Business in Malaysia

DOING SUCCESSFUL BUSINESS IN MALAYSIA

DOING

SUCCESSFUL BUSINESS IN

MALAYSIA

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CHARTERED ACCOUNTANTS

The material contained in this publication is not intended to provide comprehensive or complete advice on any specific matter. Every care has been taken to ensure that the information given is accurate. However, no reader should act on the basis of the information contained in this publication without seeking appropriate professional advice. The publisher, auditors and editors expressly disclaim all and any liability to any person in respect of the consequences of any actions taken or omitted on the basis of the contents of this publication.

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CHARTERED ACCOUNTANTS

The material contained in this publication is not intended to provide comprehensive or complete advice on any specific matter. Every care has been taken to ensure that the information given is accurate. However, no reader should act on the basis of the information contained in this publication without seeking appropriate professional advice. The publisher, auditors and editors expressly disclaim all and any liability to any person in respect of the consequences of any actions taken or omitted on the basis of the contents of this publication.

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FOREWORD This booklet has been prepared to give useful background information to those planning to do business in Malaysia. It covers the main provisions of the legal, financial, taxation and employment regulations. It does not attempt to deal exhaustively with any of the topics covered and the reader's attention is drawn to the fact that changes in the laws may have st occurred after the date of publication. The text reflects the laws in force as at 31 May 2008 and does not incorporate subsequent changes. We strongly recommend that anyone intending to do business in Malaysia should seek professional help before undertaking any major commitment. Apart from the formalities of establishing a business in Malaysia, there can be important and perhaps complex financial and taxation implications of initial policy decisions which should be considered in consultation with a professional advisor. RSM Robert Teo, Kuan & Co is a member of RSM International (RSMi), currently the seventh largest accounting and consulting organisation in the world. RSMi, with its International Executive office situated in London, was formed in 1964, adopting its current name worldwide on 1st January 1993. 1993. RSMi is represented by over 660 offices in over 64 countries around the world, with a staff force of over 25,000 professionals. The network covers the countries set out in appendix B. Each member firm is managed and staffed by nationals of the country concerned and can provide clients with a comprehensive range of services relating to auditing, accounting, tax, consulting and financial and management advice. RSM Robert Teo, Kuan & Co. offers a full range of financial advisory services as set out at the beginning of this booklet. Specialists are available to assist with most aspects of establishing new ventures in Malaysia and many investors from overseas have successfully taken advantage of these services in the past. Any partner in the offices of RSM Robert Teo, Kuan & Co. would be glad to meet those visiting Malaysia and to provide help and advice where required. We suggest that enquiries be directed to:

Dato’ Robert Teo Keng Tuan International contact partner RSM Robert Teo, Kuan & Co. Penthouse, Wisma RKT, Block A 2 Jalan Raja Abdullah Off Jalan Sultan Ismail 50300 Kuala Lumpur Malaysia Telephone: (603) 2697 2888 Fascimile: (603) 2691 7733; 2698 6600, Email: [email protected] [email protected]

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CONTENTS INTRODUCTION TO RSM ROBERT TEO, KUAN & CO. INTRODUCTION TO RSM INTERNATIONAL Chapter 18

Labuan International Offshore Financial Centre (IOFC)

Malaysia An Introduction

Chapter 19

Malaysia Multimedia Super Corridor

Chapter 2

Government policies affecting business

SECTION D

Chapter 3

Exchange Controls

LABOUR REGULATIONS, WELFARE AND SOCIAL SECURITY

Chapter 4

Banking and Finance

Chapter 20

Labour conditions

Chapter 5

Types of Business Entities

Chapter 21

Labour Legislations

Chapter 22 Chapter 6

Company Formation

Employment of foreign workers

Chapter 7

Company Administration

Chapter 23

Industrial relations

SECTION E

STRIKING OFF & WINDING UP OF COMPANY

SECTION A

General Business and Legal Requirements

Chapter 1

Chapter 8

Immigration requirements

Chapter 9

Accounting and Reporting Requirements

Chapter 24

Guidelines for striking off the name of a company

SECTION B

TAXATION

Chapter 25

Chapter 10

Principal Taxes

Guidelines on winding up of a company & closure of a foreign company

Chapter 11

Administration SECTION F

MERGERS & ACQUISITIONS

Chapter 26

General guidelines on Mergers & Acquisitions

Chapter 12

General Taxation

Chapter 13

Corporate Taxation

Chapter 14

Personal Taxation

Chapter 15

Withholding Taxes

Appendix I

Acronyms and abbreviations

Chapter 16

Tax Incentives & Government Grants

Appendix II

Investment Guarantee Agreements

Operational Headquarters (OHQ)

Appendix III

Scale of stamp duty for authorised share capital

Appendix IV

Visa requirements to enter Malaysia

Chapter 17

SECTION C

LABUAN INTERNATIONAL OFFSHORE FINANCIAL CENTRE

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Appendix V

Double Tax Agreements

Appendix VI

Tax Rates

Appendix VII

Personal reliefs and rebates

Appendix VIII Rates of levy for foreign workers Appendix IX

Places to stay in Malaysia

Appendix X

Qualitative Listing Criteria on Bursa Malaysia

Appendix XI

Integrated Bus and Rail Network

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TO OUR VALUED CLIENTS AND ASSOCIATES

• • • • •

Robert Teo, Kuan & Co. Strategic Business Advisors Sdn. Bhd. Profit Improvement Sdn. Bhd. Tax Consultants Sdn. Bhd. NWT Advisory Services Sdn. Bhd.

RSM International is a worldwide network of independent accounting and consulting firms. RSM International and its member firms are separate and independent legal entities. RSM International does not itself provide accounting or consultancy services. All such services are provided by affiliate members practicing on their own account. RSM is represented by affiliate independent members in 64 countries and brings together the talents of almost 28,000 individuals in over 660 offices worldwide. The network’s total fee income of US$3.06 billion places it amongst the top 7 international accounting organizations worldwide. Affiliate members are driven by a common vision of providing high quality professional services, both in their domestic markets and in serving the international professional needs of their client base. RSM International is a member of the Forum of Firms. The objective of the Forum of Firms is to promote consistent and high quality standards of financial and auditing practices worldwide. In Malaysia, RSM International’s member firm is represented by RSM Robert Teo, Kuan & Co., founded in 1978 and now one of the leading and fastest-growing providers of audit, assurance, accounting and tax services. Any partner/director in the office of RSM Robert Teo, Kuan & Co. would be glad to meet those visiting Malaysia and to provide help and advice where required. Penthouse, Wisma RKT Block A, 2 Jalan Raja Abdullah Off Jalan Sultan Ismail 50300 Kuala Lumpur MALAYSIA

Telephone: 603 2697 2888 Facsimile: 603 2691 7733 Email : [email protected] [email protected] [email protected] Website : www.rsmi.com.my

International Contact Partner Dato’ Robert Teo Keng Tuan Audit Tan Yen Fen / Ng Boon Hiang Strategic Consulting & Advisory Girish Ramachandran Tax Lee Voon Siong / Wong Yok Chin Corporate Services Eng Bee Hong Restructuring & Insolvency Arul Gunendran Profit Improvement / Risk Management Stephen Seah Business Development Julius Lau Tze Yi

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Introduction to

Robert Teo, Kuan & Co.

Background

Robert Teo established the practice in 1978 under the name of Robert K. T. Teo & Co. in Kuala Lumpur. On admission of Ms. Kuan Mei Ling as partner, a new firm was formed under the name of Robert Teo, Kuan & Co. The name of the firm was changed to RSM Robert Teo, Kuan & Co. whe n the firm became a full member of RSM International. The firm is committed to providing high quality and cost effective services and our work is based on the highest professional standards that comply with International Accounting Standards, International Auditing Guidelines and the M alaysian Companies Act 1965. Every client, whether it is a large multinational company or a private individual, is given personal and close attention. We have been providing services for many years to foreign companies which include internationally known foreign corporations with substantial operations in Malaysia. We have in the process developed an understanding of problems normally encountered by foreign clients. Our system of control has been developed to ensure that all our foreign clients are given prompt and urgent attention in view of tight reporting deadlines to head offices abroad.

Range of Services

The range of services provided by the firm is quite broad and the main services are summarised as follows: Auditing

The partners of the firm are approved auditors under Section 8 of the Malaysian Companies Act 1965, for purposes of carrying out statutory audits of limited companies incorporated in Malaysia and Malaysian branches of foreign companies. The firm follows a high code of standards set by established accountancy bodies, both locally and internationally. This underlines our commitment to achieving work of the highest standards at all times. Our exposure to a wide range of industries and good relationship with major institutions enable us to advise our clients in the best possible manner. Tax consultancy and planning

This is an area of major interest to most individuals and corporations and is a subject that often outweighs many others as the prime factor for consideration in any business organisation. Many corporate decisions are usually based on tax considerations and expert guidance is important due to significant financial implications. The tax consultancy services are provided by our associate company, RSM Tax Consultants Sdn Bhd, which services both our local and international clients. The services range from routine tax compliance assignments to advisory and tax planning matters usually applicable when establishing new corporations and restructuring existing ones. We keep in constant communication with our clients, updating them on the latest developments in tax legislations and advising them of the implications. In this regard, we periodically issue tax circulars on new tax legislations as well as on current events which affect our clients.

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Our tax services cover a broad spectrum of business activities and usually involve indepth analysis and interpretation of tax legislations so as to minimise tax exposure within the confines of the Malaysian Income Tax Act 1967. Our tax specialists are highly qualified and have wide experience acquired from many years of service in the profession. We have a significant number of large clients from Korea, Japan, Hong Kong, Taiwan, Singapore, Australia, Europe and the United States of America. We have a special team of qualified staff to provide the necessary services for our overseas based clients. Corporate services

This service involves maintaining and updating the statutory records of our corporate clients. Such services include formation of companies, filing of statutory forms, attending meetings and taking of minutes, advising clients regarding corporate matters, etc. Clients, particularly those foreign clients wishing to establish businesses in Malaysia are advised on the most appropriate form of corporate structure, exchange control regulations, taxes and incentives, import levies and other legal requirements. Accounting

This service is extended to some of our clients either on a continuous or part-time basis to convey the right method of record keeping and to provide advice in the form of financial accounting systems which are best suited to the clients' businesses. This involves the setting up of accounting systems and internal controls with the main objectives of achieving efficiency, accuracy and control of the company's assets. Business information

We have the necessary expertise to provide our clients with business information on both local and international investments. Such information includes up-to-date government legislations and guidelines, company searches and any other specific business information that our clients may require from time to time. Corporate recovery

We undertake corporate recovery work through RSM NWT Advisory Services Sdn. Bhd. We are on the panel of a number of financial institutions, both local and foreign, handling recovery work which includes the following: Receiverships Asset disposal Financial monitoring Cash flow restructuring Security and risk review

Credit control review Debtors review Debt recovery Debt restructuring Liquidation

Provisional liquidation Corporate solvency review Litigation support Schemes of arrangement Turnaround management

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Corporate finance services

The firm also has expertise in the following areas of corporate services: Initial public offering Equity capital financing Strategic partnerships Mergers & acquisitions Financial markets Procurement of loans Debt structuring Applications to Authorities

Share valuation Share buy-back Management buy-out Independent expert advice Structured financing Arranging off-shore loans High yield bonds Equity linked securities

Loan dossiers Investment appraisals Project coordination System review Viability investigations Cost reduction planning Reverse takeovers Share placements

Management consultancy services

Our support to clients extends to related services as follows: a.

Design of systems Financial accounting systems Management accounting systems Administration systems, etc.

b.

Business planning and appraisal Company appraisals Organisation and corporate planning Management audit Merger and acquisition studies, etc.

c.

Finance Financial controls Project evaluation Financial planning Cost reduction planning, etc.

d.

Special assignments Investigation of suspected fraud Purchase and sale of businesses Review of accounting systems

e.

Others - Corporate planning and advice on capital restructuring Share valuation of unlisted companies Accountant's report for inclusion in prospectus Feasibility studies Executive recruitment

Investment consultancy services

We have the expertise to support foreign clients who wish to establish business in Malaysia and our services cover the fo llowing areas: a.

Registration of a company in Malaysia

b.

Application for manufacturing licence

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c.

Application for tax incentives such as: Pioneer Status Investment Tax Allowances Other incentives

d.

Application for key posts/expatriate posts

e.

Application for work permits

f.

Assistance in identifying project sites Purchase of land/construction of factory Purchase of land and factory Rental of factory - Advising on the implications of the Malaysian National Land Code

g.

Arrangement of financing which include: Preparation of feasibility/viability reports Advising on requirements for loan procurement

h.

Recruitment of staff

i.

Application for Licensed Manufacturing Warehouse (LMW) status and exemption of custom duties on imports of: Machinery Raw materials

The above summary of the services provided by us is not exhaustive and we are always ready to work with clients and their staff in all areas of their activities where the involvement of a public accountant is considered to be of assistance.

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Introduction to RSM Robert Teo, Kuan & Co is a member of RSM International (RSMi), currently the seventh largest international group of independent accounting and consultancy firms in the world in terms of fee income. The acronym “RSM” comes from the names of the 3 initial core firms, Robson Rhodes of the United Kingdom, Salustro Reydel of France and McGladery & Pullen LLP of the United States of America. RSMi, with its International Executive office situated in London, was formed in 1964, adopting its current name worldwide on 1st January 1993. Today, full member firms of RSMi carry the signature name of RSM as part of the firms’ name. RSMi is represented by over 660 offices in over 64 countries around the world, with a staff force of over 25,000 professionals. The network covers the countries set out in Appendix B. Each member firm is managed and staffed by nationals of the country concerned and can provide clients with a comprehensive range of services relating to auditing, accounting, tax, consulting and financial and management advice. Each member firm is independent, managed and staffed by nationals of the country concerned and can provide c lients with a comprehensive range of services relating to auditing, accounting, tax consulting and financial and management advice. Co-ordination of common standards and objectives amongst the member firms is maintained by the International Board of Directors and a number of specialised committees under the overall authority of the International Council based in Amsterdam. The RSMi International network covers countries in following regions: Africa:

Europe:

Latin America

Afghanistan

Austria

Argentina

Canada

Algeria Mauritius Morocco South Africa Tunisia

Belgium Cyprus Denmark France Germany Greece Italy Luxembourg

Bolivia Brazil Chile Colombia Cuba Dominican Republic Ecuador El Salvador

Mexico Puerto Rico United States of America

Malta Netherlands Norway Poland Portugal Romania Russia Spain Sweden Switzerland Turkey United Kingdom

Nicaragua Peru Uruguay Venezuela

Egypt Iran Israel Jordan Kuwait Lebanon Saudi Arabia United Arab Emirates Yemen

Asia- Pacific

Australia China, Peoples’ Republic Hong Kong India Indonesia Korea Malaysia New Zealand Pakistan Philippines Singapore Taiwan Thailand Vietnam

North America:

Caribbean

Bermuda Middle East

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Chapter 1: Malaysia - An Introduction

1.1

Geography and climate

Malaysia is strategically located in the heart of South East Asia, one of the world’s fastest growing trade and economic regions. It occupies two distinct regions - Peninsular West Malaysia, and East Malaysia, separated by about 750 km of the South China Sea. The country covers an area of 329, 750 square km. Peninsular Malaysia has an area of 131,587 square km stretching from Thailand in the north to Singapore in the south. Sabah and Sarawak straddle the northern and western coast of Borneo, covering 74,398 and 124,449 square km respectively. About four-fifths of Malaysia’s approximate land area of 330,000 square km is covered by tropical rain forests while major land uses include the cultivation of rice, rubber and palm oil. Malaysia lies in the equatorial zone where no seasons mark the passing of months. The days are generally warm and sunny with temperatures averaging 26 degrees celcius. The wet north-east and south-west monsoons which blow from October till March and from May till September respectively bring much rain to Malaysia, especially along the coastal areas.

1.2

Population

Malaysia has a population of approximately 27.17 million with a diversity of races and colourful cultures. The population is made up of Malays, Chinese, Indians, indigenous people and others including Eurasians. Malaysia has a very young population with about 70% below 35 years of age. Malaysia’s literacy rates are high at 94% and school leavers entering the j ob market have at least 11 years of basic education. Life expectancy of the population is 72 years for males and 76 for females. Bahasa Malaysia or the Malay language is the national and official language of the country. English is widely used in commerce and industry.

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Islam is the official religion but freedom of worship for other religious groups is guaranteed by her constitution.

1.3

History

The early history of Peninsular Malaysia can be said to date from about the fourteenth century in the era of the Malaccan Sultanate. Peninsular Malaysia eventually attained independence from the British in 1957. The Federation of Malaysia made up of Peninsular Malaysia, Sarawak, Sabah and Singapore was formed in 1963. Singapore left the Federation in 1965.

1.4

Government

The Supreme Head of State is His Majesty, the Yang Di Pertuan Agong, a constitutional monarch who is elected from among the nine State Rulers by the Conference of Rulers and holds office for five years. All Peninsular Malaysian states have hereditary rulers except Melaka and Pulau Pinang (Penang); those two states along with Sabah and Sarawak in East Malaysia have governors appointed by government. Powers of state governments are limited by federal constitution. Under terms of federation, Sabah and Sarawak retain certain constitutional prerogatives (e.g., right to maintain their own immigration controls) Each of the thirteen states of Malaysia has its own constitution and a state government to handle state affairs. Malaysia welcomes foreign investments, particularly in the manufacturing sector, and does not discriminate against investors from any country. To encourage foreign investments, Malaysia offers many incentives and other advantages to foreign investors and has entered into double taxation agreements with more than 65 countries (please refer to Appendix V). 1.5

Investment guarantee agreements

To encourage foreign investments, Malaysia has signed investment guarantee agreements with most major industrialised countries, as set out in Appendix II. These agreements generally cover the following: a.

