific rules for different sectors and business structures.

Table 1: Overview of Malaysia’s taxes for businesses

Corporate Income Tax (CIT)

The standard CIT rate is 24 percent, but small-medium enterprises (SMEs) are subject to lower progressive rates of 15 per cent and 17 per cent on the first MYR 150,000 (AUD 52,552) and MYR 600,000 (AUD 210,208) of chargeable income, respectively.

Under an OECD inclusive framework implemented from 2025, the overseas and Malaysian profits of all multinational groups with consolidated revenue over EUR 750 million (AUD 1.3 billion) parented in Malaysia will be taxed at a minimum effective tax rate of 15 per cent, regardless of where they operate.

A company’s taxable income and effective tax rate depends on residency status. To be considered a tax resident, the management and control of the company must occur from Malaysia. This typically means that directors’ meetings concerning management and control of a company must occur in Malaysia.

If a company is not deemed to be a tax resident, Australian companies benefit from the Malaysia-Australia Double Taxation Agreement (DTA) Treaty. Under the DTA, profits from non-resident Australian company business activity are only taxable in Australia, unless the entity conducts business through a permanent establishment (PE) in Malaysia, such as an office or branch. Where a PE is present, Australian businesses are subject to Malaysian CIT rates on the portion of business income derived from operations in Malaysia.

Malaysia offers a range of tax incentives for resident companies. For businesses operating in certain sectors, the government offers a five-to-ten-year tax exemption for qualified activities. The government also offers a concessional tax rate of 20 per cent or less for sectors considered beneficial to the Malaysian economy.

Personal income tax 

Individuals who meet one of the follow criteria are classified as tax residents under Malaysian law:

• A Malaysian citizen or resident who normally resides in Malaysia
• A foreign citizen who resides in Malaysia for more than 182 days in the current tax year 
• A foreign citizen who resides in Malaysia for less than 182 days in the current tax year but is present in the country before and after the shortfall period and the cumulative periods of stay exceeds 182 days
• A foreign citizen who has been a tax resident in Malaysia for three out of the last four years and resides in Malaysia for at least 90 days in the current tax year 
• A foreign citizen who has resided in Malaysia for the past four years.

For individuals not classified as tax residents, income tax rates are typically governed under the Australia-Malaysia DTA.

Individuals who qualify as tax residents in Malaysia are subject to the following progressive tax rates:

Table 2: Personal income tax rates

Indirect taxes

Sales and services tax: All goods manufactured in, or imported into, Malaysia are subject to a tax rate of 5 or 10 per cent, based on product category. Apart from some exclusions, most goods with a sale value of MYR 500 (AUD 175) or less imported into Malaysia are subject to a flat tax rate of 10 per cent. All taxable services are subject to either a 6 per cent or 8 per cent service tax, depending on classification.

Property taxes: Three types of property taxes apply to residents and foreigners in Malaysia. Assessment taxes are imposed by local authorities as a percentage of the annual rental value of the property, depending on region. Land tax is payable to the state government and calculated based on the size and type of land use. Parcel rent may also be applied to property developments.

Auditing and accountancy play a vital role in enhancing transparency and accountability in a business, especially one engaged in a foreign market. It increases business performance by identifying risks and highlighting areas for improvement.

Accounting standards

Auditing and accountancy play a vital role in enhancing transparency and accountability in a business, especially one engaged in a foreign market. It increases business performance by identifying risks and highlighting areas for improvement. Accounting standards Accounting standards in Malaysia are developed by the Malaysian Accounting Standards Board (MASB). The Malaysian Financial Reporting Standards (MFRS) are compliant with the International Financial Reporting Standards (IFRS), aside from requirements on Property Development Activities (Section 34 regarding Specialised Activities). CPA Australia also has a presence in Malaysia.

Companies incorporated under Malaysia’s Companies Act 2016 have mandatory annual compliance filings that need to be lodged with the regulator, Suruhanjaya Syarikat Malaysia (SSM). Private entities have the choice to comply with either MFRS or the Malaysian Private Entities Reporting Standard (MPERS).

Foreign companies listed on a stock exchange in Malaysia must comply with either one of the internationally recognised accounting standards or MASB approved accounting standards. Although the Australian Accounting Standards (AAS) are also based on IFRS, Australian businesses with Malaysian operations should review any differences between jurisdictions and ensure their records are compliant with both countries’ accounting rules.

Preparation and submission of company financial statements is overseen by the Companies Commission of Malaysia (SSM), the state entity charged with regulating private corporate activities under the Companies Act. Public company activities are overseen by the Securities Commission (SC).

Statutory audits

All companies incorporated in Malaysia are required to have their financial statements audited by a Ministry of Finance approved auditor.

