Malaysia allows companies in many industries to be wholly owned by foreigners, which is why a Sdn. Bhd. is a common choice for founders who want to set up operations, hire a team, or expand into the local market. But before deciding to incorporate, beyond confirming whether you can hold shares, you also need to arrange a resident director, a company secretary, capital, and annual compliance. If you plan to use the company to apply for an Employment Pass (EP), the company and the applicant’s own eligibility need to be checked separately as well.
These requirements can all be planned for before incorporation. This article works through shareholding, directors, capital, tax and operating responsibilities item by item, to help you estimate the real cost of starting up and plan your next steps once the company is formed.
Three Questions This Article Answers
- How to arrange shareholders and directors: whether foreigners can hold 100% of the shares, who can act as the resident director, and what is required of a company secretary
- How much capital to prepare: why company registration and applying to employ foreign staff carry different capital requirements
- How to plan for tax: the standard 24% corporate rate, the SME preferential rate, and the effect of foreign shareholding
Who Should Read This Before Filing Incorporation Documents?
If you are preparing to start a business in Malaysia, this article helps you fit company registration, licensing, bank account opening and day-to-day operations into a single plan.
If you intend to work in the country yourself once the company is set up, you need to factor in EP eligibility conditions at the same time. Incorporating the company and getting a work pass approved are separate processes, and each needs its own budget and timeline.
If you are planning a joint venture with a local partner, the equity split affects not just profit sharing and control but potentially also tax incentives and industry access. Agreeing on each party’s contribution, responsibilities and exit terms before registering the company usually saves time on changes later.
Foundation One: The Legal Structure of Shareholders and Personnel
Under the Companies Act 2016, a private company limited by shares needs at least one shareholder and one director; a single eligible person can hold both roles. In principle, a shareholder’s liability is limited to any unpaid amount on their shares, but taking on the director role as well brings its own separate statutory duties.
Foreign founders need to confirm three things first.
Shareholding: look at the actual business first.
The Companies Act itself does not universally require a local shareholder, and many businesses can be 100% foreign-owned. However, the relevant industry regulator may impose its own shareholding conditions through licensing, approval or market-access requirements.
For businesses involving wholesale, retail or distribution, check KPDN’s guidelines on foreign participation, along with the approval requirements for the specific business type. What the market commonly calls a “WRT license” relates to this kind of arrangement, and it should not be oversimplified as “only needed once foreign ownership exceeds half.” If the company also plans to apply to employ foreign staff through ESD, it must also meet that process’s requirements for WRT documentation.
Resident director: the key factor is residency status.
A private company must have at least one director who ordinarily resides in Malaysia with their principal place of residence there — this does not have to be a Malaysian citizen. A foreign founder who meets this condition can take on the role themselves; if they still live abroad long term, they will need to arrange a qualifying individual first.
Company secretary: must be appointed within 30 days of incorporation.
A company secretary must meet the professional qualification or licensing requirements under the Companies Act and hold a valid SSM practising certificate. In practice, this role is usually outsourced to a corporate secretarial firm, which helps handle the statutory registers, company changes and annual filings.
The resident director and the company secretary have different roles. The former takes part in company governance and carries director duties; the latter assists with statutory procedures. The two cannot substitute for each other.
Foundation Two: Capital — Two Separate Standards, Don’t Mix Them Up
“How much capital do I need” depends first on what you plan to use the company for.
At the company-registration level: incorporation can start with low capital, but RM1 is not the full cost.
Setting up a standard Sdn. Bhd. does not carry a uniform, large minimum paid-up capital requirement. “You can start a company with RM1” is a common shorthand for low-capital incorporation — it does not mean registration or actually starting business can be completed by paying just RM1. Registration fees, secretarial services, an address, licenses and operating expenses all still need to be budgeted for separately.
At the level of employing foreign staff: look separately at ESD and regulator requirements.
If the company needs to apply through ESD (the Expatriate Services Division) to employ foreign staff, the general published paid-up capital requirements are as follows.
| Company Category | Paid-Up Capital Requirement |
|---|---|
| Joint-venture company, at least 30% foreign shareholding | RM350,000 |
| 100% foreign-owned company | RM500,000 |
| Foreign-owned company engaged in wholesale, retail or trading | RM1,000,000, and must also meet the applicable WRT requirements |
These are published administrative application requirements and should not be treated loosely as “roughly this amount is enough.” The RM350,000 joint-venture category is also not limited to a 50:50 equity structure; the specific category that applies still needs to be confirmed based on the business and the application route.