A guarantee that there shall be no expropriation or nationalisation except for a public purpose and with prompt and adequate compensation;

b.

A permission to remit or repatriate in any convertible currency profits or capital on investment.

All disputes will be settled at the International Centre for the Settlement of Investment Disputes, of which Malaysia is a member. The government plans to develop Malaysia into an industrialised nation by the year 2020. The private sector is expected to play a major role in such development, with manufacturing becoming the leading economic sector.

1.6

Resources and primary products

Malaysia is a country full of natural resources and is a major producer of some of the world's primary commodities such as: Rubber

13% of the world output

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Palm Oil Timber Tin

45% of the world output 35% of world production of tropical hardwood timber 25% of the world output

Malaysia also produces substantial volumes of crude petroleum, natural gases, pepper, cocoa, copra, coconut oil, tapioca, tobacco and pineapples.

1.7

Transport and communication

Malaysia has one of the most developed transport and communication systems in South East Asia. Airports

There are presently five international airports, fifteen domestic airports and eighteen other aerodromes. Malaysia's central position at the cross-roads of South East Asia makes her particularly convenient as a transhipment centre. Malaysia's air cargo facilities are well-developed. Ports

Malaysia's seven international ports are at Penang Port, Port Kelang, Johor Port, Port of Tanjung Pelepas, Kuantan Port and Kemaman Port in Peninsular Malaysia and Bintulu Port in Sarawak. Most of these ports offer containerised services in addition to normal and ancillary services. Many minor ports serve industrial towns. There is also a specialised industrial port at Kemaman, on the east coast of Peninsular Malaysia which caters to the needs of petroleum companies. Roads, Railway and Public Transportation

In Peninsular Malaysia, travel and transport by land is well served by an extensive network of macadamised roads and railway system linking major towns as well as to Singapore in the south and Thailand in the north. The Kuala Lumpur Sentral is the central transportation hub integrating all major rail transport networks, including the Express Rail Link to the Kuala Lumpur International Airport, Malaysia’s newest and biggest airport and Putrajaya, the government’s administrative centre. (refer to Appendix XI) Telecommunication

The telecommunication system provides telephone (both digital and analogue systems), telegraph and telex services and also communication facilities for broadcasting, civil aviation, police, customs and fisheries. Malaysia is using the latest digital and fibre optics technology to provide high quality telecommunication services at competitive prices. Malaysia has three network service providers providing a full range of local, domestic and international encompassing voice and data facilities. There are also six cellular service providers providing services nationwide using various technologies including GSM 900 and PCN 1800. There are six internet service providers with whom Malaysians can log onto the Net.

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Postal services

The Malaysian Postal Service Department provides a full range of services including postal remittance service with foreign countries. 1.8

Utilities

There is ample supply of electricity throughout Malaysia. Water supply in Malaysia is available at any time of the day and is fully treated. Waste disposal is under the jurisdiction of the local authorities such as city halls, town councils and municipalities.

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Chapter 2: Government Policies Affecting Business

2.1

Ninth Malaysia Plan (9MP)

The 9MP will chart the nation’s development agenda for the first 5 years of the national Mission. The 9MP will seek to achieve growth with distribution. The government has set target of completely eliminating hardcore poverty and halving overall poverty to 2.8% by 2010. The government will emphasise trans-border development including developing the Northern Corridor, encompassing areas in the states of Perlis, Kedah, northern Perak and Pulau Pinang; the Eastern Corridor encompassing areas in the states of Terengganu, Kelantan and Pahang; the Southern Corridor focusing on southern Johor; as well as the states of Sabah and Sarawak.

2.2

Third Industrial Master Plan (IMP3)

The Third Industrial master Plan will serve as a guide for the country’s economic development from Year 2006 to 2020. The IMP3 aims to improve the country’s global competitiveness across three pillars of the economy namely the manufacturing, services and agriculture sectors. Measures will be instituted to encourage the manufacturing sector to progress towards production of more value-added goods or components, greater utilisation of technology and heavier emphasis on product or process improvement via R & D.

2.3

National Development Policy (NDP)

Following the expiry of the NEP in 1990, the Government introduced the National Development Policy (NDP) in 1991 as the framework for economic policy between 1991 and 2000. The goal of NDP is to promote balanced development to create a more unified and just society. The NDP, which emphasises growth with equity, is intended to enable all

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Malaysians to participate fully in the country's economic life, thus promoting political stability and national unity.

2.4

Free Market Economy

In general, the Malaysian government permits a free-market economy. It does, however, regulate certain industries, including financial services, pharmaceuticals and transport. Consumer protection is provided in legislations on money-lending, product descriptions, price control of essential goods, housing development and hire-purchase transactions.

2.5

Industrial Co-ordination Act 1975 (ICA)

The Industrial Co-ordination Act 1975 (ICA) provides for the co-ordination and orderly development of manufacturing activities in Malaysia. A manufacturing company with shareholder funds of RM25 million and above is required to apply for a manufacturing licence from Malaysian Industrial Development Authority (MIDA), a licensing agency of the Ministry of International Trade and Industry.. A licence is required for each location of a manufacturing activity. The following manufacturing activities are exempted from complying with the requirements provided under ICA: a.

manufacturing activities with: i. ii.

shareholders' funds of less than RM 2.5 million; or less than seventy-five full-time paid employees;

b.

milling of oil palm fresh fruits into palm oil;

c.

production and processing of natural rubber of all types, including latex, skim sheets, crepe, scrap, technically-specified rubber, non-standard and modified rubber or any other unvulcanised form of natural rubber prepared by any patented or technically-specified procedure; and

d.

milling of paddy into rice.

All manufacturing projects licensed under ICA must obtain the prior written approval of the MIDA before entering into any technical agreements involving foreign partners. Technology transfer agreements cover licence rights over specific processes, formulae or manufacturing technology (patented or unpatented), other knowledge and expertise necessary for the setting up of a plant and provision of various technical assisting and supporting services. This is done to ensure that: a. b. c.

the agreement will not impose unfair and unjustifiable restrictions or handicaps on the local party; the agreement will not be prejudicial to national interest; and the payment of fees (if applicable) will commensurate with the level of technology to be transferred.

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2.6

Regulation of businesses

The principal regulatory agencies concerned with business operations are: a.

Ministry of International Trade and Industry (MITI) This Ministry deals with foreign investments and promotion thereof and has overall responsibility for all aspects of foreign trade and industrial development. MITI acts through: i.

Malaysian External Trade Development Corporation (MATRADE) MATRADE was established since March 1, 1993 as the external trade promotion arm of Malaysia’s MITI. MATRADE functions as a focal point for Malaysian exporters and foreign importers to source for trade related information.

ii.

Malaysian Industrial Development Authority (MIDA) MIDA controls the promotion and co-ordination of all industrial activities. It advises MITI on the formulation and implementation of various industrial development policies, strategies and incentives for industry and on other matters concerning accelerated industrial development. MIDA issues manufacturing licences, which are required under ICA and gives approval on various incentives.

iii.

Small and Medium Industries Development Corporation (SMIDEC) SMIDEC was established on May 2, 1996. The establishment of SMIDEC was in recognition of the need for a specialised agency to further promote the development of Small and Medium Industries (SMIs) in the manufacturing sector.

b.

Securities Commission (SC) This is a statutory body, set up under the Securities Commission Act 1993 to ensure the orderly and efficient development of the Malaysian securities market for the purpose of national economic development. SC's primary role is to advise the Minister of Finance on all matters relating to the securities and futures contract industries. It is also to safeguard the public's and minorities' interest, as well as to maintain market integrit y and efficiency.

c.

Local Government Authorities These authorities are responsible for local b y-laws that affect business operations. Such laws relate mainly to buildings and structures (business premises), health, public safety and security, and displays (signboards, advertisement hoarding (i.e., billboards), etc.)

d.

Factories and Machinery Department Approval from this department is required before manufacturing operations may begin.

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e.

Ministry of Science, Technology and Innovation This Ministry has responsibility for the administration of the Environmental Quality Act and ensures that factories are equipped with appropriate anti-pollution controls.

Various other government agencies regulate specific industries, such as finance and banking, insurance, real estate, petroleum, etc.

2.7

Industrial and intellectual property protection Patents Act 1983

Patent protection in Malaysia is governed by the Patents Act 1983 and the Patents Regulations 1986. Protection is given to inventions which may relate to a product or a process. An invention is patentable if it is new, involves an inventive step and is industrially applicable. The period for patent protection is fifteen years from the date of grant. The Patents Act conforms with the requirements of the Paris Convention of which Malaysia is a party as of 1st January, 1989. The classification of patent application used in Malaysia is in accordance with the International Patent Classification. Trade Marks Act 1976

Trade mark protection in Malaysia is governed by the Trade Marks Act 1976 and the Trade Marks Regulations 1983. The Trade Marks Act, modelled along the acts of some of the industrial countries, provides effective and adequate protection for registered trade marks in this country. The protection of a trade mark is not limited in time, provided its registration is periodically renewed and its use continues. The Trade Marks Act does not discriminate in the rights conferred under the Act to locals or foreigners. Copyright Act 1987

Copyright protection in Malaysia is governed by the Copyright Act which came into force on 1st December, 1987. The Copyright Act provides for a better and more comprehensive protection of copyright. The duration of the copyright protection is fifty years.

2.10 Guidelines on foreign equity ownership

The Malaysian government welcomes foreign investment in the manufacturing sector. In keeping with the objective of ensuring increasing Malaysian participation in manufacturing activities, it is the policy of the government to encourage projects to be undertaken on a joint-venture basis. Foreign investors are allowed to hold 100% equity irrespective of their level of exports with the exception of certain products / activities where Malaysian Small and Medium Industries have the capabilities. For projects involving non-renewable resources, such as the extraction or mining and processing of mineral ores, majority foreign equity participation of up to 100% is permitted. In determining the percentage, the following criteria will be taken into consideration: a. b. c.

the level of investment, technology and risks involved in the projects; the availability of Malaysian expertise in the areas of exploration, mining and processing of the minerals concerned; and the degree of integration and level of value added involved in the projects.

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Assurance in respect of equity ownership

A company that has been approved with a given equity condition will not be required to restructure its equity at any time, notwithstanding the fact that the company may have undergone expansion or diversification, provided that the company continues to comply with the original conditions of approval and retains the original features of the project. Foreign Investment Committee (FIC)

This non-statutory body regulates acquisitions, mergers and takeovers. It was formed to ensure that mergers, takeovers or acquisitions of Malaysian assets that involve foreign interests take into consideration the objectives of NDP. For the purposes of implementing the guidelines, FIC was established and is responsible for major issues on foreign investments. The functions of FIC are: i.

to formulate policy guidelines on foreign investments in all sectors of the economy to ensure the fulfilment of the objectives of the NDP;

ii.

to monitor the progress and help resolve problems pertaining to foreign private investments and to recommend suitable investment policies;

iii.

to supervise and advise ministries and government agencies on all matters concerning foreign investments;

iv.

to co-ordinate and regulate the acquisition of any assets or interests, mergers and take-overs of companies and businesses in Malaysia; and

v.

to monitor, assist and evaluate the form, extent and conduct of foreign investments in the country and to maintain comprehensive information on foreign investments.

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Chapter 3: Banking and Finance

3.1

Central Bank

Bank Negara Malaysia is the Central Bank of Malaysia and is responsible for supervising the banking system to promote monetary stability and to develop a sound financial structure. The objectives of BNM in essence are to encapsulate the importance of promoting economic growth with price stability and maintaining monetary and financial stability. It also issues the Malaysian currency, acts as banker and financial adviser to the government, administers foreign exchange control regulations and is the lender of last resort to the banking system. The Banking and Financial Institutions Act 1989 (BAFIA) extended BNM’s powers for the supervision and regulation of financial institutions and deposit taking institutions who are also engaged in the provision of finance and credit. 3.2

Financial institutions Commercial banks

There are nine licensed commercial banks operating in Malaysia. There are also thirteen foreign banks that have established representative offices in Malaysia, but they are not permitted to conduct normal banking business. Commercial banks are also authorised to deal in foreign exchange and are the only financial institutions allowed to provide current account facilities. In addition to offering normal banking services, commercial banks may accept deposits denominated in foreign currencies from non-residents, loan foreign currencies to residents or syndicate such loans for productive purposes or for the purchase of Malaysian assets owned by non-residents.

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In 2004, the legislative framework was amended to enable rationalisation of retail banking business through the consolidation of the commercial banks and finance companies within the same banking group. This initiative was introduced to enable the domestic banking groups to streamline their businesses and reap benefits from economies of scale. To date, all domestic banking groups have rationalised their commercial banking and finance companies businesses. Investment Banks (IBs)

January 1, 2007 signified a historic occasion for the Malaysian financial landscape when merchant banks, stockbroking companies, universal brokers and even discount houses transformed into investment banks. Investment banks differ from commercial banks, which mainly take deposits and make commercial and retail loans. Investment banks engage mainly in public and private market transactions for corporations, governments and investors. These transactions include mergers and acquisitions (M & A), divestitures and issuance of equity and debt securities. Investment banks also advise and assist clients with specialised industry expertise (such as technology and real estate). They also do securities businesses such as trading, securitisation, financial engineering, merchant banking, funding, investment, management and securities services. Other banking institutions

a.

Bank of Islam Malaysia Berhad Bank Muamalat Malaysia

In Malaysia, separate Islamic legislation and banking regulations exist side-byside with those for the conventional banking system. The legal basis for the establishment of Islamic banks was the Islamic Banking Act (IBA), which came into effect on 7 April 1983. The IBA provides BNM with powers to supervise and regulate Islamic banks. The above banks provide all the conventional banking services, based on Islamic concepts of banking and credit. b.

Development financial institutions

The development financial institutions are government agencies specialising in the provision of medium and long-term loans to finance capital investments of new industries as well as entrepreneurs in the industrial sector. The six Development Financial Institutions are: i. ii. iii. iv. v. vi.

Bank Pembangunan Malaysia Bank Perusahaan Kecil & Sederhana Malaysia (SME Bank) Export – Import Bank of Malaysia Berhad Bank Kerjasama Rakyat Malaysia Bank Simpanan Nasional Agrobank (formerly known as Bank Pertanian Malaysia)

Other Development Financial Institutions: i. ii. iii. iv. v.

Malaysian Industrial Development Finance Berhad (MIDF) Credit Guarantee Corporation Malaysia Berhad (CGC) Lembaga Tabung Haji Sabah Development Bank Berhad Sabah Credit Corporation Berhad

22


MIDF was formed as a joint venture between the government and the pr ivate sector to provide medium and long-term finance for the manufacturing industry. The other development banks provide loans to meet the credit needs of the industrial and t he agriculture sectors respectively. 3.3

Securities and commodities exchanges Bursa Malaysia (Bursa)

The Kuala Lumpur Stock Exchange was incorporated on December 14, 1976 as a company limited by guarantee and took over the operations of the Kuala Lumpur Stock Exchange Berhad in the same year. On April 14, 2004 its name was changed to Bursa Malaysia Berhad. Bursa Malaysia provides a market place for the buying and selling of stocks of public companies. Securities of over five hundred companies are quoted on the main board and about 300 companies are quoted on the second board of the Bursa. Foreign investors are permitted to buy and sell shares of the listed companies in the stock exchange, subject to compliance with regulatory requirements. A committee manages the Bursa to regulate and maintain a free and open market for the purchase and sale of securities. The manipulation of share prices and short-selling is an offence in Malaysia. Malaysia Derivatives Exchange (MDEX)

The MDEX, formerly known as Kuala Lumpur Options and Financial Futures Exchange, was launched in June 2001. MDEX is an integrated derivatives exchange offering a wide range of products to investors. Malaysian Exchange of Securities Dealing and Automated Quotation (MESDAQ)

The MESDAQ was set up as an avenue for capital raising including allowing the listing of technology incubators and MSC status companies seeking listing on MESDAQ to dual list on NASDAQ. Labuan International Financial Exchange

The Labuan International Financial Exchange (LFX) is an offshore financial exchange board in Labuan, the international business financial centre for Malaysia. LFX was established to complement the various business financial services currently available in Labuan. LFX is limited by shares and is wholly owned by Bursa Malaysia Berhad. LFX is a full fledged Exchange with listing and trading facilities. Its initial f ocus will be listing of financial instruments. 3.4

Insurance companies

Under the Insurance Act 1996, BNM retains a substantial degree of regulatory control over the management, control of licensees and critical aspects of their operations. There are 66 insurance companies operating in Malaysia, out of which 53 are incorporated domestically while 13 are foreign companies. The insurers comprise 5 life companies, 40 general, 13 composite companies which transact in both life and general businesses, 7 general reinsurers and 1 life reinsurance company. There are 2 insurance companies providing services based on Islamic principles. Insurance companies are monitored by the Central Bank.

