Date: Monday 21-Apr-14


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Invest in Malaysia

Incentives for Investment

17.1 Definition

A Representative Office/Regional Office of a foreign company/ organisation in the manufacturing and services sector is an office which is established in Malaysia to perform permissible activities for its head office/principal.  The Representative Office/ Regional Office does not undertake any commercial activities and only represents its head office/principal to undertake designated functions.  The Representative Office’s/ Regional Office’s operation is completely funded from sources outside Malaysia. The Representative Office/ Regional Office is not required to be incorporated under the Companies Act 1965. The setting up of a Representative/Regional Office requires the approval by the Government of Malaysia.

17.2 Representative Office

A Representative Office is an office of a foreign company/ organisation approved to collect relevant information on investment opportunities in the country especially in the manufacturing and services sector, enhance bilateral trade relations, promote the export of Malaysian goods and services and carry out research and development (R&D).

17.3 Regional Office

A Regional Office is an office of a foreign company/organisation that serves as the coordination centre for the company’s/ organisation’s affiliates, subsidiaries and agents in South-East Asia and the Asia Pacific.  The Regional Office established is responsible for the designated activities of the company/ organisation within the region it operates.

17.4 Activities Allowed

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

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

17.5 Activities Not Allowed

However, an approved representative office/regional 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

17.6 Eligibility Criteria

The proposed operational expenditure of the RE/RO must be at least RM150,000 per annum.
The RE/RO should be financed by funds emanating from sources outside Malaysia.

17.7 Duration of Establishments

Company and Others (including non–profit organisations not relating to trade)
Minimum of two years depending on the merits of each case.
Government and Trade Association
Duration is based on the requirement of the applicant.

As representative/regional offices do not have issued capital in Malaysia, they are not subject to any equity condition.

17.8 Expatriate Employment

A Representative office/Regional office will be given expatriate post and the number allowed depends on the functions and activities of the Regional Office/Representative Office. Expatriates will only be considered for managerial and technical posts.

The proposed expatriate should  be currently employed by the applicant company or its subsidiary or within the group. An expatriate working in a Representative Office is subject to normal income tax. However, an expatriate working in a Regional Office is taxed only on the portion of their chargeable income attributed to the number of days that they are in the country.

Applications for the establishment of Representative/Regional offices and expatriate posts should be submitted to MIDA.

 



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