Paid-up capital belongs to the company’s own funds, and is different from the government application fee. Once the funds are put in, their use should have a genuine business purpose and be reflected in the accounting records; meeting the capital requirement also does not mean an EP application is automatically approved.
When budgeting, it is best to list the required share capital, setup costs and cash needs for the initial operating period together, to avoid a situation where the company is incorporated but does not have enough funds to cover rent, salaries and day-to-day expenses.
Foundation Three: Tax — 24% Is the Planning Starting Point for Most Foreign-Owned Companies
The standard income tax rate for a Malaysian company is 24%, calculated on chargeable income — not turnover, and not necessarily the same as accounting profit.
Qualifying small and medium enterprises can use a preferential tiered rate:
| Chargeable Income | Tax Rate |
|---|---|
| First RM150,000 | 15% |
| Next RM450,000 | 17% |
| Amount above RM600,000 | 24% |
Eligibility is not only about company size — it also includes being incorporated in Malaysia and tax resident there, paid-up ordinary share capital not exceeding RM2.5 million, total business revenue not exceeding RM50 million, and conditions relating to shareholding and related companies.
From year of assessment 2024, if more than 20% of the paid-up ordinary share capital is held, directly or indirectly, by a company incorporated overseas or by a non-Malaysian citizen, the company does not meet the shareholding condition for the preferential rate above. As a result, a wholly foreign-owned company should generally build its financial projections around the 24% rate, then separately evaluate any applicable tax incentives or exemptions.
In a joint venture, equity should also not be decided purely to chase the preferential tax rate. Genuine capital contribution, control, and the long-term partnership arrangement matter just as much — and keeping foreign ownership at 20% or below does not mean every other qualifying condition has automatically been met.
Foundation Four: Operating Responsibilities — Day-to-Day Compliance Starts Once the Company Exists
Once a company is incorporated, someone needs to be responsible for bookkeeping, keeping transaction records, statutory filings, financial statements and the company tax return. Once staff are hired, payroll withholding, statutory contributions and employer filings need to be handled according to the applicable rules; where the business involves taxable goods, services or certain overseas payments, SST or withholding tax obligations may also apply.
This work can be handed to a company secretary, accountant and tax agent, but directors still need to fulfil their own oversight duties. A company having no income for the time being does not mean all filings can be paused — certain dormant-company arrangements, audit exemptions and tax-estimate exceptions need to be checked individually.
Foreign founders also need to sort out their own work eligibility separately. Holding shares or being appointed as a director does not, on its own, grant a right to reside or work in Malaysia. If you plan to use the company to apply for an EP, you need to check the position, the applicant’s eligibility, the salary, and the relevant regulator’s requirements, in addition to the capital.
EP applications submitted from 1 June 2026 are subject to a new salary policy, under which the salary threshold is calculated on basic salary and excludes allowances. Setup budgets and employment contracts should be prepared according to the applicable category and industry requirements, rather than relying on older figures.
The Most Common Misunderstandings and Risks Before Incorporating
Misunderstanding One: You Can Start a Company for RM1, So Startup Costs Are Low
Low-capital incorporation only describes the registration-level threshold. What you actually need to prepare also includes licenses, a company secretary, accounting, premises, payroll and working capital; if you plan to apply for an EP, there is a further capital requirement on top of that. Drawing up a full budget is far more useful than just comparing registration-service quotes.
Misunderstanding Two: A Small Company Automatically Qualifies for the 15%/17% Rate
The SME preferential rate also carries shareholding and other eligibility conditions. Foreign founders should first confirm eligibility against the rules above, then choose the appropriate rate for financial projections.
Misunderstanding Three: Any Nominal Resident Director Will Do
An appointed director still carries statutory duties, and these do not disappear just because both parties privately agree the role is “in name only.” When choosing someone, besides trustworthiness, confirm they can actually access company information and take part in necessary decisions. Signing authority, banking access, reporting arrangements and handover on departure should all be agreed before they accept the appointment.