23


3.5

Offshore Financial Centre

The Federal Territory of Labuan was established as an International Offshore Financial Centre (Labuan IOFC) in October 1990. (Please refer to Chapter 20 for details)

24


Chapter 4: Exchange Controls

4.1

Exchange control policy

Malaysia has a very liberal exchange control system which enables businesses to deal freely in foreign exchange with very little or no restriction. The system applies uniformly to all countries except Israel against which special restrictions apply. The main objectives of the exchange control policy in Malaysia are to ensure that export proceeds are received promptly in Malaysia, to assist Bank Negara in monitoring the settlement of payments and receipts in international transactions as well as to encourage the use of the nation’s financial resources for productive purposes. The foreign exchange administration rules have been progressively liberated to facilitate a conducive and competitive business environment by enhancing the efficiency of the regulatory deli very system. 4.2

Investments in Foreign Currency Assets

The current limits for investment in foreign currency assets by residents are principally applicable only to resident individuals and corporations who have domestic ringgit borrowing and convert ringgit into foreign currency to invest abroad. There are no limits for residents with no domestic ringgit borrowing or those investing abroad with their own foreign currency funds. 4.3

Foreign currency accounts (FCA)

A resident is free to open FCA to retain any amount of foreign currency receipts, with licensed onshore banks, licensed offshore banks in Labuan and overseas banks. The account can be credited with foreign currency funds sourced from foreign currency received from non-residents, foreign currency received from residents for permitted purposes, and from the conversion of ringgit. Resident exporters are allowed to retain their foreign currency export proceeds, without converting them into Ringgit Malaysia, in foreign currency accounts maintained with

25


licensed onshore banks in Malaysia. Resident individuals are free to open joint foreign currency accounts for any purpose. Prior permission however, is required for resident corporations to maintain joint foreign currency accounts. There are no restrictions for a non-resident to open or maintain any number of foreign currency accounts with licensed onshore banks in Malaysia as well as the amount to be retained in the accounts. The ringgit account maintained by a non-resident with banks in Malaysia is termed as an External Account. 4.4

Non resident borrowings from local sources

Non-resident controlled companies (NRCCs) operating in Malaysia do not face difficulties in obtaining domestic credit facilities to finance their business in Malaysia. NRCCs can also obtain any amount of forward exchange contracts, guarantee facilities and As a general rule, NRCCs which borrow in excess of RM 10 million in Malaysia are required to ensure that their domestic borrowings do not exceed their capital funds by more than three times. This is to ensure that NRCCs bring in sufficient amount of their own funds to finance projects in Malaysia as a long-term proposition, and not merely as a venture for quick profits without any long-term commitment to the economy. 4.5

Investment in Immovable Properties

Non residents are free to purchase residential or commercial properties in Malaysia. Such purchases need only to comply with guidelines issued by the Foreign Investment Committee of Malaysia. Foreign interests are allowed to acquire property valued at more than RM150,000 per unit with no limits on the number of properties acquired. Effective 21 December 2006, approval is not required for non residents to purchase residential properties exceeding RM250,000. Non residents are also free to borrow any amount of property loans to finance or refinance the purchase of residential and commercial properties in Malaysia. 4.6

Foreign borrowings

Bank Negara Malaysia wishes to announce further l iberalisation of the foreign exchange administration rules on borrowing in foreign currency by residents as well as borrowing and lending in ringgit between residents and non-residents, with immediate effect. This liberalisation is part of the continuous efforts to enhance Malaysia's competitiveness by facilitating greater access to fi nancing and reducing the cost of doing business. I. Borrowing in foreign currency by residents

(a)

A resident company is free to borrow any amount in foreign currency from (i) its non-resident non-bank parent company; (ii) other resident companies within the same corporate group in Malaysia (previously, approval required for any amount); and (iii) licensed onshore banks.

(b)

A resident company is free to obtain any amount of foreign currency supplier's credit for capital goods from non-resident suppliers; and

(c)

A resident company or an individual is free to refinance outstanding approved foreign currency borrowing, including principal and accrued interest.

26


The thresholds for foreign currency borrowing of RM100 million in aggregate by a resident company on a corporate group basis and RM10 million for a resident individual would no longer be applicable for the above financing activities. II. Borrowing in ringgit by residents from non-residents

(a)

(b)

A resident company is allowed to borrow in ringgit, including through the issuance of ringgit-denominated redeemable preference shares or loan stocks: (i)

of any amount from its non-resident non-bank parent company to finance activities in the real sector in Malaysia; and

(ii)

up to RM1 million in aggregate from other non-resident non-bank companies and individuals for use in Malaysia; and

A resident individual is allowed to borrow in ringgit up to RM1 million in aggregate from non-resident non-bank companies and individuals for use in Malaysia.

Previously, borrowing in ringgit of any amount from non-residents required prior permission of the Controller of Foreign Exchange. III. Lending in ringgit by residents to non-residents

(a)

A resident company or individual is free to lend in ringgit of any amount to non-resident non-bank companies and individuals to finance activities in the real sector in Malaysia (previously, only allowed up to RM10,000).

(b)

A licensed onshore bank is free to lend in ringgit of any amount to nonresident non-bank companies and individuals to finance activities in the real sector in Malaysia (previously, only allowed up to RM10 million in aggregate).

27


Chapter 5: Types of Business Entities

5.1

Forms of business

In Malaysia, a business may be carried on in any one of the following forms: a. b. c.

by an individual operating as a sole proprietorship; by two or more (but not more than twenty) persons in partnership; and by a locally incorporated company or by a foreign company registered under the provisions of the Companies Act 1965.

The above may be utilised by almost any form or type of business. In the case of partnerships, partners are both jointly and severally liable for the debts and obligations of the partnership if assets are found to be insufficient. Formal partnership deeds may be drawn up governing the rights and obligations of each partner but this is not obligatory.

5.2

Company structure

Companies in Malaysia are governed by the Companies Act 1965, which provides for three types of companies: a. b. c.

5.3

a company limited by shares; a company limited by guarantee; and an unlimited company.

Company limited by shares

A company having a share capital may be incorporated as a private company (identified through the words ‘Sendirian Berhad’ or ‘Sdn Bhd’ appearing together with the company

28


name) or public company (identified through the words ‘Berhad’ or ‘Bhd’ appearing together with the company name). The requirements to form a company are: • • •

A minimum of two subscribers to the shares of the company A minimum of two directors; and A company secretary who can be either An individual who is a member of a professional body prescribed by the o Minister of Domestic Trade and Consumer Affairs; or An individual licensed by the Companies Commission of Malaysia (CCM) o

Both the directors and company secretary shall have their principal or only place of residence in Malaysia.

5.4

Private companies

A company having a share capital may be incorporated as a private company where its articles of association:

5.5

a.

restricts the right to transfer its shares;

b.

limits the number of its members members to fifty, excluding excluding employees and some former employees;

c.

prohibits any invitation to the public to subscribe for its shares shares and the debentures; and

d.

prohibits any invitation to the public to deposit money with the company.

Public companies

A company can be formed as a public company or alternatively, a company which is incorporated as a private company can also be converted to a public company subject to Section 26 of the Companies Act. A public company cannot offer shares to the public unless a prospectus which complies with the requirements of the Companies Act has been registered with CCM. The proposal for the issue or offer of shares to the public should be submitted to SC for approval first before the prospectus can be accepted for registration. A public company can apply to Bursa Malaysia for permission to have its shares quoted on the Exchange, subject to compliance with the requirements set by Bursa Malaysia. ( refer to Appendix X )

5.6

Branch of foreign company

Every foreign company shall, within one month after it establishes a place of business or commences to carry on business within Malaysia, lodge with CCM for registration, notice of the situation of its registered office in Malaysia in t he prescribed form. The appointed local agent of the foreign company is answerable for the performance of all acts required to be done by the company under the Companies Act. Any change in agents must be reported to CCM.

29


5.7

Representative office

A foreign corporation may also apply to MITI to set up a representative office. A representative office has no legal status nor can it be engaged in any profit-making or trading activities. Principally a representative office serves as a promotional and liaison office of its parent company. Its activities shall be restricted to promotion, market research, liaison and co-ordination of activities done on behalf of its head office.

5.8

Regional office

A Regional Office of a foreign company based in Malaysia performs permissible activities for its headquarters/principal. Such office should be totally funded from sources outside Malaysia and are not required to be incorporated or be registered with the Companies Commission of Malaysia (CCM) under the Companies Act 1965. An approved regional office serves as the coordination centre for its affiliates, subsidiaries and agents within the Asia Pacific region. It is responsible for conducting designated activities within the region it operates.

30


Chapter 6: Company Formation

6.1

Basic requirements and procedures

Essentially, the principal requirements for the incorporation of a company consist of: a. b. c. d. e.

6.2

Obtaining approval of a name by the Companies Commission of Malaysia. Having at least two directors (promoters), whose principal or only place of residence is in Malaysia. Having two or more shareholders who are initial subscribers to the memorandum of association. Having a registered office in Malaysia. Having a minimum authorised share capital of RM 100,000.

Stamp duty

The stamp duty payable on incorporation depends on the amount of the authorised share capital to be determined. A schedule of the stamp duty is set out in Appendix III.

31


Chapter 7: Company Administration

7.1

Directors

Directors must be natural persons. A company must have at least two directors whose principal or only place of residence is in Malaysia. The number of directors is not limited by statute, but companies usually specify a maximum number of directors in their articles of association. Directors' meetings may be held in or outside Malaysia. The duties and responsibilities of directors are set out in the Companies Act and the articles of association. An undischarged bankrupt cannot act as a director.

7.2

Company secretary

Under the Companies Act, a company must appoint a company secretary who must be a natural person and a member of a professional body approved under the Companies Act, or a person licensed by CCM. A person will be disqualified to act as a company secretary if he is an undischarged bankrupt or is convicted whether within or outside Malaysia.

7.3

Registered office

A company must have a registered office in Malaysia at which all books, registers and documents required to be kept as provided in the Companies Act are kept. The statutory registers and minute books required to be kept are: -

Minutes of meetings of shareholders and of the directors Register of shareholders Register of directors, managers and secretaries Register of directors' shareholdings Register of charges and debentures

32


7.4

Statutory auditors

Every company must appoint an approved auditor or a firm of approved auditors to report to the shareholders on the accounts of the company.

7.5

Annual general meeting

Every company must hold an annual general meeting in each calendar year, not more than fifteen months after the previous annual general meeting. A newly incorporated company must hold its first annual general meeting within eighteen months of its date of incorporation.

7.6

Statutory filing

The company must lodge an annual return at CCM within one month after the date of every annual general meeting. Unless the company is an exempt private company, the audited accounts and directors' report must be lodged with the annual return.

33


Chapter 8: Immigration Requirements

8.1

Passport requirements

All persons entering Malaysia must possess valid national passports or other internationally recognised travel documents valid for travel to Malaysia. These passports or travel documents must be valid for at least six months beyond the date of entry into Malaysia. Those who are in possession of passports which are not recognised by Malaysia must apply for a document in lieu of a passport and visa which is issued by Malaysian missions abroad.

8.2

Visa requirements

Visa requirements to enter Malaysia are set out in Appendix IV.

8.3

Application for visas

Application for visas for the purpose of entry into Malaysia should be made at the nearest Malaysian mission abroad. In countries where Malaysian missions have not been established, applications should be made to the nearest British High Commission or Embassy.

8.4

Entry into Malaysia

a.

Passes obtained at point of entry A visit pass for the purpose of a social or tourist visit or business may be issued at the point of entry if the visitor can satisfy the immigration authority at th e point of entry that he has a valid passport and visa (wherever applicable).

34


The types of pass issued are as follows: i.

Visit pass (social or tourist) Visit passes (social or tourist) are issued solely for the purpose of a social or tourist visit. A person who has been issued with a social or tourist visit pass is not permitted to take up employment, business or professional work while in Malaysia.

ii.

Visit pass (business) Visit passes (business) are issued to foreign visitors who enter Malaysia for purposes of conducting business negotiations or inspection of business houses. These passes cannot be used for the purposes of employment or for supervising the installation of new machinery or the construction of a factory.

iii.

Conversion of pass Foreign visitors, except those from the Republic of Singapore, who have entered Malaysia on social or tourist visit passes, may apply to the Immigration Department for converting their social or tourist passes into business visit passes. This ruling is designed to assist foreign visitors who wish to undertake business activities. All applications for converting social or tourist visit passes into business passes must be submitted to the Immigration Department with a letter of recommendation from MITI.

b.

Passes obtained prior to arrival in Malaysia Other than applications for entry for the purpose of tourist, social or business visits, all applications for passes of the types mentioned below must be made prior to arrival in the country. All such applications must have sponsorships in Malaysia. The sponsors must agree to be responsible for the maintenance and repatriation of the visitors from Malaysia if it should become necessary. The types of pass issued are as follows: i.

Visit pass (temporary employment) A Visit Pass (Temporary Employment) (VPTE) is suitable for assignments of less than 2 years. The duration of the VPTE will be in accordance with the period of assignment under the employment contract. A duly registered Malaysian company must sponsor the VPTE application.

ii

Employment pass An Employment Pass is a long-term work permit for assignments of 2 years or longer. An Employment Pass can be valid for a period of up to 5 years, in accordance with the employment contract and subject to the discretion of the MID. A duly registered Malaysian company must sponsor the Employment Pass application.

iii

Visit pass (professional) The Professional Visit Pass (PVP) is suitable for assignments of up to 12 months for technical roles. Assignments to install or repair machinery, computer software or equipment or perform other technical duties, no matter how brief, would qualify for a PVP. The assignee must remain employed and on the payroll of his/her home company throughout the PVP assignment to qualify for a PVP. A contract or agreement evidencing the relationship

35


between the assignee's home company and the Malaysian host company will also be required as a registered Malaysian company must sponsor all PVP applications. A PVP application is submitted to the MID, and the Inland Revenue Board must be notified. iv

Dependent's pass The wife and children of Employment Pass holders may be granted Dependent Passes. Husbands of female employees are eligible for Long Term Social Visit Passes (LTSVP). The spouse and children under 21 years of age of Visit Pass (Temporary Employment) holders are eligible for LTSVP. The spouse and children of Professional Visit Pass holders are generally not eligible for Dependent or LTSVP status. On a discretionary basis, and provided that the PVP is issued for 12 months, the spouse of a PVP holder may be granted a LTSVP. The LTSVP is valid for one year, renewable up to the expiry of the employee's Employment Pass or VPTE.

v

Student's pass This is issued to any person who enters the country for the purposes of taking up studies in any approved educational institution.

8.5

Employment of expatriate personnel

It is the government's policy to see that Malaysians are eventually trained and employed at all levels of employment. Notwithstanding this, foreign companies are allowed to bring the required personnel in areas where there is a shortage of trained Malaysians to do the job. In addition to this, foreign companies are also allowed certain key posts to be permanently filled by foreigners. Companies should make every effort to train more Malaysians so that the employment pattern at all levels of the organisation will reflect the multi-racial composition of t he country.

8.6

Guidelines on employment of expatriate personnel in the manufacturing sector

a.

Any foreign company with a paid up capital of US$2 million (or equivalent) and above will automatically be allowed five expatriate posts including key posts. Additional expatriate posts will be given when necessary upon request.

b.

Any foreign company with a paid up capital of less than US$2 million (or equivalent) will be considered for expatriate posts on the basis of the following:

c.

i.

Key posts can be considered where the foreign paid up capital is at least equivalent to RM 500,000. This figure, however, is to be considered as a guideline only and the number of key posts allowed depends on the merits of each case.

ii

For executive posts which require professional qualifications and practical experience, expatriates may be employed up to a maximum period of ten years subject to the condition that Malaysians are trained to eventually t ake over the posts.

iii

For non-executive posts which require technical skills and experience, expatriates may be employed up to a maximum period of five years subject to the condition that Malaysians are trained to eventually take over the posts.

The other conditions relating to expatriate employment are as follows:

36


8.7

i

An expatriate officer who is transferred from one post to another post within the same company is not required to obtain a new employment pass. His original employment pass will be amended to reflect the change in post.

ii

A new expatriate officer replacing another expatriate officer is required to obtain a fresh employment pass.

iii

All employment passes are valid for the period of time as approved for the post. However, for key posts holders, the employment passes will be given on a five-year renewable basis.

iv

All holders of employment passes will be issued with multiple entry visas valid for the corresponding period that the employment pass is valid.

Applications for expatriate posts

Applications for expatriate posts (including key posts, executive and non-executive posts) can be submitted to MIDA at the same time as the company's application for approval of its project.

37


Chapter 9: Accounting and Reporting Requirements

9.1

Accounting books and records

Financial statements of companies incorporated in Malaysia are required to be kept in a manner that will sufficiently explain its transactions and enable them to be conveniently and properly audited. Under the Companies Act, 1965 and the Income Tax Act, 1967, transactions of the company must be recorded within sixty days of the date of transactions and the records must be kept in Malaysia and be retained for at least seven years. There is also a requirement in the Companies Act to keep in Malaysia all accounting and other related records of companies incorporated in Malaysia. In respect of operations outside Malaysia, records relating to operations outside Malaysia may be kept by the company at a place outside Malaysia provided that all such statements and returns with respect to the business dealt with in the records are sent to and kept at a place in Malaysia.

