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We can assist you in setting up a Representative Office in Malaysia, prior to incorporating a Malaysian based Company …………

Representative Office

A Representative Office is an office set up by a foreign company to carry out administrative functions, develop bilateral trade relations, promote the export of Malaysian goods/products and carry out research & development.

Activities Allowed

The approved Representative office is established to perform the following permissible activities for its head office or principal:

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  • Gathering and analysis of important information or undertaking feasibility studies on investment and business opportunities in Malaysia and the region;
  • Planning of business activities;
  • Identifying sources of raw materials, components or other industrial products;
  • Undertake research and product development;
  • Act as a coordination centre for the corporation's affiliates, subsidiaries and agents in the region
  • Other activities which will not result directly in actual commercial transactions


Activities Not Allowed

However, an approved representative office is not allowed to carry out the following activities:
 

  • Be engaged in any trading (including import and export), business or any form of commercial activity
  • Lease warehousing facilities; any shipment/transhipment or storage of goods must be carried out through a local agent or distributor
  • Sign business contracts on behalf of the foreign corporation or provide services for a fee
  • Participate in the daily management of any of its subsidiaries, affiliates or branches in Malaysia


The difference between a private limited company and a representative office are:

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  • Cheaper & easier to set up
  • Cheaper to maintain yearly.
  • Cannot formally do trading or conduct business transactions; can only market services and products
  • Work permit can be obtained without any limitation of share capital
  • Set-up valid for maximum of 5 years after which you will have to set up a local Private Limited Company

RPTG: A Brief Introduction

Real Property Gains are gains arising from the disposal of a real property in Malaysia. The term “real property” is defined by the Act to mean any land situated in Malaysia and any interest, option or other right in or over such land. The word “land” includes:

 

  1.     The surface of the earth and substances forming that surface;
  2.     The earth below the surface and substances therein;
  3.     Building on land and anything attached to land or permanently fastened to anything attached to land (whether on or below the surface);
  4.     Standing timber, trees, crops and other vegetation growing on land; and
  5.     Land covered by water.

RPTG: Latest Development

Under the Budget 2012, it was announced that effective from January 1, 2012, Chargeable Gains from the disposal of real property are as follows:

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  1.     For properties held and disposed within 2 years, the RPGT rate is 10%
  2.     For properties held and disposed within a period exceeding 2 years and up to 5 years, the rate is 5%, and
  3.     Properties held and disposed after 5 years are not subject to RPGT

    

The revised RPGT rate will however not burden genuine property owners as there are exemptions:

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  1.     For disposal of residential property once in a lifetime by an individual who is a citizen or permanent resident of Malaysia;
  2.     For disposal by way of gifts between parent and child, husband and wife, grandparent and grandchild; and
  3.     For individuals, exemption up to RM10,000 or 10% of the net gains, whichever is higher.

RPTG: Tax Administration

Every disposer and acquirer is required to submit the completed RPGT return to the tax authorities within 60 days from the date of the disposal.

Withholding Tax

​1.1 What is withholding tax (WHT)

WHT is the tax withheld by the tax payer who resides in Malaysia when making a payment to a non-resident (NR) for services rendered in Malaysia.
Examples of such payments are interest, royalty, rents and payments for service contract, technical advice or assistance.

Types of payment                                        New Rate
                                                                         w.e.f. 21st September, 2002
Interest (sec . 109)                                       15%
Royalties (sec. 109)                                      10%
Special classes of income (sec. 4A)         10%
Contract payment                                         10 + 3 %
Other income (sec. 4(f))                               10%

The rates imposed will be dependent on the Double Taxation Agreements (if any) between the resident and the NR’s country.

​​1.2 The Scope of charge

Effective from 21st September, 2002, WHT shall only apply to services performed in Malaysia. Furthermore, any gains or profit falling under the paragraph 4(f) of the Income Tax Act, 1967 received by a non-resident from an offshore company is tax exempt with effect from 1st January, 2009 pursuant to the Income Tax Order 2009 [P.U. (A) 389/2009]

​​​1.3 Responsibility for WHT payments and when are they due

The responsibility for deducting and paying WHT lies with the resident payer. The amount of WHT so deducted must be remitted to the Inland Revenue Board within one month from the date of paying or credit the NR recipient.

Where the resident payer fails to deduct and remit any amount of WHT, a penalty of 10% will be imposed on the amount of unpaid tax. Previously, the 10% penalty failure to deduct and remit any amount of WHT was imposed on the gross payment made to a NR (effective from 2nd September, 2006).

Real Property Gains Tax

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