As of January 2025, a private company may be exempt from appointing an auditor if it meets at least two of the following three criteria for the current and preceding two financial years:

Annual Revenue does not exceed:

• RM1,000,000 in 2025
• RM2,000,000 in 2026
• RM3,000,000 in 2027

Total Assets do not exceed:

• RM1,000,000 in 2025
• RM2,000,000 in 2026
• RM3,000,000 in 2027

Number of Employees does not exceed:

• 10 in 2025
• 20 in 2026
• 30 in 2027
• These thresholds are being phased in over three years to allow companies to adapt.
• The entity is dormant, meaning it has had no transactions and operations have halted

If an entity is exempt from the audit rule, it must submit its unaudited financial statements along with a declaration of the exemption, confirmation that shareholders have made no request for an audit and a director’s report.

Books and records

Financial statements must be prepared in Malaysian Ringgit and presented either in English or Malay, unless accompanied by a translation.

The Companies Act 2016 does not specify a required year-end date, so individual companies may dictate their own financial year-end. However, the choice of date affects when financial statements are due to be presented. Private companies must prepare their financial statements no more than 6 months from their year-end date. Public companies must lodge their accounts with the Registrar of Companies (ROC) within 30 days of their Annual General Meeting (AGM).

Annual General Meetings

Private companies incorporated under Malaysia’s Companies Act 2016 are not required to hold an AGM. However, all public companies are required to hold an AGM within six months after the end of the fiscal year. The AGM can be physical, virtual or hybrid, but must be accessible to shareholders in Malaysia, and comply with notice, quorum, and voting requirements.

Quality control

Public company audits are regulated by the Audit Oversight Board (AOB) which sits within the Securities Commission Malaysia (SC). The AOB is tasked with maintaining a registration of auditors, inspecting audit compliance, taking enforcement action for non-compliance and imposing sanctions where required. The AOB is a member of the International Forum of Independent Audit Regulators.

Private company audits are overseen by the Corporate Compliance Division of the SSM. They are responsible for ensuring compliance with the Companies Act, checking financial statements, monitoring non-compliant companies, issuing notices as well as recommending investigation and prosecution for non-compliant companies.

Doing business in Malaysia will often require employing local and foreign workers. Understanding Malaysia’s labour market regulations and recruitment methods is crucial to building and supporting an effective team.

Labour market

Skill level: Educational attainment is high in Malaysia. Over 83 per cent of Malaysians have completed lower secondary school or higher and 40 per cent are enrolled in tertiary education. The labour force participation rate is 70.8 per cent, compared to 67.1 per cent in Australia, and the Malaysian unemployment rate is low at 3.0 per cent.

Employment contracts: The most common employment contracts in Malaysia are open-ended or permanent contracts and need to be written in both Malay and English. Fixed-term contracts, which includes causal employment, are less common. Any employment that exceeds one month’s duration must have a written contract.

Minimum wage: The statutory national minimum wage for the private sector is MYR 1,500 (AUD 525). The Minimum Wages Order of 2022 stipulates that employees need to be paid at least MYR 7.2 (AUD 2.5) per hour. The minimum wage is reviewed by the Malaysian government every two years.

Human resources and employment law: The Malaysia Employment Act covers all employees regardless of salary. It covers mandatory terms and conditions, including working hours, overtime, wages, paid holidays, sick leave and pay, parental leave and other agreed leave. Overseas labour is common in Malaysia and Australian companies are advised to do their due diligence before employing workers. Companies also need to be aware of the need to comply with the reporting requirements under Australia’s Modern Slavery Act.

Working hours: The minimum working hours in Malaysia are eight hours a day for permanent employment. Employees cannot be required to work for more than five consecutive hours without a break of at least 30 minutes; more than eight hours in one day; or more than 45 hours per week.

Holidays: Employees are entitled to paid holiday for the 11 Malaysian public holidays and to minimum paid annual leave depending on years of service.

Overtime: Under Malaysia’s Employment Act, any work performed in excess of the normal hours of work per day is defined as overtime. The following employees are eligible for overtime pay:

• Those who earn MYR 4,000 (AUD 1,400) and below per month.
• Those engaged in manual labour, regardless of wages.
• Individuals who operate or maintain mechanised vehicles, irrespective of wages.
• Supervising or overseeing manual labourers, regardless of wages.

The maximum number of overtime hours an employee can work are 24 hours in a week, up to a maximum of 104 hours in a month.

Overtime rates

Overtime pay in Malaysia is based on the Ordinary Rate of Pay (ORP), which is the monthly rate of pay divided by 26, and the Hourly Rate of Pay (HRP), which is the ORP divided by 8. Based on these ORP and HRP rates, overtime is calculated using the following formula.