9.2

Form and content of financial statements

The Companies Act sets out various disclosure requirements relating to form and content of financial statements but does not promulgate any accounting standards. With the establishment of Malaysian Accounting Standards Board (MASB), compliance with the approved accounting standards is mandatory and legally enforceable. The directors of the companies incorporated under the Companies Act are required by that Act to prepare financial statements that give a true and fair view of the financial position of the company at the end of the financial year and results and cash flows of the company for the financial year. In this regard, the financial statements are to be prepared using “approved accounting standards” issued and adopted by the MASB. Compliance with the approved accounting standards in preparing financial statements pursuant to any laws administered by the CCM, the Securities Commission and the Central Bank of Malaysia, is mandatory and legally enforceable. The financial statements may be prepared in Bahasa Malaysia or in English. However, the currency of presentation must be in the Malaysian currency, i.e. Ringgit Malaysia (RM).

38


Holding companies must prepare group financial statements in the form of consolidated balance sheets and income statements dealing with the group a s a whole. Public companies listed in the KLSE have additional disclosure requirements in the annual report prescribed by KLSE over and above those required by the Act. Financial statements of banks and finance companies and insurance companies are subject to modification by Bank Negara Malaysia while presentation of financial statements of co-operative societies is governed by the Co-operative Act 1948.

9.3

Financial reporting requirements The Malaysian Institute of Accountants (MIA) is the national accountancy body in Malaysia and was established in 1967 under an Act of Parliament, the Accountants Act, 1967. The functions of MIA are to: •

• •

•

regulate the practice of the accountancy profession in Malaysia including the issue of auditing standards, guidelines and code of ethics; promote in any manner it thinks fit, the interests of the accountancy profession in Malaysia; provide for the training, education and examination by MIA, or any other body, of persons practising or intending to practice the accountancy profession; and to determine the qualification of persons for admission as members.

With the enactment of the Financial Reporting Act 1997, MASB was established to take over the role of MIA in relation to the following matters: • • • • •

•

issue new accounting standards as approved; review, revise or adopt as approved accounting standards existing accounting standards; issue statements of principles for fi nancial reporting; sponsor or undertake development of accounting standards; conduct such public consultation as may be necessary in order to determine the contents of accounting concepts, principles and standards; develop a conceptual framework for the purpose of evaluating proposed accounting standards; and make such changes to the form and content of proposed accounting standards as it considers necessary.

Presently, there are two sets of standards being issued and adopted by the MASB; namely Financial Reporting Standards (FRSs) and Private Entity Reporting Standards (PERSs). FRSs are for public listed companies, their subsidiaries, associates and entities jointly controlled by them. PERSs on the other hand are meant primarily for private companies incorporated under the Companies Act 1965 but they are also given the option to use FRSs. However, if a company chooses FRSs or PERSs, it must comply with the full set of FRSs or PERSs respectively in their entirety. The decision to have two sets of standards is a conscious decision made by the MASB, recognising that public listed companies and private companies have different information needs. FRSs, which are equivalent International Financial Reporting Standards (IFRSs), serve to ensure a more informed and detailed reporting, reflecting the MASB’s commitment to convergence to IFRSs. PERSs on the other hand, are introduced after recognising the burden of compliance by the private companies if they were to comply with IFRSs. MASB has issued to current date the following MASB Approved Accounting Standards for Private Entities:   

MASB 1 MASB 2 MASB 3

Presentation of Financial Statements Inventories Net Profit or Loss for the Period, Fundamental Errors and Changes in

39


Accounting Policies Research and Development Costs  MASB 4  MASB 5 Cash Flow Statements  MASB 6 The Effect of Changes in Foreign Exchange Rates  MASB 7 Construction Contracts  MASB 8 Related Party Disclosures  MASB 9 Revenue  MASB 10 Leases Consolidated Financial Statements and Investments in Subsidiaries  MASB 11  MASB 12 Investments in Associates  MASB 14 Depreciation Accounting  MASB 15 Property, Plant and Equipment  MASB 16 Financial Reporting of Interests in Joint Ventures  MASB 19 Events After the Balance Sheet Date  MASB 20 Provisions, Contingent Liabilities and Contingent Assets  MASB 23 Impairments of Assets  MASB 25 Income Taxes  MASB 27 Borrowing Costs  MASB 28 Discontinuing Operations  MASB 29 Employee Benefits Accounting and Reporting by Retirement Benefit Plans  MASB 30  MASB 31 Accounting for Government Grants and Disclosure of Government Assistance  MASB 32 Property Development Activities  IAS 25 Accounting for Investments  IAS 29 Hyperinflationary Economies  MAS 5 Accounting for Aquaculture Preliminary and Pre-operating Expenditure  IB-1 MASB has issued to current date the following MASB Approved Accounting Standards for Entities other than Private Entities:



FRS 1 FRS 2 FRS 3 FRS 5 FRS 6 FRS 101 FRS 102 FRS 107 FRS 108 FRS 110 FRS 111 FRS 112 FRS 1142004 FRS 116 FRS 117 FRS 118 FRS 119 FRS 120



FRS 121



FRS 1232004 FRS 124 FRS 126 FRS 127 FRS 128 FRS 129 FRS 131 FRS 132

                

      

First-time Adoption of Financial Reporting Standards Share-based Payment Business Combinations Non-current Assets Held for Sale and Discontinued Operations Exploration for and Evaluation of Mineral Resources Presentation of Financial Statements Inventories Cash Flow Statements Accounting Policies, Changes in Accounting Estimates and Errors Events After the Balance Sheet Date Construction Contracts Income Taxes Segment Reporting Property, Plant and Equipment Leases Revenue Employee Benefits Accounting for Government Grants and Disclosure of Government Assistance The Effects of Changes in Foreign Exchange Rates – Net Investment in a Foreign Operation Borrowing Costs Related Party Disclosures Accounting and Reporting by Retirement Benefit Plans Consolidated and Separate Financial Statements Investments in Associates Financial Reporting in Hyperinflationary Economies Interests in Joint Ventures Financial Instruments: Disclosure and Presentation

40


          

FRS 133 FRS 134 FRS 136 FRS 137 FRS 138 FRS 140 FRS i-12004 FRS 2012004 FRS 2022004 FRS 2032004 FRS 2042004

Earnings Per Share Interim Financial Reporting Impairment of Assets Provisions, Contingent Liabilities and Contingent Assets Intangible Assets Investment Property Presentation of Financial Statements of Islamic Financial Institutions Property Development Activities General Insurance Business Life Insurance Business Accounting for Aquaculture

The numbering of the FRSs corresponds to the IFRSs issued by the IASB. For example, FRS 1 in Malaysia is equivalent to IFRS 1. FRS with a ‘100 prefix’ corresponds to its equivalent IASs. Thus FRS 101 is equivalent to IAS 1. FRS with a ‘200 prefix’ denotes locally developed Standard with no equivalent International Standard. 9.4

Audit requirements

Under the Companies Act, every company must appoint an approved auditor or a firm of approved auditors to report to the shareholders on the financial statements of the company. An approved auditor must be a member of MIA and is additionally licensed by the Minister of Finance to perform a statutory audit under section 8 of the Act. The directors may appoint the first auditors of the company, but the shareholders may make subsequent appointments at the annual general meeting. An auditor holds office until the conclusion of the next annual general meeting. Auditing standards issued by MIA prescribe the basic principles that their members are expected to follow when conducting an audit. These standards are modelled primarily on the International Auditing Guidelines issued by the International Federation of Accountants. Auditors are required by MIA to: •

•

state in their report whether the audit has been conducted in accordance with approved auditing standards; and refer to any significant non-compliance with IAS and MAS adopted by MASB and MASB standards if the fact on non-compliance is not disclosed in the financial statements.

The auditors must express an opinion on the following: •

•

whether the statutory financial statements have been prepared in accordance with the provisions of the Act and applicable approved accounting standards and whether they give a true and fair view of the state of affairs of the company, its results and cash flow position; and whether the company has kept proper books of accounts and other records and registers required under the Act.

In addition, the auditor is required to report to the Companies Commission of Malaysia all breaches or non-compliance with the provisions of the Act and applicable approved accounting standards if the circumstances are such that in his opinion the matter has not been or will not be adequately dealt with by comment in his report or by bringing the matter to the notice of the directors.

9.5

Annual accounts

Companies are required to present audited financial statements to shareholders annually. There is no specific date to which the financial statements must be drawn, but many companies choose 31st December to coincide with the tax year. Where a company is a subsidiary of another corporation incorporated in Malaysia, its accounting year end must be co-terminous with that of the holding company.

41


Chapter 10: Principal Taxes

10.1 Income tax

Income accruing in or derived from Malaysia is subject to Malaysian income tax. Foreign income received in Malaysia by a resident person is tax exempt, except for a resident company carrying on the business of banking, insurance or sea or air transport. 10.2 Real Property Gains Tax (RPGT)

A gain on disposal of a chargeable asset is subject to real property gains tax. Chargeable assets include the following: a. b.

Real properties situated in Malaysia Investments held in a real property company (RPC)

A RPC refers to a controlled company which owns real property or shares or both, the market value of which is more than 75% of the value of its total tangible assets. A "controlled company" means a company having not more than fifty members and controlled by not more than five persons. The rates of RPGT range from 5% to 30% depending on the period during which the chargeable assets have been held before disposal. Disposal of a chargeable asset after 1st April 2007 will be exempted from Real Property Gains Tax. 10.3 Stamp duty

Stamp duty is levied on documents as provided under the Stamp Act 1949.

42


10.4 Indirect taxes

Indirect taxes include: a. b. c.

Custom duties on import and export of goods. Sales tax on goods. Service tax on goods and services.

10.5 Local taxes

In Malaysia, the Federal Government levies income tax. The State Governments impose assessments and quit rents on properties and licence fees for various businesses carried out within the states' municipalities. 10.6 Estate duty

There is no estate duty in Malaysia.

43


Chapter 11: Income Tax

11.1. Tax year

The tax year is based on the calendar year, i.e. from 1st January to 31st December. However, a company may adopt an accounting period other than the calendar year. Income is assessed on a current year basis. 11.2 Self Assessment System

Malaysian tax system is based on the Self Assessment System (SAS). Under the SAS, no official assessment will be issued by the Inland Revenue to taxpayers. The assessment is deemed to be issued on the date of submission of the income tax return.

11.3 Appeals

Appeals against an assessment must be lodged within thirty (30) days after the submission of tax returns.

11.4 Payments Companies

Please refer to Chapter 15. Non-companies

Individuals and other taxable persons with annual tax liability exceeding RM 1,000 are required to pay their tax liability by six bi-monthly instalments as specified by the I nland Revenue.

44


For employed individuals, payments are made by monthly salary deductions under the Schedular Tax Deductions (STD) system. The balance of tax payable is required to be settled by 30 April or 30 June (Business income) of the following year.

11.5 Penalties

Penalties, fines and prison terms are provided in the Income Tax Act 1967 for various offences, including late payment, failure to submit tax returns, tax evasion, omission of income, etc. A late payment penalty of 10% is levied on any tax not paid within the period stipulated. A further 5% will be imposed if the tax is not settled after another sixty ( 60) days.

45


Chapter 12: General Taxation

12.1. Sources of income

The following sources of income are liable to income tax: a. b. c. d. e. f.

gains or profits from a business; gains or profits from an employment; dividends, interest or discounts; rents, royalties or premiums; pensions, annuities or other periodical payments not falling under any of the foregoing paragraphs; gains or profits not falling under any of the foregoing paragraphs.

Each of the above income is considered as a separate source of i ncome.

12.2 Business income and expenses Allowable Expenses

Only revenue expenses incurred wholly and exclusively in the production of the gross income are allowable against the business income. Current year loss

Current year adjusted loss can be utilised against any other income in the same basis year. Unutilised loss brought forward

Unutilised loss for a year can be carried forward to be set off against income from any business source for subsequent years.

46


Capital allowances

Provision for depreciation is not allowed as a deduction for income tax purposes. allowances are granted on qualifying expenditure.

Instead, capital

Types of allowances are: a. b. c. d.

Capital allowances for plant and machinery Industrial building allowance Agriculture allowance Forest allowance

Unutilised capital allowances

Unutilised capital allowances are available to be set off against income from the same business source for subsequent years.

12.3 Double taxation agreements

Malaysia has concluded tax agreements with the countries l isted in Appendix V.

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Chapter 13: Corporate Taxation

13.1 Single Tier system

Malaysia’s imputation system of taxation has been replaced with Single Tier System of Taxation with effect from 1st January 2008. Under the Single Tier System, the tax on profit of companies is a final tax and dividend distributed will be exempted from tax in hands of shareholders.

13.2 Tax residence

A company is resident in Malaysia for tax purposes if its management and control are exercised in Malaysia. Generally, a company is considered resident in Malaysia if the meetings of its board of directors are held in Malaysia, even if the companies are not incorporated in Malaysia.

13.3 Rates of tax

The rate of income tax for companies whether resident or not is at 26% and will be further reduced to 25% in Year of assessment 2009. For companies carrying on petroleum operations, the rate of income tax is 38%.

13.4 Foreign branch

A foreign branch is taxed at the rate of 26% on its income derived from Malaysia and it will be further reduced to 25% in Year of assessment 2009. However, interest income is taxed at the rate of 15% except where provided otherwise under the Double Taxation Agreement that Malaysia has with the country concerned.

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13.5 Compliance requirements Estimated tax

Under the SAS, a company is required to notify the Inland Revenue thirty (30) days before the start of the next financial year its estimated tax liability for the next financial year. The company is allowed to make a revision of its estimated tax liability in the 6th month or the 9th month of its financial year. For a company which first commences operations in a basis period, the company is allowed to notify the Inland Revenue of its estimated tax payable within three (3) months from the date of commencement of business operation or receiving income. Similarly, the company is allowed to furnish to the Inland Revenue a revised estimate in the 6th or 9th month of the basis period, where applicable. Where a company has underestimated its tax liability, the difference which exceeds 30% of its tax payable for that year is subject to a penalty of 10%. Submission

Company tax returns Form C or R are required to be submitted within 7 months from date of closing of accounts. Payments

Payments of the estimated tax payable shall be made on or before the tenth (10th) day of every calendar month in equal instalments start from the second month in every basis period. For a new company, the monthly instalments shall be made commencing from the sixth month of the basis period. Late payments of the monthly instalments are subject to a penalty of 10%. The balance of tax payable, if any, shall be made within seven (7) months after the end of each financial year.

49


Chapter 14: Personal Taxation

14.1 Tax residence

For tax purposes, an individual is treated as a resident if he is physically present in Malaysia in a particular calendar year for 182 days or more. However, if his period of stay is less, he may still be resident if certain conditions are satisfied.

14.2 Rates of tax and personal reliefs

For residents, the rate of tax is on a graduated scale on the chargeable income after deduction of reliefs. The rates of tax are as shown in Appendix VI. The reliefs available to a resident in Malaysia are summarised in Appendix VII. For non-residents, the rate of tax is 28% on the gross income. non-resident.

No reliefs are available to a

14.3 Separate assessment for wife

A wife's incomes from all sources are separately assessed from that of her husband unless she elects for her income to be combined with that of her husband.

14.4 Short term employment

Income from an employment exercised in Malaysia for a period not exceeding sixty days in a calendar year is tax exempt provided the employee is not resident in Malaysia for tax purposes for the basis year concerned. This provision does not apply to professional entertainers and non-resident directors.

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14.5 Employees in Malaysia

An employee exercising an employment in Malaysia is taxable on his full income for the exercise of that employment, notwithstanding that part of his income may be paid to him outside Malaysia. Employment income is deemed to be derived from Malaysia:

14.6

a.

For any period during which the employment is exercised in Malaysia;

b.

For any period of leave attributable to the exercise of the employment in Malaysia; or

c.

For any period during which the employee performs outside Malaysia duties incidental to the exercise of the employment in Malaysia.

Exemptions

Exemption from income tax in the following circumstances: Period of less than 60 days in Malaysia The income of an individual who is not a tax resident, from an employment exercised in Malaysia is exempted from tax where the employment is exercised for the following period(s):a.

for a period or periods which together do not exceed sixty (60) days in a calendar year; or

b.

or a continuous period (not exceeding sixty days) which overlaps over two calendar years.

Double Taxation Agreements Period of more than 60 days but less than 183 days in Malaysia

Malaysia has signed double taxation agreements (DTA) with more than 65 countries. Generally, the income of an individual from an employment exercised in Malaysia is exempted from Malaysian income tax where the following conditions are satisfied:a. the employee is present in Malaysia for a period or periods not exceeding in the aggregate 183 days in the basis year; b. the remuneration of the employee is paid by, or on behalf of, a person who is not a resident of Malaysia; and c. the remuneration is not deductible in determining taxable profits of a permanent establishment which that person has in Malaysia. The precise conditions are provided in the DTA of the countries concerned. Operational Headquarter/Regional Office

The income of a non-citizen who is employed by a company with Approved Operational Headquarter status or a Malaysian regional office of a foreign company is exempted from income tax on income derived in respect of the period during which the employment is exercised outside Malaysia. The exemption would only apply to the period when the employment is exercised outside Malaysia and would not be applicable for the number of days that the individual is outside Malaysia for personal reasons or on vacation.

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International Procurement Centre (IPC) / Regional Distribution Centre (RDC)

Expatriate employees employed by companies with IPC or RDC status are accorded the same t ax treatment as that given to expatriate employees working in an OHQ or a Regional Office. Labuan Offshore Company Managers 50% of gross income derived by a non-citizen exercising an employment in Labuan, in a managerial capacity in an offshore company, is exempted from income tax.