Misunderstanding Four: Incorporate First, Sort Out the Industry License Later
Licensing requirements can affect shareholding, capital, premises and the timeline for starting business. Especially for trading, retail or regulated services, confirm market-access conditions first before arranging registration and a lease. Completing SSM registration does not mean every part of the business can start operating immediately.
Misunderstanding Five: Once the Company Is Set Up, the Work Pass Follows Automatically
A company can act as an eligible employer to submit an application, but the company’s eligibility, the position and the applicant all still need to be approved. If your plan is to run the business in Malaysia in person, plan the company setup and the pass application together, and allow separate processing time for each.
Three Typical Scenarios: What Does Your Setup Checklist Look Like?
Scenario One: A Wholly Foreign-Owned Founder Planning to Run the Business in Person
Mr. A plans to set up a wholly foreign-owned services company. He first confirms whether the industry allows full foreign ownership and which licenses are needed, then checks the application route and capital requirement for employing foreign staff.
At incorporation, he arranges a qualifying resident director and company secretary, and budgets for share capital, salaries and initial operating expenses. If he does not yet meet the resident director conditions himself, he needs to arrange this separately; when preparing an EP application, he confirms the position and salary against the current rules.
Scenario Two: A Foreign Shareholder in a Joint Venture With a Local Partner
Ms. B is starting a business with a Malaysian partner. Beyond discussing each party’s shareholding, they also need to agree clearly on who runs day-to-day operations, who can sign contracts, how additional funding is handled, and how shares are transferred if someone exits.
They then check how this equity arrangement affects tax incentives, industry approvals and any application to employ foreign staff. Different regimes use different tests, and this cannot simply be summarized as “whether foreign ownership exceeds half.”
Scenario Three: A Remote Founder Based Overseas, Setting Up the Company First
Mr. C is not moving to Malaysia for now and will have the business run by a local team initially. He needs to arrange a resident director, company secretary and accounting services, and set up regular financial reporting and an approval process for significant matters.
Bank account opening should also be confirmed in advance for document and in-person requirements. Company registration, bank review and actually starting business each follow their own process, and sequencing them in advance makes overall progress easier to track.
Frequently Asked Questions
Can foreigners hold 100% of the shares?
For many businesses, yes — the Companies Act itself does not universally require a local shareholder. However, the license or approval for a specific industry may carry its own shareholding conditions. For wholesale, retail and distribution businesses, also check KPDN’s applicable requirements.
Do I need a local Malaysian director?
The law requires at least one director who ordinarily resides in Malaysia with their principal place of residence there — this does not have to be a Malaysian citizen. A foreigner who meets the conditions can take on the role, but holding a particular type of pass does not automatically mean you meet the resident director requirement.
What is the minimum capital I need to prepare?
First distinguish between simply registering a company and also applying to employ foreign staff. The former can be incorporated with low capital; the latter needs to be confirmed against the ESD categories and industry requirements set out above, with enough working capital set aside on top.
What is the corporate tax rate?
The standard rate is 24%, calculated on chargeable income. The SME preferential rate requires meeting size, shareholding and other conditions at the same time, and a wholly foreign-owned company generally does not qualify for that tiered rate.
Can I get a visa once the company is set up?
Not automatically. If you plan to work at the company, you need to confirm the applicable work pass route. Taking the EP as an example, the company, the position and the applicant all need to meet requirements — reaching the capital or salary threshold is only part of the application conditions.
What do I need to do every year after the company is set up?
Mainly annual filings, bookkeeping, financial statements and the company tax return, plus audit, employer obligations, SST and other filings as applicable. Even when the company has no income, a company secretary and tax agent should confirm which obligations still apply.
Disclaimer
This article is compiled from official publicly available information as accessed in September 2026, and provides general information on company setup; it does not constitute legal, tax or immigration advice. Industry access, capital and pass requirements may change; specific arrangements should be confirmed by a company secretary and relevant professionals based on the actual business, and against the regulator’s current requirements.
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Sources
- SSM — Companies Act 2016
- SSM — Incorporation of Company
- MIDA — Equity Policy
- KPDN — Guidelines on Foreign Participation in Distributive Trade Services in Malaysia 2022
- ESD — Company Registration FAQs
- ESD — Revised Expatriate Salary Policy FAQs, Effective 1 June 2026
- LHDN — Public Ruling No. 8/2025: Tax Treatment for Micro, Small and Medium Companies