Sick leave: All employees in Malaysia are entitled to sick leave, based on years of service. Employees with less than two years of service are entitled to 14 working days per calendar year. Employees with two to five years of service are entitled to 18 days. Employees with five years of service or more are entitled to 22 days. If hospitalisation is required, then an extra 60 days’ aggregate is granted, provided certification by a doctor.

Social, health and unemployment insurance contributions: The Employee Provident Fund (EPF) is the national compulsory savings scheme for all Malaysians and permanent residents up to the age of 75. The employer is responsible for the EPF payment and must pay a contribution on behalf of both the employer and the employee.

It is important that employers deduct their employees’ contributions from the employees’ pay check and add the employer contribution before submitting each employees’ pay check to the EPF by the 15th of the following month. Failure to do so could result in penalties. Contributions to the EPF for non-Malaysian citizens and non-permanent residents is voluntary.

The monthly EPF contribution rates are as follows:

In addition to the EPF contribution, employees in Malaysia below 60 years of age pay 0.5 per cent of their earnings up to MYR 6,000 (AUD 2,102) a month for social insurance coverage for disability, survivor and other pensions and grants outside of the old-age pension.

For Malaysian citizens, the government provides public healthcare which runs alongside a private healthcare system that is either self-funded or covered by private health insurance

Ending employment: Employees and employers follow the same termination notice as set out in the contract. All employees are protected from unfair dismissal and must be informed of a reason for termination in writing. If there is no notice period in the contract, then the notice period is dependent on the length of service as follows.

Payment in lieu of notice can also be made by either party.

Severance pay: Workers earning up to MYR 4,000 (AUD 1,300) per month and who have been employed for 12 months or more are entitled to the following minimum statutory severance payments.

For employees with a salary of more than MYR 4,000 (AUD 1,300) a month, severance payments are outlined in the employment contract. Employees who are dismissed for misconduct, voluntary terminate their contracts or retire are not entitled to severance pay

Recruiting staff

Online advertising: Online job advertisements are an effective way to access talent in Malaysia. There are several useful websites for online advertising.

Jobstreet is a popular broad platform that covers Malaysia and other Southeast Asian countries.

Indeed is an aggregate resource which condenses all Malaysian hiring platforms.

Mystarjobs is a generalist job board owned by the Star Media group and a leading job board in Malaysia.

LinkedIn provides valuable intelligence when it comes to searching for employees in a particular sector or field.

Executive search and recruitment: Executive search firms can provide tailored searches for more senior roles and expatriates. International firms such as Michael Page, Monroe Consulting, Robert Walters and Malaysia-based Page Executive all have offices in Malaysia.

Work permits: Foreign workers can be recruited into positions where local employees are not able to meet the requirements. However, all foreigners must hold an Employment Pass (EP) issued by the Expatriates Services Division (ESD).

Dependent passes are available for spouses, children under the age of 18 and parents and parents-in-law.

Foreign companies establishing a commercial presence in Malaysia will need a local bank account to conduct business. Foreign companies may open accounts denominated in Ringgit, US Dollars and other foreign currencies. While all types of institutions are permitted to take deposits, the extent of other services offered may vary.

Australian companies looking to maximise opportunities in Malaysia will likely be better served by a local bank. This is particularly true if a business has local employees, suppliers and contractors. Local banks can also provide advice on business operations, including purchasing or leasing land, and investing capital.

Bank Negara Malaysia regulates Malaysia’s financial institutions. It also acts as a banker and an adviser to the Government of Malaysia. The Securities Commission regulates capital market activities and capital market intermediaries, such as fund managers, corporate finance advisors, investment advisors, financial planners and persons who deal in securities, derivatives and private retirement schemes.

Table 3: Financial institutions in Malaysia

Australian banks in Malaysia

ANZ has a representative office in Malaysia, but is not licensed to conduct banking operations.

Foreign exchange controls

Malaysia maintains a liberal system of foreign exchange controls that are regulated by Bank Negara Malaysia, under the Foreign Exchange Administration Rules.

A non-resident Australian company is free to:

• Undertake any type of investment in an MYR asset or foreign currency asset in Malaysia without any restriction
• Open an MYR account or foreign currency account with a licensed onshore bank. Funds are free to be remitted into and out of such accounts, subject to the normal due diligence process by the licensed onshore bank
• Repatriate divestment proceeds, profits, dividends or any income arising from investments in Malaysia. Repatriation of funds may only be in a foreign currency.

A non-resident may also hedge foreign exchange exposure from their investments in Malaysia via a licensed onshore bank or an Appointed Overseas Office.

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