Effective: From Year of assessment 1992 to Year of assessment 2010 Directors

Fees received by a non-citizen individual in his capacity as a director of an offshore company is exempted from income tax. Effective: Year of Assessment 2002 to Year of Assessment 2010 Offshore Company

An offshore company refers to an offshore company incorporated under the Offshore Companies Act 1990, and includes a foreign offshore company registered under the Of fshore Companies Act 1990, a licensed Malaysian offshore bank, an offshore limited partnership and an offshore trust.

Compliance requirements for an expatriate employee exercising employment in Malaysia

1.

UPON ARRIVAL IN MALAYSIA An expatriate employee having a source of income in Malaysia for the first time is required to notif y the Inland Revenue within two months of arrival in Malaysia.

2.

SUBMISSION OF INCOME TAX RETURN An expatriate employee is required to complete the Income Tax Return and submit it to the Inland Revenue before 30th April of each year.

3.

BEFORE LEAVING MALAYSIA An expatriate employee is required to o btain tax clearance before leaving Malaysia upon expiry of his employment contract or cessation of employment. To determine the tax residence of an expatriate employee for tax purpose for the duration of his employment in Malaysia, the employee is required to submit his original passport together with a photostated copy thereof to the Inland Revenue for verification, before departure from Malaysia on completion of assignment. It is therefore important for the expatriate employee to ensure that all his entries and exits from Malaysia are properly recorded and stamped on his ori ginal passport. In the absence of t he original passport or any other documentary proof of his stay in Malaysia, the Inland Revenue may tax the expatriate employee as a non – resident at the rate of 28% on his gross income without granting any personal reliefs.

52


Where a “smart” card is used for entering and leaving Malaysia, t he expatriate employee is required to obtain a summary of his movements into and outside Malaysia from the Malaysian Immigration Department for every entry and departure to facilitate the determination of his tax residence during the duration of his employment in Malaysia. The expatriate employee is advised to r etain the counterfoil of all his air tickets for easy retrieval of information regarding his movements into and outside Malaysia. Where the employee has already left Malaysia w ithout his passport being verified by t he Inland Revenue, a photostated copy (complete passport) verified by the Malaysian Embassy/Consular overseas is acceptable by the Inland Revenue.

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Chapter 15: Withholding Taxes

15.1 Payments to non-residents

Withholding tax is required to be withheld and remitted to the Inland Revenue within thirty days after paying or crediting the following payments to non-residents: Rate % a. b. c. d. e.

interest royalties remuneration of public entertainer special classes of income under Section 4A of the Malaysian Income Tax Act 1967 * Non-resident contractor, consultant or professional in respect of the service portion of contract payment **

15 10 15 10

13

*

The tax under d. above is a final tax and the rate of tax may be varied in accordance with the Double Tax Agreements which Malaysia has signed with the countries concerned.

**

The tax payment under e. above is made on account for the following:

Rate % 1.

2.

Non-resident contractor, consultant or professional

10

Expatriate and Foreign Employees of the above

3 --- 13

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15.2 Interest paid to resident individual

Withholding tax at the rate of 5% is required to be withheld and remitted to the Inland Revenue in respect of interest paid to a resident individual by an approved financial institution. Certain interests received by a resident individual are exempted from tax provided the conditions stipulated are satisfied.

55


Chapter 16: Tax Incentives & Government Grants

Malaysia's principal tax incentives are provided under the Promotion of Investments Act 1986 and the Income Tax Act 1967. These incentives which are designed to grant total or partial relief from payment of income tax include following: a.

Pioneer status A company given Pioneer Status will generally be granted partial exemption from the payment of income tax. It will only have to pay tax on 30% of its statutory income. The period of tax exemption is 5 years, commencing from the production date as determined by the Ministry of International of Trade and Industry. A 100% exemption may be granted for certain projects, for example strategic projects in high tech industries with heavy capital investment, high R & D content or i ndustrial linkages, etc.

b.

Investment tax allowance A company given Investment Tax Allowance will be granted an allowance of 60% in respect of qualifying expenditure incurred within 5 years from the date of the approval of the project. The ITA can be offset against 70% of the statutory income in the year of assessment. Unutilised ITA can be carried forward to subsequent years until the whole amount has been used up. 30% of the statutory income will be taxed at the prevailing company tax rate.

c.

Infrastructure allowance Infrastructure allowance (IA) is given on capital expenditure incurred on infrastructure in respect of a business or businesses in operation in a promoted area. Infrastructure means any construction, reconstruction, extension or improvement of any permanent structure including a bridge, jetty, port or road. IA is given at the rate of 100% on capital expenditure incurred within 5 years. It is deducted against statutory income up to an amount not exceeding 85% of the statutory income for a year of assessment. Any unutilised IA can be carried forward to subsequent years until it is full y utilised.

d.

Reinvestment allowance Reinvestment allowance (RA) incentive is available to manufacturing companies and the agricultural sector, which have been in operation for at least 12 months and incur qualifying capital expenditure for


the expansion of production capacity, modernisation and upgrading of production facilities, and diversification into related products and automation of production facilities. e.

Industrial adjustment allowance For the purpose of incentives, industrial adjustment has been defined as any activity proposed to be undertaken by a particular sector in the manufacturing industry to restructure by way of reorganisation, reconstruction or amalgamation within that particular sector with a view to strengthening the basis for industrial self efficiency, improving industrial technology, increasing productivity, and enhancing the efficient use of natural resources and the efficient management of manpower. Companies undertaking approved industrial adjustment programmes are eligible for the Industrial Adjustment Allowance (IAA). The IAA provides for an allowance of up to 100% in respect of qualifying capital expenditure incurred by a manufacturing company in its efforts at undertaking industrial adjustment.

f.

Double deduction of expenses (given in respect of certain expenses if the conditions imposed are satisfied) Approved agricultural projects incentives Research and development incentives Industrial building allowance Incentive for in bound tour operators Incentive for approved overseas investments Incentive for overseas construction projects Incentives for high technology and multimedia sector Incentives for training Incentives for exports of products manufactured in Malaysia and export of approved services Operational Headquarters incentives Labuan International Offshore Finance Centre Malaysia Multimedia Super Corridor (MSC)

g. h. i. j. k. l. m. n. o. p. q. r.

The well-developed financial and banking sector has enhanced the ability of Malaysian manufacturers particularly the small and medium industries (SMIs) to expand their operations and export overseas. Apart from the normal business credit, many commercial banks and financial institutions have been appointed by Bank Negara Malaysia to disburse Government grants and provide fi nancing facilities allocated for SMIs. Financial assistance for small and medium enterprises (SMEs) is provided in the form of grants and soft loans where qualifying criteria are met. The qualifying criteria are as follows: •

•

• •

Manufacturing companies or companies providing manufacturing related services incorporated under the Companies Act 1965 with annual sales turnover of not exceeding RM25 million or full time employees not exceeding 150; For the services sector, businesses must be incorporated under the Registration of Business Ordinance 1956 with annual sales turnover of not exceeding RM5 million or full time employees not exceeding 50; At least 60% equity held by Malaysians; and Possess valid premise license.

The grant schemes provided by Small and Medium Industries Development Corporation (SMIDEC) are: 1. Grant for Business Start Ups

Assistance is given in the form of a matching grant where 50% of the approved project cost is borne by the Government and the remainder by the applicant. For enterprises in the manufacturing sector, incorporated under the Registration of Business Ordinance 1956, assistance is given up to 80% of the approved cost. The maximum grant allocated per application is RM 100,000. 2. Grant for Product and Process Improvement

Assistance is given in the form of a matching grant where 50% of approved project cost is borne by the Government and the remainder by the applicant. The maximum grant allocated per application is RM500,000. 57


3. Grant for Productivity and Quality Improvement and Certification

Assistance is given in the form of a matching grant where 50% of approved project cost is borne by the Government and the remainder by the applicant. The maximum grant allocated per application is RM250,000. 4. Grant for Development and Promotion of Halal Product

Assistance is given in the form of a matching grant where 50% of the approved project cost is borne by the Government and the remainder by the applicant. For enterprises in the manufacturing sector, incorporated under the Registration of Business Ordinance 1956, assistance is given up to 80% of the approved cost. The maximum grant allocated per application is RM150,000. 5. Grant for Enhancing Product Packaging, Design and Labelling Capabilities of SMEs

Assistance is given in the form of a matching grant where 50% of the approved project cost is borne by the Government and the remainder by the applicant. For enterprises in the manufacturing sector, incorporated under the Registration of Business Ordinance 1956, assistance is given up to 80% of the approved cost. The maximum grant allocated per application is RM 200,000. 6. Grant for Enhancing Marketing S kills of SMEs

Assistance is given in the form of a matching grant where 50% of the cost of training is borne by the Government and the remainder by the applicant. For enterprise in the manufacturing sector, registered under business ordinance 1956, assistance is given up to 80% of the approved costs. 7. Grant for RosettaNet Standard Implementation

The Government provides assistance to implement the RosettaNet St andard in the form of a grant for local manufacturing, manufacturing related services as well as companies in the services sector. The implementation of the RosettaNet Standard wi ll enable Malaysian companies to adopt efficient business processes with large companies as well as preparing them to embrace global Supply Chain Management (SCM) System. With the adoption of the RosettaNet standard, local companies would be able to conduct business electronically through common codes f or sourcing of parts and components with their partners, suppliers and buyers apart f rom enjoying the benefits of reduced inventory costs, time to market and lower transaction costs. The two available models in implementing the RosettaNet Standard are: •

•

RosettaNet Direct Model o The assistance is given in the form of a matching grant, where 50 per cent of the approved project cost is borne by the Government and the remainder by the applicant. The maximum grant allocated per company is RM100,000.00.

RosettaNet Application Service Provider (ASP) Model o For SMEs The assistance is given in the form of a partial grant, w here 70 per cent of the approved project cost is borne by the Government and the remainder by the applicant. The maximum grant allocated per company is RM30,000.00.

o

For Non SMEs The assistance is given in the form of a matching grant, where 50 per cent of the approved project cost is borne by the Government and the remainder by the applicant. The maximum grant allocated per company is RM30,000.00.

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Chapter 17: Operational Headquarters (OHQ)

Companies operating in Malaysia and carrying out qualifying services for their offices or related companies outside Malaysia would be eligible to apply for Approved OHQ status. The incentives include the following: a.

Exemption from tax for a period of ten years on business income arising from qualifying services rendered;

b.

Dividends received from investments in subsidiary or associate companies are exempted from tax for a period of ten years.

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Chapter 18: Labuan International Offshore Financial Centre (IOFC)

18.1 Introduction

The Federal Territory of Labuan was launched as an IOFC on 1st October, 1990 to further enhance the attractiveness of Malaysia as an investment centre. The IOFC will complement the onshore financial system in Kuala Lumpur. Activities which are promoted and accorded preferential t ax treatment in Labuan include the following: a. b. c. d.

Offshore banking operations; Trust and fund management; Offshore insurance and offshore insurance related business; and Offshore investment holding companies.

18.2 Fiscal incentives Income Tax The maximum amount of tax payable by an offshore company is 3% of the net profits per the audited accounts or upon election, the maximum sum pa yable is RM 20,000 for each year of assessment. Withholding tax An offshore company is not required to withhold any tax on certain payments to a non-resident person if the payments are exempt from tax in the hands of the recipients. Exemption from stamp duty All instruments made in connection with an offshore business activity by an offshore company are not subject to stamp duty.

60


18.3 Individual taxation

There is no special incentive for individuals resident in Labuan. They will continue to be subject to tax under the Income Tax Act 1967. Income derived by a non-citizen individual from an employment exercised in a managerial capacity in an offshore company in Labuan is tax exempt up to an amount equivalent to 50% of the gross income from that employment. This exemption is applicable up to the year of assessment 2010.

18.4 Non-fiscal incentives Exchange control An offshore company is free from complying with most of the provisions regarding movement of funds into and outside Malaysia. Remittances can therefore be made freely. Secrecy and confidentiality provisions There are provisions in the various legislations to provide for secrecy and confidentiality as far as an offshore company is concerned. Multiple entry visas Multiple entry visas will be issued to expatriates who have been granted work permits with offshore companies in Labuan. Appointment of auditor An offshore company need not appoint an auditor provided it meets the requirements under the Offshore Companies Act.

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Chapter 19: Malaysia Multimedia Super Corridor (MSC)

19.1

What is Malaysia MSC?

A gift from the Malaysian Government to technology developer and users seeking to expand their Asian presence, to Malaysians wanting their country to prosper, and to neighbouring countries aspiring to partner with a technology hub. The MSC is a 15-by-50 kilometre (9-by-30 mile) zone extending south from Malaysia’s national capital and business hub, Kuala Lumpur, which is devoted to creating a perfect environment for companies wanting to create, distribute and employ multimedia products and services. Malaysia is moving from an industrial economy base into one which is critically dependent on technology information base. The Smart School project is one of the flagship multimedia applications which the Malaysian Government has targeted for development. Other flagship multimedia applications include electronic government, telemedicine, a national multipurpose card, R& D clusters, world-wide manufacturing webs and borderless marketing centres. Companies wanting to join the Malaysia MSC can apply for “MSC” status. Incentives for companies with MSC status include the following:-

1.

A MSC status company will be granted with an initial period of five year exemption from Malaysian income tax, which can be extended by another five year period depending on the MSC company’s performance in transferring technology or knowledge to Malaysia; or with a 100 per cent investment tax allowance (ITA) incentive on qualifying capital expenditure. A MSC status company granted with ITA incentive is allowed to deduct 100 per cent of qualifying capital expenditure from its statutory income in respect of qualifying capital expenditure during the five year period.

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2.

A MSC status company is allowed to import multimedia equipment duty free, provided that the equipment is used by the company directly in facilit ating the operational processes of the MSC status company. The exemption does not apply to imports for the purpose of direct sales and trading or used as components in manufactured items. However, application for exemption from import duty is allowed for those companies engaged in value-added reselling activities, such as system integrators.

3.

A MSC status company can be wholly owned by foreign legal entities.

4.

A MSC status company that is engaged in developing infrastructure for the MSC is allowed to source capital globally for their investments.

5.

A MSC status company will be given exemption from exchange control requirements which include:•

•

Execute transactions in any currency in Malaysia or elsewhere in the world Borrow any amount from financial institutions, associate companies or non residents

•

Hedge foreign exchange exposure

•

Remit globally for any purpose

•

Open foreign currency accounts in Malaysia or abroad with no limits on the balances, including accounts for the retention of export proceeds

However, the exemptions from exchange control requirements do not extend to dealings with Malaysia’s list of specified persons, comprising the residents or institutions of Serbia, Montenegro or Israel or the currencies of these countries. 6.

A MSC status company is given the right to tender for key implementation contracts for Flagship Applications for which only companies with MSC status will be able to apply.

7.

A MSC status company is allowed unrestricted employment of foreign knowledge workers, defined in this context as an individual possessing any one of the following qualifications: •

•

•

Five or more years’ professional experience in multimedia/information technology businesses or in a field that is a heavy user of multimedia A university degree (any discipline) or a graduate diploma ( in multimedia /IT businesses) or in a field that will be a heavy user of multimedia A master’s degree or above in any discipline

8.

A MSC status company is allowed direct access to Malaysia’s top leadership through membership of the MSC’s International Advisory Panel, chaired by the Prime Minister, and the Founders’ Council, chaired by the Deputy Prime Minister.

9.

Research and development grants are available for local small and medium size enterprises which are at least 51 per cent Malaysian owned.

10.

Seven primary areas for multimedia applications have been identified to lead the development of the MSC and to accelerate Malaysia progress towards the information Age. The seven primary areas cover the following:(a)

Electronic Government

(b)

Multi – purpose card

63


(c)

Smart schools

(d)

Telemedicine

(e)

R & D Cluster

(f)

World wide manufacturing web

(g)

Borderless marketing

19.2 Criteria for qualifying for MSC status

The criteria for qualifying for MSC status include the following:1. The company applying for MSC status is a provider or heavy user of multimedia products and services i.e. the company’s business activities participate directly in or contribute directly to some segment of the multimedia value chain or the supporting products and services chain. The MSC Company may be a contributor to or provider of multimedia products and services, or it may be a heavy user of those products and services. 2. A company with MSC status is expected to maintain a work force using a substantial number of knowledge workers (at least 15%) 3. A company applying for MSC status is required to provide a compelling explanation of how the company will transfer technology and/or knowledge to Malaysia or otherwise contribute to the development of the MSC. 4. Conditions which a MSC status company is expected to comply with include:•

•

Establish a separate legal business entity for MSC qualifying multimedia businesses and activities Locate selected operations within the MSC designated cybercities by June 2000

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Chapter 20: Labour Conditions

20.1 Introduction

Malaysia's important resource lies in its youthful labour force which is diligent, disciplined, educated and readily trainable. Though labour costs in Malaysia are low relative to the industrialised countries, labour productivity and quality standards are high. During the last decade the Malaysian labour force has grown rapidly, due to robust economic growth and the large proportion of young people born in the 1970s. Due to rapid expansion of all sectors of the national economy, there has been a high demand for all types of workers, especially skilled labour in the manufacturing sector and well-trained professionals in the services sector. This led in turn to better wages and rapidly improving working conditions.

20.2 Manpower development

The overall development strategy for the manufacturing sector requires an increased number of technically trained workers. The government is undertaking active measures to increase the number of engineers, technicians and other skilled personnel. The Malaysian government is trying to develop better education at all levels, as it wants to attract skill-intensive industries and services to the country. Primary education is compulsory, and young people may choose between a large number of both public and private schools and colleges. There is an established system of vocational and technical training. A number of Malaysians receive their education overseas, many of them with state support. In order to meet growing demand of university-trained professionals, in 1994 Malaysia allowed foreign universities to establish campuses in the country.

