Online businesses are more and more popular across the world, including in Malaysia, due to the fact that internet services have become easily accessible to the world’s population. Having an online business means that the company may conclude financial transactions for its products or services at any given hour, thus not being bound by the traditional schedule of a brick-and-mortar shop.
In order to open a company in Malaysia as an online shop, the company’s representatives have to follow a set of steps, including the procedures related to theincorporation of one of the business forms available under the local legislation. Our team of specialists in company registration in Malaysia can assist on theregistration procedure and may also advise on related matters, for example, the requirements for opening an online platform in this country.
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What business forms should I choose for my Malaysian online shop?
One of the first aspects that should be decided when starting an online shop is the legal entity under which the commercial activity will be developed. This can depend based on the investment plans of the businessmen. Provided that if we talk of a small business, the best way to start the online shop is through a sole trader.
Other suitable options are the registration of a partnership or of a corporate body, such as the limited liability company (LLC). The first two types of entities are easier to register in Malaysia, as there are less standard procedures, but in the case of the business forms with legal personality (such as the LLC), more steps are included and this is why we strongly recommend you to address to our team of consultants in company formation in Malaysia, who can advise on the most suitable entity, based on your investment plans and the available capital.
What are the main steps in opening an online shop in Malaysia?
It is necessary to known that all websites, blogs and any other type of online platform that sells products or services through which a person/legal entity obtains taxable income have to be registered with the competent authorities, this being applicable to those selling goods through social media platforms as well. The regulations concerning these aspects are prescribed under the Malaysian Consumer Protection Regulations 2012 and under the Malaysian Regulation and Consumer Protection of eCommerce and Online Business. Some of the most important steps are presented below:
- register with the Companies Commission of Malaysia, regardless of the type of online platform;
- register with the Malaysian Communications and Multimedia Commission, if the company’s online activities are related to the telecommunication sector;
- register a company name – the fee for the company’s name will depend on the legal entity chosen forincorporation (for a sole trader, the fee is of RM 30, for example);
- open an website that has a top level country domain name with the extension “.my”/”com.my”, designating the fact that the company is registered in Malaysia;
- select a hosting company and design the website taking into consideration all the aspects that have to be included in an online store, such as the shopping cart facility;
- choose a payment method that provides the necessary level of security for transactions.
What are the main taxes for online shops in Malaysia?
One of the last steps related to the registration of an online shop in this country is the registration with the country’s tax authority, the Inland Revenue Board of Malaysia (IRBM). This is a necessary procedure for all online entities obtaining taxable income in this country. Such businesses are taxed following the same tax treatment that is available fortraditional companies and the tax system is prescribed under the Income Tax Act 1967.
As stipulated by the Guidelines of Taxation of Electronic Commerce, issued by the IRBM, any person or legal entity obtaining profits through a website in Malaysia is required to pay taxes in this country, following the tax system available here. This is imposed to residents in Malaysia who have registered a website in this country and who have their business operations here, but also to those having a website outside the country, but which develop business activities in Malaysia.
In the case of a Malaysian company operating here, which has set up a website outside the country through a branch office, it is necessary to know that the legal entity will be liable to taxation in this country for most of its taxable income, but the income obtained through the respective website will not be taxed here.
Instead, it will be taxed in the country where the company develops its commercial operations through the branch. Please contact our team of specialists in company formation in Malaysia for more details on other aspects referring to the taxation of an online shop.