Choosing the Right Business Structure in Malaysia

Representative Office vs Foreign Branch vs Company

Whether you're exploring new markets or ready to launch operations, choosing the right business structure is a crucial first step for any foreign investor entering Malaysia. The three main options available are:

Representative Office
Foreign Branch
Malaysian-Incorporated Company (Sdn Bhd)

Each structure comes with its own benefits and limitations, depending on your strategic goals, regulatory preferences, and operational needs. Below, we provide a clear comparison across key business aspects to help you make an informed decision.

Choosing the Right Business Structure for Foreign Investors

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1. Purpose and Suitability

Representative Office: Best suited for foreign companies assessing the Malaysian market. Activities are limited to non-commercial functions like market research, liaison work, and feasibility studies. No revenue-generating activities are permitted.
Foreign Branch: Suitable for companies ready to conduct business in Malaysia under the same identity and scope as their parent company, without incorporating a separate entity.
Company (Sdn Bhd): Offers the most flexibility and scalability. As a separate legal entity, it is ideal for businesses planning long-term commercial operations in Malaysia.

2. Legal and Regulatory Oversight

Representative Office: Requires approval from the Malaysian Investment Development Authority (MIDA), and in some sectors, additional oversight from ministries like Bank Negara Malaysia or MOTAC.
Foreign Branch: Regulated by the Companies Commission of Malaysia (SSM) and subject to the Companies Act 2016 (Section 562). Also overseen by the Inland Revenue Board (IRB).
Company: Governed under Section 14 of the Companies Act 2016 and registered with SSM. Depending on the nature of the business, specific licences may be required.

3. Business Activities

Representative Office: Prohibited from generating income, signing contracts, or engaging in retail trade. Purely non-commercial.
Foreign Branch: Can carry out all commercial activities permitted under Malaysian law. Activities must mirror those of the parent company.
Company: Can undertake any lawful business activity. Offers greater operational flexibility and scalability.

4. Registration and Setup

Criteria	Representative Office	Foreign Branch	Company
Authority	MIDA (Malaysian Industrial Development Authority) [a unit under the Ministry of Investment, Trade and Industry (MITI)]	SSM (Companies Commission of Malaysia)	SSM
Approval Likelihood	Difficult due to stringent MIDA criteria	Generally approved	Generally approved
Setup Time	3–6 months	1–3 months	2–4 weeks
Duration	2–5 years, renewable	Perpetual	Perpetual
Fees (Government)	RM6,000 (approx.)	RM5,000 – RM70,000	RM1,000
Name	Same as parent company	Same as parent company	Chosen by investor (subject to approval)

5. Legal Status and Liability

Representative Office & Foreign Branch: Not separate legal entities. The parent company assumes full liability.
Company: A separate legal entity. Company enjoys limited liability.

6. Licensing and Business Operations

Representative Office: Cannot operate as a business entity; hence no business licenses are required.
Foreign Branch: Requires relevant licenses (e.g., WRT licence for retail).
Company: May require business premises license, signboard license, and industry-specific approvals.

7. Employment and Expatriate Rules

Representative Office: Can apply for expatriate posts for senior or technical roles only. Must meet MIDA’s RM300,000 minimum annual expenditure requirement.
Foreign Branch & Company: Can employ both locals and foreigners, subject to Immigration Department regulations.

8. Taxation

Representative Office: Not subject to corporate tax as it cannot generate income. Expatriates taxed as individuals.
Foreign Branch & Company: Subject to Malaysian corporate tax on Malaysian-sourced income. Expatriates taxed as individuals; some tax incentives may apply to companies.

9. Banking and Financial Reporting

All Entities: Can open bank accounts subject to Know-Your-Client (KYC) and anti-money laundering (AMLA) compliance by banks.
Foreign Branch & Company: Must comply with local accounting standards (MFRS/MPERS) and statutory audit requirements, unless exempted.

Conclusion

Which Structure Fits Your Business Best?

Each business structure serves a distinct purpose and suits different investment objectives.

If your primary goal is to explore the Malaysian market without engaging in commercial transactions, a Representative Office offers a low-commitment way to conduct research, liaise with stakeholders, and assess viability before scaling up.

For companies looking to extend their existing operations directly into Malaysia, a Foreign Branch may be appropriate. It allows continuity with the parent company’s brand and operations but does not offer the benefit of separate legal status. However, it suffers from certain unfavourable tax treatments.

On the other hand, if you're planning to establish a long-term presence with full operational capabilities, incorporating a Malaysian Company (Sdn Bhd) offers the most flexibility, local identity, and access to tax incentives. It is particularly well-suited for businesses that value autonomy, scalability, and local stakeholder engagement.

Ultimately, choosing the right structure depends on your strategic goals, risk appetite, and long-term vision for the Malaysian market.

Need Help Setting Up in Malaysia?

Setting up a business in a new country involves more than just ticking boxes — it requires local insight, regulatory know-how, and strategic foresight. At Crowe Malaysia, we work closely with you to ensure a smooth and compliant entry into the Malaysian market, regardless of your chosen structure.

Whether you’re establishing a Representative Office for market research, registering a Foreign Branch to extend your global footprint, or incorporating a new Malaysian company to scale your operations — our team of professionals is here to guide you at every step.

Our integrated services include:

Business entity registration and incorporation
Company secretarial and licensing support
Tax advisory and compliance
Expatriate and work permit services
Accounting, audit, and payroll outsourcing

Ready to get started or need tailored advice? Reach out to us today for a consultation and let us help you turn your plans into a strong and compliant business presence in Malaysia.

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