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20.3 Labour costs

The higher wages and better working conditions attract large numbers of temporary workers from neighbouring Indonesia, Bangladesh, Thailand, and the Philippines. Many of them are hired to work in the low-skill and low-wage construction and service sectors and on agricultural plantations. However, Malaysia has also experienced an inflow of illegal foreign workers, prompting the government to implement harsh detention measures and mass deportation of unauthorized arrivals. There are currently over 600 trade unions in Malaysia, engaging in the union activities of just over 11 percent of the workforce. Most of the private-sector trade unions are members of the Malaysian Trade Union Congress (MTUC), which was established in 1951. Around 90 unions of public-and civil-sector employees are members of the Congress of Unions of Employees in the Public and Civil Services (CUEPACS). Unions maintain their independence from the government and from political parties; by law, union officers may not hold principal positions in political organizations. There is no national minimum wage, although there have been calls recently from trade unions for its introduction. The Employment Act of 1955 established a maximum 48-hour working week. Basic wage rates vary according to locations and industrial sectors.

20.4 Facilities for recruitment

Employment offices under the Ministry of Human Resources located throughout the country can provide free assistance to both employers and job seekers.

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Chapter 21: Labour Legislations

21.1 Employment Act 1955

The Employment Act 1955 is the legislation regulating the terms and conditions of employment of any person, irrespective of his occupation, who has entered into a contract of service with an employer under which such person's wages do not exceed RM1,500 a month. Among other things it sets out the minimum conditions of employment which include: a.

A contract of service engaging a person may be written or oral, expressed or implied, specifying the period of notice required to terminate it;

b.

Wages earned must be paid not later than the seventh day after the last day of any wage period;

c.

Female workers are not permitted to work in any industrial or agricultural undertakings between the hours of ten in the evening and five in the morning. An application can however be made to waive the restriction;

d.

Ten paid gazetted public holidays in any one calendar year;

e.

Eight days of paid annual leave for employees with less than two years of service, twelve days of paid annual leave for those employees with two or more years of service but less than five years of service, and sixteen days for those with over five years of service;

f.

Fourteen to twenty-two days sick leave in a year depending on length of service and where hospitalisation is necessary, up to an aggregate of sixty days sick leave in each year;

g.

Normal hours of work shall not exceed eight hours a day or forty-eight hours a week;

67


h.

Payment for overtime work is at a minimum of one and a half times the hourly rate of pay on normal working days, two times his hourly rate on rest days and three times his hourly rate on public holidays;

i.

Paid maternity leave for female employees on maternity leave for sixty days.

21.2 Employees Provident Fund Act 1951 (EPF)

The Employees Provident Fund Act 1951 provides for a compulsory contributory provident fund which is payable to employees in full on reaching the age of 55 years. All employers and employees are required to contribute to EPF at the rates of 12% and 11% respectively of the employees' monthly wages. Among the categories of employees precluded from compulsory contributions are: a. b.

Expatriates employees Domestic servants - Persons who are employed to work in or connected with work in a private dwelling house including a valet, gardener, and who are paid from the private account of the employers.

However, expatriate employees, domestic servants and self-employed persons can elect to contribute to the EPF. 21.3 Employees' Social Security Act 1969

The Social Security Organisation (SOCSO) administers the Employment Injury Insurance Scheme and the Invalidity Pension Scheme, as provided for under the Employees' Social Security Act 1969. All establishments, including factories, employing workers earning w ages not exceeding RM 3,000 a month, are required to insure their workers under the two social security schemes. The Employment Injury Insurance Scheme provides employees with coverage in the event of any disablement or death due to employment injury by way of cash benefits and medical care. The contribution is borne solely by the employer and is about 1.25% of the wages of an employee. The Invalidity Pension Scheme provides a 24-hour coverage to employees against invalidity and death due to any cause before the age of 55 years. The total contribution is about 1% of the wages and is shared by the employer and the employee equally.

21.4 Human Resource Development Fund Act 1992

The Human Resources Development Act, 1992 which was enforced in January 1993 led to the establishment of the Human Resources Development Fund (HRDF) and administered by the Human Resources Development Council (HRDC). In line with the corporatisation exercise via the Pembangunan Sumber Manusia Berhad Act, 2001, the HRDC is now known as Pembangunan Sumber Manusia Berhad (PSMB). The HRDF operates on the basis of a levy/grant system. Employers who have paid the levy will qualify for training grants from the fund to defray or subsidise training costs for their Malaysian employees.

21.5 Workmen’s Compensation Act 1952

68


An Act to provide for the payment of compensation benefits to a foreign worker who possesses valid employment document for injuries sustained due to accident which arises out of or in the course of employment or if death results from he accident, to the dependents.

21.6 Occupational Safety and Health Act 1994

An Act to make further provisions for securing the safety, health and welfare of persons a t work, for protecting others against risks to safety or health i n connection with the activities of persons at work, to establish the National Council for Occupational Safety and Health, and for matters connected therewith.

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Chapter 22: Employment of Foreign Workers

The policy on the employment of foreign workers will be reviewed from time to time. The employment of foreign workers are allowed in: a. b. c. d.

the construction sector the plantation sector the service sector (domestic servants, hotel industry, trainers and instructors) the manufacturing sector

The employment of these workers will be based on the merit of each case and subject to conditions that will be determined from time to time. This policy applies only to foreign workers belonging to the skilled, semi-skilled and unskilled categories and not expatriates under the management, professional and technical/supervisory categories. To ensure that employers will employ foreign labour only when necessary, an annual levy on foreign workers will be imposed. The rates of levy vary depending on the types of industry and are set out in Appendix VIII.

70


Chapter 23: Industrial Relations

23.1 Trade Unions

In line with the government policy to encourage the growth of responsible trade unions, the following legislations have been enacted:

a.

Trade Union Act 1959.

b.

Trade Union Regulations 1959. Under this legislation:

i.

Trade unions should confine their membership to employees within a particular trade, occupation or industry; All trade unions must be registered; A union cannot organise a strike without first obtaining the consent by secret ballot of at least two-thirds of its total members; All unions are inspected regularly to ensure compliance with the laws.

ii. iii. iv.

23.2 Industrial Relations Act 1967

The Industrial Relations Act 1967 provides for the regulation of relations between employers and workmen and their trade unions, and the prevention and settlement of tr ade disputes. The Act is self-contained. It replaces all previous legislation pertaining to industrial relations but continue to encourage democratic self-government in industry by providing safeguards to legitimate rights, prerogatives and interest of workmen and employers and their trade unions, as well as ensuring the speedy and just settlement of trade disputes, so as not to prejudice public and national interests.

71


23.3 Relations in non-unionised establishment

The normal practice for dispute settlement in a non-unionised establishment is for the employee to try to obtain redress from his supervisor, foremen or employer directly. A complaint can be lodged by the employee with the Ministry of Human Resources which will conduct an investigation.

72


Chapter 24: Guidelines for striking off the name of a company A. Striking off a company

Please refer below for guidelines on application to strike off the name of a company.

Strike Off Section 308 (1)

Section 308 (3)

Guidelines

Guidelines

1 dissolve without having to undertake the formal process of 1 The Registrar may strike off a company that has been winding up wound up where the Registrar has reasonable cause to believe that: 2

- not carrying on business

(a) no liquidator is acting

- not in opearation

(b) the affairs of the company are fully wound up and for a period of six (6) months the liquidator has been in default in lodging any return required to be made by him; (c) affairs of the company has been fully wound up under Section 217 (winding-up by court) and there are no assets or the assets available are not sufficient to pay the costs of obtaining an order of ther Court dissolving the company.

Requirements:

Requirements:

1 Directorto obtain resolution of the shareholders (consent of the majority shareholders) for the initiation of the application to strike off the name of the comapany from the register

1 The affairs of the company must remain unchanged for six (6) months or longer. The evidence from the no change in the status of the company as shown in the Form 75 after the order of winding up has been granted.

2 The company has no assets and liabilities at the time when application is made.

2 Affairs of the company have been fully wound up and there are no assets available.

3 The company has no outstanding charges in the Register of Charges.

3 The company must not have any asset which needs o be administered by the Liquidator prior to the making of the application.

4 The company has no outstanding penalties or offer of compounds under the Companies Act 1965.

4 The company must not have any outstanding penalty.

73


Strike Off Section 308 (1)

Section 308 (3)

5 The company has no outstanding tax or other liabilities with any government department or agency.

5 All outstanding tax liabilities with IRB incurred by the liquidator in administering the company's estate must be fully settled.

6 The information of the company with the Registrar is up to date.

6 All indebtness to other Government department incurred by the liquidator in administering the company's estate must be fully settled.

7 The company is not involve in any legal proceeding within or outside Malaysia.

7 The liquidator or the company must not be involved in any legal proceeding whether inside or outside Malaysia.

8 The company has not make any return of capital to the shareholders. 9 The company is not a holding company or a subsidiary of another corporate body. 10 The company is not a Guarantor Corporation. Application Procedure Application procedure 1 Ensure all requirements are compiled. 2 Ensure all boxes in checklist are ticked (appendix 2)

1 Must be accompanied with a Statement by Liquidator (appendix 3)

Application Fee

The completed application must be submitted together to the Registrar together with an application fee of RM120.00. Withdrawal of Application for Striking Off

The applicant may withdraw the application at any time before dissolution takes effect by writing to the Registrar. Gazette Notification

The striking off is effected through the issuance of letters and notices to the relevant party and the publication of the relevant Gazette, after which the company shall henceforth be dissolved.

74


Chapter 24: Guidelines for winding up of a company & Closure of a foreign company Generally, a company can be wound up either by way of voluntary liquidation or by way of Court order. Please refer below for further details.

Circumstances of Winding-Up

Procedure Winding-Up

Voluntary Members' Voluntary Creditors' Voluntary - Occurance of specific events - Directors recognise that the company by - Expiration of fixed duration as provided by the reason of its liabilities cannot continue its company's M&A business - Company resolves by special resolution

Pursuant to a winding-up order granted b y th e Cour t, u pon th e appli cat io n of a petitioner on such basis defined in Sectio n 218 of the Companies' Act 1965.

- Company is solvent i.e the company has sufficient assets to pay off its debt (assets more than liabilities).

- Usually company is insolvent i.e. unable to meet its debts as they fall due (liabilities more than assets).

- Company is insolvent i.e. the company unable to settle its debts (liabilities more than assets).

Court

of Directors resolves in a board of directors' Directors resolves in a board of directors' meeting that: meeting that: (a) that the company be wind-up and majority of the directors to declare that the company is solvent and to sign Declaration of Solvency (Form 66) (appendix 4); and (b) that an EGM be called and a liquidator be appointed

(a) the company is insolvent and unable to continue with its business and a provisional liquidator is appointed; and (b) that a meeting of members and creditors be called

T he dir ecto rs wi ll the n have to pr esent to all creditors in the meeting to disclose the company's state of affairs (Form 61 & 62) (appendix 5 & 6) and circumstances leading up to the ro osed windin -u . Commencement Deemed commenced at the time of passing the Deemed commenced at the time declaration of Winding-Up resolution. was lodged with t he Reg istr ar . ( Th is i s onl y applicable if a Provisional Liquidator was appointed before the resolution was passed) Final Meeting After the affairs of the company are fully wound After the affairs of the company are fully wound and Dissolution up and tax clearance obtained, a general up, a general meeting of company and meeting of the company be called. creditors be called.

Upon receiving the Court Order the liquidator takes possesion.

After the affairs of the company are fully wound up, a general meeting o f company and creditors be called.

The company deemed dissolved three months The company deemed dissolved three months Application to the Court for the release from the date of the lodgement of the final from the date of the lodgement of the final o f the li quidator a nd di ssoluti on of th e meeting (Form 69) with the Registrar. meeting (Form 69) with the Registrar. company.

Closure of a Foreign Company

If a foreign company ceases to have a place of business or to carry on a business in Malaysia, it must within 7 days lodge a prescribed notice of that fact with the R egistrar by way of Form 90, Notice of Foreign Company of Cessation of Business. The Registrar must also be notified within one month if the foreign company goes into liquidation or is dissolved in its place of origin. Upon expiration of twelve months after the lodgement of the notice, the Registrar will remove the name from the register.

75


Chapter 24: General guidelines for Mergers & Acquisitions Introduction

Mergers and Acquisitions (M&A’s) and Joint Ventures (JV’s) in Malaysia, as in any country with a sound financial system, is subject to regulations, guidelines and recommended procedures. These aim to ensure that all take-overs and mergers shall take place in a competitive, informed and efficient market, and to ensure fair and equal treatment of all shareholders of a company involved in a take-over and merger situation. Regulatory / Statutory Approvals

Generally, when a merger / acquisition / joint venture is proposed, its success will be subject to the approvals of the following parties: Equity Compliance Unit, Securities Commission, subject to FIC’s guidelines Ministry of International Industry and Trade Bursa Securities Securities Commission, for the Offer document Ministry of Finance (if applicable) Directors / Shareholders of the acquirer & acquiree Any other relevant regulatory authorities, where applicable • • • • • • •

If the transactions involve the sale or purchase of substantial assets by a public company, the regulations which govern such transactions are under Section 32 of the Securities Commission Act 1993 (SCA) and the Companies Act 1965. Where an acquisition involves the acquisition of voting shares which results in a change of control in a company, certain laws and regulations are put in place to protect the interests of shareholders, i.e. under Section 33 of the Securities Commission Act 1993 and the Malaysian Code on Takeovers and Mergers 1998 (Take-over Code). Where an acquisition is carried out through a take-over offer to all the remaining shareholders of a company, the party which proposes to take-over the target company will issue an offer document to the shareholders. The offer document will state all the important information on the offer. The shareholders will be offered as consideration either cash or shares of another company in exchange for their shares in the target company, or a combination of both shares and cash.

Merger/Acquisition/ JV Proposal Equity Compliance Unit

Ministry of International Industry & Trade

Bursa Securities

Securities Commission

Approval

Ministry of Finance

Directors & Shareholders

Other Regulatory Authorities

76


Transaction Types

Sale or Purchase of Assets

Acquisition- Voting of Shares

Transaction-take over offer

Public Company

Change of Control of Company

Party A

Governance

Protection of interest of shareholders

Offer Document

Party B Companies Act 1965

Reg: Section 33

Reg : Section 32

Take over Code Shareholders

Cash

Shares

Given shares of Another company in exchange of Target company

Foreign Investment Committee (FIC)

In 1974, the Malaysian Government set up the Foreign Investment Committee (FIC), an institutional machinery responsible for implementing guidelines for regulating the acquisition of assets, or any interests, mergers and takeovers of companies and businesses by local and foreign interests. The guidelines are as follows: Against the existing pattern of ownership, the proposed acquisition of assets or any interests, merger or take-over should result directly or indirectly in a more balanced Malaysian participation in ownership and control:, The proposed acquisition of assets or any interests, merger or take-over should lead directly or indirectly to net economic benefits. In relation to such matters as the extent of Malaysian participation, particularly Bumiputera participation, ownership and management, income distribution, growth, employment, exports, quality, range of products and services, economic diversification, processing and upgrading of local raw materials, training, efficiency, and research and development; The proposed acquisition of assets or any interests, merger or take-over of companies and businesses should not have adverse consequences in terms of national policies in such matters as defense, environmental protection, or regional development; The onus of proving that the proposed acquisition of assets or any interests, merger or take-over of companies and businesses are not against the objectives of the New •

•

•

•

77


Economic Policy and the National Development Policy is on the acquiring parties concerned. The guidelines stated above applies to the f ollowing transactions: Any proposed acquisition by foreign interests of any substantial fixed assets in Malaysia; Any proposed acquisition of assets or any interests, mergers and take-overs of companies and businesses in Malaysia by any means, which will result in ownership or control passing to foreign interests; Any proposed acquisition of 15% or more of the voting power by any one foreign interest or associated group, or by foreign interests in the aggregate of 30% or more of the voting power of a Malaysian company and business; Control of Malaysian companies and businesses through any form of joint-venture agreement, management agreement, and technical assistance agreement or other arrangements; Any merger or take-over of any company or business in Malaysia whether by Malaysian or foreign interests; Any other proposed acquisition of assets or interests exceeding in value of the sum of $5 million, whether by Malaysian or foreign interests. • •

•

•

•

•

The above guidelines will not apply to specific projects which are approved by the Government and defined as follows:Acquisitions by Ministries and Go vernment Departments Acquisitions by Ministries and Government Departments are considered as being approved by the Government and are therefore exempted from the FIC Guidelines. •

•

•

•

Acquisitions by Minister of Finance Incorporated, Menteri Besar Incorporated and State Secretary Incorporated Acquisitions by Minister of Finance Incorporated, Menteri Besar Incorporated and State Secretary Incorporated are also considered to have been approved by the Government and are therefore exempted from the FIC Guidelines. However this exemption does not include disposals or divestments by the above parties as the acquirers are required by the FIC Guidelines to obtain the approval of the FIC. Acquisitions by Statutory Corporations, Government- owned companies and their subsidiaries Acquisitions by Statutory Corporations and Government-owned companies and their subsidiaries, either owned by the Federal or State Governments, are not considered as approved by the Government and are therefore required by the FIC Guidelines to obtain the approval of the FIC. Privatized Projects Privatized projects, whether at the Federal or State level, are considered as approved by the Government and therefore exempted from the FIC Guidelines. However only the companies or parties who are the original signatories in the contracts for the privatized projects are considered as approved by the Government. Other companies or parties who later participated in the projects are not considered as approved by the Government and are therefore required by the FIC Guidelines to obtain the approval of the FIC. The definition of privatization however does not include sales of Government-owned companies or their subsidiaries, either owned by the Federal or State Governments, to the private sector, and the acquirers are required by the FIC Guidelines to obtain the approval of the FIC.

