Foreign investors who want to open a company in Malaysia can choose from several legal options through which they can establish their business presence in this market. The main ways in which a foreign business can be set up in Malaysia are through a representative office, a branch, or a subsidiary. There are significant differences between the above-mentioned entities, and our team of agents specialized in company formation in Malaysia can offer more details on this matter.
| Quick Facts | |
|---|---|
| Applicable legislation (home country/foreign country) |
Malaysian Company Law |
|
Best used for |
– banking, – insurance, – trading, – manufacturing |
|
Minimum share capital |
Yes |
| Time frame for the incorporation (approx.) |
Around 4 months |
| Management (local/foreign) |
Local or foreign with residence in Malaysia |
| Legal representative required |
No |
| Local bank account |
Yes |
| Independence from the parent company | Yes |
| Liability of the parent company | No, the subsidiary is fully liable |
| Corporate tax rate | 24% |
| Possibility of hiring local staff | Yes |
Table of Contents
What is a subsidiary in Malaysia?
One of the ways in which a business can be set up here is through a subsidiary. This entity refers to a type of company that is controlled by another company. It is important to know that a subsidiary in Malaysia is controlled to a certain degree by another legal entity, which can be a holding company or a parent company. In order to qualify as a Malaysian subsidiary, a company needs to comply with a set of legal requirements, which are stated under the Companies Act. Here are some important aspects:
- the parent company has the right to control the Malaysian subsidiary when appointing the company’s board of directors;
- the subsidiary is owned up to more than 50% in terms of voting rights by the parent company;
- the parent company owns more than 50% of the issued share capital of the subsidiary;
- the parent company can appoint and change the majority of the subsidiary’s directors.
The name reservation is required for subsidiaries in Malaysia, where a flat fee of around RM 50 is solicited. Such a name verification and reservation can be made online with the SSM, the institution that can reserve the name for 30 days.
However, a subsidiary is an independent entity, and it does not reflect the same legal structure and taxation system as the parent company. Foreign investors establishing a subsidiary in Malaysia should know the incorporation process available here; our team of company incorporation representatives can provide more details. You might want to check this infographic with details about subsidiaries in Malaysia:
What are the main characteristics of a Malaysian subsidiary?
We have presented so far some of the aspects that define the Malaysian subsidiary. However, besides the above-mentioned, the subsidiary in Malaysia is characterized by other relevant matters. Below, investors can learn more about the characteristics of a subsidiary, but in-depth advice concerning this legal structure can also be offered by our team of consultants in company registration in Malaysia:
- the subsidiary’s trading name can be a different name from the one of the parent company;
- a subsidiary can operate in most of the Malaysian business sectors, but it can’t be set up in specific strategic sectors;
- it can be registered by both local and foreign companies wanting to expand their activities in Malaysia;
- the subsidiary can be registered with 100% foreign ownership, with the exception of certain business sectors;
- it represents a different legal entity than the one of the parent company;
- it can be incorporated by a maximum number of 50 members;
- it can be set up by a single shareholder and it can appoint a single director;
- the director does not have to be a Malaysian citizen, but he or she must own a work permit issued by local authorities and must have an official residential address in Malaysia.
Private limited liability companies in Malaysia are often selected for establishing subsidiaries in this country. This structure is the most popular in Malaysia and needs only a director and one shareholder, being quite beneficial for international entrepreneurs. Here is a video presentation with details about subsidiaries in Malaysia:
What are the advantages of registering a subsidiary as a private limited company in Malaysia?
One of the main advantages of registering a subsidiary as a private limited company refers to the fact that this type of business form allows 100% foreign ownership. In the case of a foreign company, the paid-up capital is established at RM 500,000, and, as a general rule, businessmen can invest in the local market in most of the investment sectors, but certain restrictions do apply (in the sense that the local legislation restricts wholly foreign ownership for businesses related to education, agriculture, and tourism, for example).
In the case of a subsidiary registered as a private limited company, Malaysian legislation stipulates that the business can have foreign directors, as long as the respective persons have a residential address in this country. In this case, it is necessary to appoint at least one director.
Main tax and reporting requirements in Malaysia
A subsidiary in Malaysia will be treated as a local company from a tax point of view. The same is applicable for its reporting requirements. Thus, those who want to open a company in Malaysia as a subsidiary have to file financial documents with the Companies Commission of Malaysia and need to conduct a yearly audit of the company’s accounts.
Regarding its taxation, the Malaysian subsidiary can benefit from local tax incentives, even though it represents a subdivision of a foreign company. The company will be taxed with a corporate tax rate of 24% on its local income. There are also specific conditions under which companies can benefit from a lower corporate tax.
Besides the lower corporate tax rate, a subsidiary in Malaysia can benefit from various tax incentives, as we mentioned above. The company can qualify, under specific conditions, for the tax benefits that are prescribed under the Promotion of Investment Act and the Income Tax Act; the advantage of registering a local subsidiary is that it can benefit from the tax regulations available for local businesses, while a branch office can’t.
Taxes for 2026 on the registration of a Malaysian subsidiary
When registering a Malaysian subsidiary, the local legislation does not stipulate any particular taxes or fees; however, those opening a company in Malaysia must be aware that the subsidiary has to be registered following the standard incorporation procedure, during which the investors will have to pay specific fees.
For example, some fees can be imposed when drafting the company’s statutory documents, which are represented in this case by stamp duty. When registering a trading name for the subsidiary, the procedure will be concluded through the Companies Commission of Malaysia; the registration is available for one year, at the end of which the subsidiary will have to apply for a renewal.
About the business trends in Malaysia in 2026
Malaysia is one of the countries with great potential and interesting investment options in Asia. As the authorities are focusing quite a lot on implementing new technologies in the business sector, the country’s economy is expected to experience major development in the coming years. Here are some interesting facts in this regard:
- The tax exemption on foreign dividend income & gains from the disposal of foreign capital assets obtained by subsidiaries in Malaysia has been prolonged until 31 December 2030.
- Another news in the business field in Malaysia refers to tax deductions for investments in subsidiary companies that commercialize non-resource-based research and development (R&D) findings. These are now extended for 5 years, starting from 2026.
- The National Sustainability Reporting Framework (NSRF) in Malaysia is now mandatory for a wider range of enterprises. As such, the Environmental Quality Act is in full effect, and companies can be fined if they do not align with the new regulations.
- Remote working in Malaysia remains a popular option for foreign citizens. Business investors and/or subsidiary owners can take advantage of a skilled workforce & professionals in 2026.
Besides assistance in opening a subsidiary in Malaysia, investors can also benefit from the complete services of our accountants in Malaysia. We assist anyone wishing to explore the business sector and start a business in Malaysia in the future. Please contact our team of agents and find out more about the company incorporation in Malaysia.