78


General Terms / Issues / Agreements used in M& A / JV transactions

General key issues in a Conditional Sale and Purchase Agreement would include: Consideration Conditions precedent Basis of arriving at the Purchase Price Sources of funding Liabilities to be assumed by acquirer Additional financial commitment • • • • • •

General key issues in a Proposed Mandatory Offer: Consideration Conditions Warranty Duration Withdrawal Listing Status of acquiree (If applicable) Source of funding • • • • • • •

General key issues to consider in a JV agreement: JV structure JV objectives Financial contributions for each JV party Whether any party will transfer any assets or employees to the JV Ownership of intellectual property created by the JV Management and control, e.g. respective responsibilities and processes to be followed How liabilities, profits and losses are shared How any disputes between the partners will be resolved Exit strategy Non-disclosure agreements • • • • • • • • • •

79


APPENDICES

80


Appendix I Acronyms And Abbreviations BURSA

Bursa Malaysia

CCM

Companies Commission of Malaysia

CDS

Central Depository System

EPF

Employees Provident Fund

FIC

Foreign Investment committee

ICA

Industrial Co-ordination Act, 1975

IMP

Industrial Master Plan

KLCE

Kuala Lumpur Commodity Exchange

Labuan IOFC

Labuan International Offshore Financial Centre

LMW

Licensed manufacturing Warehouse

MIA

Malaysian Institute of Accountants

MIDA

Malaysian Industrial Development Authority

MIDF

Malaysian Industrial Development Finance Berhad

MITI

Ministry of International Trade and Industry

MSC

Multimedia Super Corridor

NDP

National Development Policy

NPC

National Productivity Corporation

NRCC

Non-resident controlled company

OHQ

Operational Headquarters

RM

Ringgit Malaysia (Malaysian currency)

RPC

Real Property Company

SC

Securities Commission

SOCSO

Social Security organisation

81


Appendix II Investment Guarantee Agreements Malaysia has concluded Investment Guarantee Agreements with the following countries: Date of signing agreement

Countries

1.

United States of America

21.4.1959 (amended on 24.6.1965)

2.

Federal Republic of Germany

22.12.1960 (amended on 5.11.1965)

3.

Netherlands

15.6.1971

4.

Canada

1.10.1971

5.

France

24.4.1975

6.

Switzerland

1.3.1978

7.

Sweden

3.3.1979

8

Belgo-Luxembourg

22.11.1979

9

United Kingdom

21.5.1981

10.

Sri Lanka

16.4.1982

11.

Romania

12.

Norway

6.11.1984

13.

Austria

12.4.1985

14.

Finland

15.4.1985

15.

Organisation of Islamic Conference (OIC)

30.9.1987

16.

Kuwait

21.11.1987

17.

Association of South East Asian Nations ( ASEAN)

15.12.1987

18.

Italy

4.1.1988

19.

Republic of Korea

11.4.1988

20.

People’s Republic of China

21.11.1988

21.

United Arab Emirates

11.10.1991

22.

Denmark

6.1.1992

26.11.1982 (amended on 25.6.1996)

82


23.

Socialist Republic of Vietnam

Countries

21.1.1992 Date of signing agreement

24.

Papua New Guinea

27.10.1992

25.

Republic of Chile

11.11.1992

26.

Laos People’s Democratic Republic

8.12.1992

27.

Taiwan

18.12.1993

28.

Republic of Hungary

19.2.1993

29.

Republic of Poland

21.4.1993

30.

Republic of Indonesia

22.1.1994

31.

Republic of Albania

24.1.1994

32.

Republic of Zimbabwe

28.4.1994

33.

Turkmenistan

30.5.1994

34.

Republic of Namibia

12.8.1994

35.

Kingdom of Cambodia

17.8.1994

36.

The Argentine Republic

6.9.1994

37.

Jordan

2.10.1994

38.

Republic of Bangladesh

12.10.1994

39.

Republic of Croatia

6.12.1994

40.

Bosnia Herzegovena

16.12.1994

41.

Spain

4.4.1995

42.

Pakistan

7.7.1995

43.

Kyrgyz Republic

20.7.1995

44.

Mongolia

27.7.1995

45.

Republic of India

3.8.1995

46.

Oriental Republic of Uruguay

9.8.1995

47.

Republic of Peru

13.10.1995

48.

Republic of Kazakhstan

27.5.1996

49.

Republic of Malawi

5.9.1996

50.

Czech Republic

9.9.1996

83


51.

Republic of Guinea

7.11.1996 Date of signing agreement

Countries

52.

Republic of Ghana

11.11.1996

53.

Arab Republic of Egypt

14.4.1997

54.

Republic of Botswana

31.7.1997

55.

Republic of Cuba

26.9.1997

56.

Republic of Uzbekistan

6.10.1997

57.

Macedonia

11.11.1997

58.

Democratic People’s Republic of Korea

4.2.1998

59.

Republic of Yemen

11.2.1998

60.

Republic of Turkey

25.2.1998

61.

Republic of Lebanon

26.2.1998

62.

Burkina Faso

23.4.1998

63.

Republic of Sudan

14.5.1998

64.

Republic of Djibouti

3.8.1998

65.

Republic of Ethiopa

22.10.1998

66.

Senegal

11.2.1999

67.

State of Bahrain

15.6.1999

68.

Saudi Arabia

25.10.2000

84


APPENDIX III Scale of Stamp Duty for Authorised Share Capital (Payable to the Companies Commission of Malaysia)

Authorised Share Capital Stamp duty RM

Not exceeding RM 100,000

1,000

RM 100,001 to

RM 500,000

3,000

RM 500,001 to

RM 1,000,000

5,000

RM 1,000,001 to RM 5,000,000

8,000

RM 5,000,001 to RM 10,000,000

10,000

RM 10,000,001

to RM 25, 000, 000

20,000

RM 25,000,001 to RM 50, 000, 000

40,000

RM 50,000,001 to RM 100, 000, 000

50,000

Exceeding RM 100,000,000

70,000

The maximum stamp duty payable is RM 70,000

85


Appendix IV Visa Requirements to Enter Malaysia Countries That Requires Visa: •

• • • • • • • • • • • •

• •

Afghanistan (Visa With Reference) Angola Bhutan Burkina Faso Burundi Central African Republic China Colombia Comoros Congo Democratic Republic Congo Republic Cote D’ivoire Djibouti Equat. Guinea Eritrea

•

• • • • • • • • • • • •

•

Ethiopia Guinea-Bissau Hong Kong (C/I or D/i) India Liberia Mali Myanmar (normal passport) Nepal Niger Rwanda Serbia & Montenegro Taiwan United Nations (Laissez Passer) Western Sahara

Commonwealth Countries That Requires Visa: • • • •

Bangladesh Cameroon Ghana Mozambique

• • •

Nigeria Pakistan Sri Lanka

Countries That Requires Visa For a Stay Exceeding 3 Months: • • • • • • • • • • • •

Albania Algeria Argentina Australia Austria (Vienna) Bahrain Belgium Bosnia – Herzegovina Brazil Croatia Cuba Czech Republic

• • • • • • • • • • • •

Lebanon Lienchestien Luxembourg Morocco Netherlands Norway Oman Peru Poland Qatar Romania St Marino 86


• • • • • • • • • • • • • •

Denmark Egypt Finland France Germany Hungary Iceland Ireland Italy Japan Jordan Kirgystan Kuwait Kyrgyz Republic

• • • • • • • • • • • • •

Saudi Arabia Slovakia South Korea Spain Sweden Switzerland Tunisia Turkey Turkmenistan United Arab Emirates United Kingdom Uruguay Yemen

Countries That Requires Visa For a Stay Exceeding 1 Month: • • • • • • • • • • • • • • • • • • • • • • • • • • • •

Armenia Azerbaijan Barbados Belarus Benin Bolivia Bulgaria Cambodia Cape Verde Chad Chile Costa Rica Equador El Savador Estonia Gabon Georgia Greece Guatemala Guinea Republic Haiti Honduras Hong Kong SAR Kazakhstan Latvia Lithuania Macao SAR Macedonia

• • • • • • • • • • • • • • • • • • • • • • • • • • •

Madagascar Maldova Mauritania Mexico Monaco Mongolia Nicaragua North Korea North Yemen Panama Paraguay Portugal Russia Sao Tome & Principe Senegal Slovenia Sudan Surinam Tajikistan Togo Ukraine Upper Volta Uzbekistan Vatican City Venezuela Zaire Zimbabwe

87


Countries That Requires Visa For a Stay Exceeding 14 Days: • • • •

•

Iran (15 days) Iraq Libya Macao (Travel Permit / Portugal CI) Palestine

• • • •

Sierra Leone Somalia South Yemen Syria

No visa is required for U.S.A. citizens visiting Malaysia for social, business or academic purposes (except for employment). No visa required for a stay of less than one month for nationals of all ASEAN countries except Myanmar. For a stay exceeding one month a visa will be required, except nationals Brunei and Singapore. For national Israel, visas are required and permission must be granted from Ministry of Internal Security. For national of Republic of Serbia and Republic of Montenegro, visas are required and permission must be granted from Ministry of Home Affairs. National of countries other than those stated above (with the exception of Israel) are allowed to enter Malaysia without visa for a visit not exceeding one month.

88


Appendix V Double Taxation Agreements Taxes on various payments by Malaysian residents to non-residents under Double Taxation Agreements

Countries of residence

Non – treaty countries

Royalties

Interest

Technical / Management Fees

%

%

%

%

10

15

10

Nil

10

Nil or 10

10

Nil

Dividends

Treaty countries

1.

Albania, Republic

2. 3. 4. 5.

Argentina * Australia Austria Bahrain

10 Nil or 10 10 8

15 Nil or 15 Nil or 15 Nil or 5

10 Nil 10 10

Nil Nil Nil Nil

6. 7.

Bangladesh Belgium

Nil or 10 10

Nil or 15 Nil or 10

10 10

Nil Nil

8. 9.

Bosnia & Herzegovina Canada

8 Nil or 10

Nil or 10 Nil or 15

10 10

Nil Nil

10. 11. 12. 13.

Chile ** China, People’s Republic Croatia Czech Republic

10 Nil or 10 Nil or 10 10

15 Nil or 10 Nil or 10 Nil or 12

5 10 10 10

Nil Nil Nil Nil

14. 15. 16. 17.

Denmark Egypt Fiji Finland

Nil or 10 10 10 Nil or 10

Nil or 15 Nil or 15 Nil or 15 Nil or 15

10 10 10 10

Nil Nil Nil Nil

18. 19.

France Germany

Nil or 10 Nil or 10

Nil or 15 Nil or 15

10 Nil

Nil Nil

20. 21. 22.

Hungary India # Indonesia

10 Nil or 10 10

Nil or 15 Nil or 10 Nil or 15

10 10 10

Nil Nil Nil

23. 24.

Ireland Islamic Republic of Iran **

8 Nil or 10

Nil or 10 Nil or 15

10 10

Nil Nil

25.

Italy

Nil or 10

Nil or 15

10

Nil

26.

Japan

10

Nil or 10

10

Nil

27. 28.

Jordan Kazakhstan **

10 10

Nil or 15 Nil or 10

10 10

Nil Nil

29. 30.

Korea, Republic Kuwait

Nil or 10 10

Nil or 15 Nil or 10

10 10

Nil Nil

31.

Kyrgyz, republic

10

Nil or 10

10

Nil 89


32.

Lebanon

Countries of residence

Nil or 8

Nil or 10

Royalties

Interest

10 Technical / Management Fee

Nil

%

%

%

%

Nil or 8

Nil or 10

8

Nil

10 10

Nil or 15 Nil or 15

10 10

Nil Nil

Dividends

33.

Luxembourg

34. 35.

Malta Mauritius

36. 37. 38. 39.

Mongolia Morocco ** Myanmar ** Namibia

10 Nil or 10 10 5


10 10 10 5

Nil Nil Nil Nil

40. 41. 42. 43.

Netherlands New Zealand Norway Pakistan



8 10 10 10

Nil Nil Nil Nil

44. 45.

Papua New Guinea Philippines

10 Nil or 10

Nil or 15 Nil or 15

10 10

Nil Nil

46. 47. 48.

Poland Romania Russia

Nil or 10 Nil or 10 10

Nil or 15 Nil or 15 Nil or 15

10 10 10

Nil Nil Nil

49.

Saudi Arabia –Old agreements *

15 Nil or 5 10

10 8 10

Nil Nil Nil

50.

Seychelles

10 8 10

51.

Singapore –Old agreements

10

Nil or 15

10

Nil

52.

Singapore –New agreements South Africa

8 5

Nil or 10 10

5 5

Nil Nil

53. 54.

Spain Sri Lanka

7 10

Nil or 10 Nil or 10

10 10

Nil Nil

55. 56.

Sudan Sweden –Old agreement

10 Nil or 10

Nil or 10 Nil or 15

10 10

Nil Nil

57.

Sweden –New agreement Switzerland

Nil or 8 Nil or 10

Nil or 10 Nil or 10

8 10

Nil Nil

58. 59.

Syria Taiwan

12 10

Nil or 10 10

10 7.5

Nil Nil

60.

Thailand

Nil or 10

Nil or 15

10

Nil

61.

Turkey

10

Nil or 15

10

Nil

62. 63. 64. 65. 66.

United Arab Emirates United Kingdom United States of America * Uzbekistan Venezuela

10 8 10 10 10

Nil or 5 Nil or 10 15 Nil or 10 Nil / 15

10 8 10 10 10

Nil Nil Nil Nil Nil

67. 68.

Vietnam Zimbabwe

10 10

Nil or 10 Nil or 10

10 10

Nil Nil

Saudi Arabia –New agreements **

90


Notes

1.

Payments of approved royalties or approved industrial royalties and interest on approved loans and long term loan (as defined in each double tax agreement) to nonresident are usually tax exempt.

2.

Where the rate of tax on the above payments is not specifically mentioned in the respective double tax treaty, the applicable rate of tax as stated in the Income Tax Act 1967 (ITA 1967) is inserted herein.

3.

Where the rate of tax as stated in the Income Tax Act 1967 is lower than the maximum rate of tax as mentioned in the respective double tax agreement, the lower rate of tax shall apply and is inserted herein.

4.

For Taiwan, double tax relief was given to the Taipei Economic and Culture Office in Malaysia by way of exemption orders.

*

Limited double tax treaty

**

Gazetted DTAs; not yet entered into force

#

Protocol which amends limited articles of the treaty has been gazetted but not yet entered into force

91


Appendix VI Tax Rates Income Tax Rates - Resident Individuals

Chargeable Income

Rate RM

Tax RM

%

On the first

2,500

0

0

On the next On the first

2,500 5,000

1

25 25


15,000 20,000

3

450 475


15,000 35,000

7

1,050 1,525


15,000 50,000

13

1,950 3,475


20,000 70,000

19

3,800 7,275


30,000 100,000

24

7,200 14,475


150,000 250,000 ======

27

40,500 54,975 ======

In excess of

250,000 ======

28

92


Appendix VII Personal Reliefs And Rebates

The following reliefs are available to a resident in Malaysia PERSONAL RELIEFS RM

Taxpayer – personal relief

8,000

Wife – if she has no total income or elects for combined assessment

3,000

Husband – if he has no total income or elects for combined assessment

3,000

Children: Each child (below 18 years old) Disabled child (unmarried) Each child above 18 years old and studying: -Overseas universities, colleges or similar establishments -Local universities, colleges or similar establishments

1,000 5,000 4,000 4,000

Life insurance premiums/ Approved fund contributions: Taxpayer (Maximum) Further deduction for amount paid by wife under combined assessment (Maximum)

6,000 -

Insurance premiums on insurance for education or medical benefits: Taxpayer (Maximum) Further deduction for amount paid by wife under combined assessment (Maximum)

3,000 -

Annuity premium on annuity purchased through EPF Annuity Scheme:- Taxpayer (Maximum) Further deduction for amount paid by wife under combined assessment (Maximum)

1,000 -

Medical expenses for parents (Maximum)

5,000

Medical expenses for taxpayer, spouse and children on serious diseases (include RM 500 for medical examination expenses) (Maximum)

5,000

Disabled person : Taxpayer Spouse

6,000 3,500

Supporting equipment for disabled taxpayer, spouse, children or parent (Maximum)

5,000

Fee for acquiring technical, vocational, industrial, scientific or technological, law, accounting, Islamic financing, skills or qualifications (Maximum)

5,000

93


Purchase of books, journals, magazines and other similar publications for the use of taxpayer, spouse or children

1,000

Purchase of computer (Once every three years)

3,000

Amount deposited into Skim Simpanan Pendidikan Nasional for his child (Maximum)

3,000

Purchase of sports equipment

300

INCOME TAX REBATES FOR INDIVIDUALS RM REBATE GIVEN TO TAXPAYER Individual chargeable income not exceeding RM 35,000 -

350

Additional rebate for wife if she does not elect for separate assessment or has no income or elects for combined assessment with husband

350

Additional rebate for husband if he has no income or elects for combined assessment with wife -

350

Rebate given to wife if she elects for separate assessment or does not elect for combined assessment

350

ZAKAT, FITRAH OR ANY OTHER ISLAMIC RELIGIOUS DUES

Full rebate in respect of zakat, fitrah or any other Islamic religious dues paid ANY FEE PAID TO GOVERNMENT FOR THE ISSUE OF AN EMPLOYMENT PASS, VISIT PASS OR WORK PASS

Full rebate of fee paid.

94


Appendix VIII Rates of Levy for Foreign Workers SECTOR

Levy per year RM

Management / Professional

Technical Professional Middle Management Higher Management

2,400 3,600 3,600 4,800

Agriculture / Estate

Unskilled worker Semi – skilled worker Skilled worker Workers in paddy fields and sugar cane plantations

300 1,080 1,440 Exempted

Manufacturing and construction

Unskilled worker Semi-skilled worker Skilled worker Housemaids

840 1,200 1,800 360

Other sectors

Unskilled worker Semi-skilled worker Skilled worker

720 1,080 1,440

95


Appendix IX Places to Stay In Malaysia Name

State

Tel Contact

Email

1

Putra Palace

Perlis

604-976 7755

[email protected] www.putrapalace.com/index.php

2

Eastern Oriental Hotel

Penang

604-222 2000 604 261 2966

[email protected] www.e-o-hotel.com

3

Cheong Fatt Tze Mansion

Penang

604 262 5289

[email protected] www.cheongfatttzemansion.com

4

Genting Highlands Resort

Pahang

603 211 1118

www.genting.com.my

5

Shangri-La Kuala Lumpur

Kuala Lumpur

603 2032 2388

[email protected] www.shangri-la.com

6

The Westin Kuala Lumpur

Kuala Lumpur

603 2731 8333

[email protected] www.starwoodhotels.com/westin/

7

The Ritz Carlton

Kuala Lumpur

603-21428000 603-27118143

www.ritzcarlton.com/hotels/kuala_lumpur

8

Hilton Kuala Lumpur

Kuala Lumpur

603-2264 2264 603-2264 2266

www.hilton.com

9

Crowne Plaza Mutiara+B60

Kuala Lumpur

603-21482322 603-21442157

www.crowneplaza.com/kualalumpur

10

Putrajaya Shangri-La Hotel

Putrajaya

603-8887-8888 603-8887-8889

[email protected] http://www.shangri-la.com/

11

Sheraton Labuan

Labuan

6087-422000 6087-422222

[email protected] www.starwoodhotels.com/sheraton/

12

Pan Pacific, KLIA

Selangor

(6)03-8787 3333 (6)03-8787 5555

[email protected] www.klairport.panpacific.com

13

Sunway Lagoon Resort Hotel

Selangor

(6)03-74928000 (6)03-74928001

[email protected] www.sunway.com.my/hotel/html/index.asp

14

Royal Adelphi, Seremban

Negeri Sembilan

(6)06-7666 666 (6)0-6-7666 600

[email protected] www.royaladelphi.com/

15

Hotel Equatorial, Melaka

Malacca

(6)06-2828333 (6)06-2829333

[email protected] www.equatorial.com/mel

16

Renaissance Melaka Hotel

Malacca

17

Hyatt Regency, Johor Bahru

Johor

www.melaka.ws/renaissance/rooms.htm (6)07-2221234 (6)07-2232718

[email protected] http://johorbahru.regency.hyatt.com/

96


18

Sofitel Palm Resort

Johor

(6)07-5996000 (6)07-5997027

[email protected] www.palm-resort.com

19

The Zon Regency Hotel By The Sea

Johor

(6)07-2219999 (6)07-2210999

http://zonhotel.com.my/main.html

20

Renaissance, Kota Bharu

Kelantan

609-7462233 609-7461122

www.marriott.com/

21

Miri Marriott Resort and Spa

Sabah

(6)085-421121 (6)085-402855

www.marriott.com

22

Hilton, Kuching

Sarawak

(6)082-248200 (6)082-428984

[email protected] www.hilton.com/en/hi/hotels/

23

Hyatt Regency Kinabalu

Sabah

(6)088-221234 (6)088-225972

[email protected] www.kinabalu.regency.hyatt.com/

24

The Royale Bintang

Kuala Lumpur

(6) 03-2143 9898 (6) 03 2142 1807

[email protected] http://www.royalebintang.com.my/kualalumpur/

25

Crown Regency Service Apartment

Kuala Lumpur

603-2162 3888 603-2162 1333

[email protected] http://www.crownregency.com.my/crown/

26

Cititel Express

Kuala Lumpur

603-2691 9833 603-2691 3103

[email protected] [email protected] http://www.cititelexpress.com

27

KL Plaza Suites

Kuala Lumpur

603 - 2145 6988 603 - 2148 1390

[email protected] www.berjayahotels-resorts.com

28

Coliseum Cafe & Hotel

Kuala Lumpur

603-2692 6270

29

The City Bayview Hotel

Penang

604-2633161 604-2634124

[email protected]

30

Bayview Hotel Melaka

Malacca

606 283 9888 606 283 6699

[email protected] www.bayviewhotels.com/melaka/

31

Balau Bay Resort

Johor

607-822 8020 607-822 8021

http://www.desarubalau.com

32

Desaru Golden Beach Hotel

Johor

607-8221101 607-8221480

[email protected] http://www.desaruresort.com/

33

Seaview Resort Desaru

Johor

607-827 0128 607-827 0128

34

Punggai Bayu Beach Resort

Johor

607-8228016 607-8228016

35

Desaru Damai Hotel

Johor

607-8224600 607-8221237

http://www.desarudamai.com/

607-8228260

http://www.kejora.gov.my/chalet_balau.htm

36

Chalet Tanjung Balau

Johor

97


607-822 1216 37

Desaru Holiday Chalet

Johor

607-8221212 607-8221245

http://www.desaruresort.com/

38

Crystal Crown Hotel

Selangor

603-31654422 603-31658408

[email protected] http://www.crystalcrown.com.my

39

Crystal Crown Hotel

Johor

607-3334422 607-3345505


40

Berjaya Times Square Hotel & Convention Centre

Kuala Lumpur

603-2117 8000 603-2143 3352

[email protected] http://www.berjayaresorts.com/

41

Putrajaya Marriott Hotel

Putrajaya

603-89498888 603-89498999

[email protected] www.marriott.com/kulpg

42

One World Hotel

Selangor

603 7681 1111 603 7681 1188

www.oneworldhotel.com.my

43

Tiara Beach Resort

Negeri Sembilan

606 - 662 8888 606 - 662 8989

[email protected] www.portdicksonresorts.com

44

Cititel Mid Valley

Kuala Lumpur

603-2296 1188 603-2283 5551

[email protected] http://www.cititelmidvalley.com/

45

Boulevard Hotel

Kuala Lumpur

603-22958000 603-22878551

[email protected] http://www.blvhotel.com/

46

Impiana Casuarina Hotel

Perak

605-255 5555 605-255 8177

[email protected] http://ipohhotels.impiana.com/

47

Number 8 Guesthouse

Kuala Lumpur

603 - 21442050 603 - 21444250

[email protected] http://www.numbereight.com.my/

48

Lavender Inn

Johor

607- 5114 509 607- 5114 639

[email protected] www.lavender-inn.com

49

Pulai Springs Resort

Johor

(6)07-521 2121 (6)07-521 1818

[email protected] http://www.pulaisprings.com

50

Sebana Cove & Marina Resort

-

607-826 6688 607-826 6622

[email protected] http://www.sebanacove.com/

51

Impiana KLCC Hotel & Spa

Kuala Lumpur

603 2147 1111 603 2147 1100

[email protected] www.impiana.com

52

Impiana Cherating Resort

Pahang

60(9) 581 9000 60(9) 581 9090

[email protected] http://cheratinghotels.impiana.com/

53

The Pulai Desaru Beach Resort

Johor

607-822 2222 607-822 2223

http://www.thepulai.com.my/

54

Putra Brasmana Hotel

Perlis

604-985 5900 604-985 2900

[email protected] www.putrapalace.com

98


55

Bukit Ayer Jungle Park Resort

Perlis

604-977 0710 604-977 7285

56

The Gardens Hotel & Residences

Kuala Lumpur

603-2268 1188 603-2284 8998

[email protected] http://www.gardenshtlres.com/

57

Desaru Golf & Country Resort

Johor

607-8222 333

[email protected]

607-8221 855

http://www.desarugolfclub.com.my/

58

Tune Hotel

Kuala Lumpur

6(03) 2692 3300 6(03) 2691 3301

http://www.tunehotels.com/index.asp

59

Prince Hotel & Residence

Kuala Lumpur

603-2170 8888 603-2170 8999

[email protected] http://www.princehotelkl.com/

60

Crystal Crown Hotel

Kuala Lumpur

603-6259 4422 603-62593322


99


Appendix X Quantitative Listing Criteria on Bursa Malaysia Aspect Three (3) Alternative Routes for Listing a. Profit Track Record Test

Main Board

Uninterrupted Profit After Tax (PAT) of 3-5 full financial years (FY) with aggregate of at least RM30 million; PAT of at least RM8 million for the most recent full FY

Second Board

Uninterrupted PAT of 3-5 full FY with aggregate of at least RM12 million; PAT of at least RM4 million for the most recent full FY

MESDAQ MARKET

For technology based companies, no minimum period of business operation and profit record. Technology incubator companies must have commenced its business operations for at least 12 months and must have its financial statements for the said 12 months audited All other companies must have been in operations and have generated operating revenues from their core business for at least 3 full FY

b. Market Capitalisation/ Profit Test

A total market capitalisation of at least RM500 million upon listing. PAT of at least RM30 million for the most recent full FY.

c. Infrastructure Project Company Test

Must have the right to build and operate an infrastructure project in or outside Malaysia: - that contributes to the overall economic growth of Malaysia or which is in accordance with national economic objectives and policies; - for which a concession or license has been awarded by a government or a state agency, in or outside Malaysia, with remaining concession of license period of not less than 15 years; and with project costs of not less than RM500 million.

Issued and Paid Up

Minimum RM500 million

Minimum RM40 million

For technology incubator company, minimum RM20 milllion. For all other companies, minimum RM2 million

IPO Price

Minimum RM0.50 each

Minimum RM0.50 each

Minimum RM0.50 each

Public Spread

At least 25% of the company's share capital; and minimum of 1,000 public shareholders holding

At least 25% of the company's share capital; and minimum of 1,000 public shareholders holding

At least 25% but not more than 49% of the company's share capital; and minimum of 200 public shareholders holding 100


Equity restrictions: Compliance with National Development Policy (NDP)

Note:

not less than 100 shares not less than 100 shares each each. Bumiputera equity participation of at least 30%. Bumiputera equity participation can make up the 25% public spread.

not less than 100 shares each. Bumiputera participation of at least 30% within 5 years of listing of 1 year following the company achieving the 2nd Board profit track record, whichever is earlier.

Multimedia Super Corridor (MSC) Companies are exempted from NDP requirements. Company which has predominantly foreign-based operations is allowed to seek listing on the MESDAQ Market provided the listing vehicle i s incorporated in Malaysia.

101


Appendix XI Integrated Bus and Rail Network RapidKL is an integrated BUS & RAIL public transportation company in the Klang Valley. It serves as the main service provider of mass public transportation in the Klang Valley via an integrated rail and bus network. They operate the KELANA JA YA LINE and the AMPANG RAIL LINE together with a network of 161 bus routes. The integrated transportation network transports approximately 4 million passengers every week with 908 buses and 48 rail stations operating daily.

102


KLANG VALLEY INTEGRATED TRANSPORT SYSTEM MAP

103


KELANA JAYA LINE (Formerly known as PUTRA Line)

Kelana Jaya Line uses the state-of-the-art driverless system by Advanced Rapid Transit Mark II technology from Canada.The alignment starts from the Depot in Subang and ends at Gombak Station totaling to 29km in length with a total of 24 stations.

Monday - Saturday / Sunday & Public Holiday) MONDAY - SATURDAY

SUNDAY & PUBLIC HOLIDAY

STATION OPENS

CLOSES

OPENS

CLOSES

KELANA JAYA

- 6.00am -

- 11.40pm -

- 6.00am -

- 11.10pm -

TAMAN BAHAGIA

- 6.00am -

- 11.40pm -

- 6.00am -

- 11.10pm -

TAMAN PARAMOUNT

- 6.00am -

- 11.40pm -

- 6.00am -

- 11.10pm -

ASIA JAYA

- 6.00am -

- 11.45pm -

- 6.00am -

- 11.15pm -

TAMAN JAYA

- 6.00am -

- 11.45pm -

- 6.00am -

- 11.15pm -

UNIVERSITI

- 6.00am -

- 11.50pm -

- 6.00am -

- 11.20pm -

KERINCHI

- 6.00am -

- 11.50pm -

- 6.00am -

- 11.20pm -

ABDULLAH HUKUM

- 6.00am -

- 11.50pm -

- 6.00am -

- 11.20pm -

BANGSAR

- 6.00am -

- 11.55pm -

- 6.00am -

- 11.25pm -

KL SENTRAL

- 6.00am -

- 11.55pm -

- 6.00am -

- 11.25pm -

PASAR SENI

- 6.00am -

- 12.00am -

- 6.00am -

- 11.30pm -

MASJID JAMEK

- 6.00am -

- 12.00am -

- 6.00am -

- 11.30pm -

DANG WANGI

- 6.00am -

- 12.00am -

- 6.00am -

- 11.30pm -

KG. BARU

- 6.00am -

- 12.00am -

- 6.00am -

- 11.30pm -

KLCC

- 6.00am -

- 12.00am -

- 6.00am -

- 11.30pm -

AMPANG PARK

- 6.00am -

- 12.00am -

- 6.00am -

- 11.30pm -

DAMAI

- 6.00am -

- 11.55pm -

- 6.00am -

- 11.25pm -

DATO' KERAMAT

- 6.00am -

- 11.55pm -

- 6.00am -

- 11.25pm -

JELATEK

- 6.00am -

- 11.55pm -

- 6.00am -

- 11.25pm -

SETIAWANGSA

- 6.00am -

- 11.50pm -

- 6.00am -

- 11.20pm -

WANGSA MAJU

- 6.00am -

- 11.50pm -

- 6.00am -

- 11.20pm -

TAMAN MELATI

- 6.00am -

- 11.45pm -

- 6.00am -

- 11.15pm -

TERMINAL PUTRA

- 6.00am -

- 11.45pm -

- 6.00am -

- 11.15pm -

104


AMPANG LINE (Formerly known as STAR line)

Adtranz German is the make of trains and system for t hese two lines.Today these two lines are carrying over 130,000 to 150,000 per day on a weekday basis and an average of 120,000 per day on weekends. It has 25 stations throughout the 27 km, transporting passengers from the northern, north-eastern and south-western suburbs in the Klang Valley.

AMPANG LINE STATION OPERATION HOURS MONDAY - SUNDAY & PUBLIC HOLIDAY OPEN

CLOSE

6.00am

11.30pm

(TO SENTUL TIMUR)

6.00am

11.30pm

(TO AMPANG)

6.00am

11.30pm

(TO SENTUL TIMUR)

6.00am

11.30pm

(TO AMPANG)

6.00am

11.30pm

PANDAN INDAH

(TO SENTUL TIMUR)

6.00am

11.35pm

(TO AMPANG)

6.00am

11.45pm

PANDAN JAYA

(TO SENTUL TIMUR)

6.00am

11.35pm

(TO AMPANG)

6.00am

11.45pm

(TO SENTUL TIMUR)

6.00am

11.35pm

(TO AMPANG)

6.00am

11.45pm

(TO SENTUL TIMUR)

6.00am

11.35pm

(TO AMPANG)

6.00am

11.45pm

CHAN SOW LIN

6.00am

11.40pm

PUDU

6.00am

11.40pm

HANG TUAH

6.00am

11.40pm

PLAZA RAKYAT

6.00am

11.40pm

(TO SENTUL TIMUR)

6.00am

12.00am

(TO AMPANG & SRI PETALING )

6.00am

12.00am

BANDARAYA

6.00am

11.35pm

SULTAN ISMAIL

6.00am

11.35pm

PWTC

6.00am

11.35pm

TITIWANGSA

6.00am

11.35pm

SENTUL

6.00am

11.35pm

SENTUL TIMUR

6.00am

11.35pm

AMPANG CAHAYA

CEMPAKA

MALURI

MIHARJA

MASJID JAMEK

105


CHERAS

6.00am

11.35pm

SALAK SELATAN

6.00am

11.35pm

BANDAR TUN RAZAK

6.00am

11.30pm

TASIK SELATAN

6.00am

11.30pm

SUNGAI BESI

6.00am

11.25pm

BUKIT JALIL

6.00am

11.25pm

SRI PETALING

6.00am

11.25pm

106


RSM Robert Teo, Kuan & Co. Penthouse, Wisma RKT, Block A 2 Jalan Raja Abdullah Off Jalan Sultan Ismail 50300 Kuala Lumpur Malaysia Telephone: (603) 2697 2888 Fascimile: (603) 2691 7733; 2698 6600, Email: [email protected] [email protected]

107

Business in Malaysia

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