The compliance requirements are as follows;
1. HOLD ANNUAL GENERAL MEETING (AGM) ANNUALLY
Section 143 (1) of the Companies Act requires every company to hold AGM as follows;
- The AGM must be held every year.
- The first AGM must be held within 18 months of incorporation.
- The subsequent AGM must be held not more than 15 months after the last AGM. If the company holds its first AGM within 18 months after its incorporation, it need not hold AGM the following year.
In the AGM, the audited accounts of the company must be presented before the company. The account must be for the period since its last preceding account. But it must not be more than 6 months before the date of the AGM. Appointment or reappointment of Auditors and fixing of Auditors’ fees must also be done.
The notice to hold the AGM must be given to everyone entitled to attend it. The party who has the authority to convene AGM is the Board of Directors. If the company fails to hold the AGM, it and every officer of the company in charge of the AGM will be liable to a maximum fine of RM5,000. Any delay to pay this fine, the company must pay RM100 more fine a day.
If the company for some reason cannot hold its AGM within the 15 months’ time, it can apply to the Companies Commission to extend the time. But it must show special reason to the Registrar before the application can be granted. Further extension can also be made later upon show of special reason.
2. FILE ANNUAL RETURN ANNUALLY
Under the Companies Act 1965, every company must lodge an Annual Return together with its Audited Account with the Companies Commission 1 month before the AGM. The annual return must be in accordance with the EIGHT SCHEDULE of the Companies Act. It must be accompanied with
- a copy of the company’s last audited accounts certified by the Director and Secretary of the company and
- a certified copy of the Auditor’s report.
But if the company is an exempt private company, it need not lodge Audited Account and only need to lodge a certificate signed by the Director, the Company Secretary and the Auditor stating that the company is an exempt private company, its Audited Account complies with the provisions of the Companies Act and has been tabled in the company’s AGM, and the company is able to meet it liabilities.
An exempt private company is a company whose shareholders are not more than 20, and none of them is a corporation.
3. KEEP ACCOUNT
Section 167 of the Act requires every company to keep accounting record that would enable true and fair profit and loss accounts and balance sheets. These accounts must be prepared in accordance with the approved accounting standards.
The Act also requires these accounts to be tabled at the AGM. For the company’s first account, it must be laid within 18 months after its incorporation. Subsequent accounts must be tabled every year but not later than 15 months. The accounts must be made up for the period since the last account to a date not more than 6 months before the next AGM.
The accounts must include:
- Profit and loss account
- Balance sheet
- Directors’ report
- Auditors’ report and
- Accompanying notes and statements to the accounts.
It must be certified by the Director or the company’s Secretary and must be lodged either in Bahasa Melayu or English.
4. REGISTER WITH THE INLAND REVENUE BOARD OF MALAYSIA WHEN THE COMPANY IS ALREADY GENERATING REVENUE
A company in itself is not taxable. It is only taxed on Income it makes. Therefore if your company has not started business and is not earning any profit yet, it is not liable to pay tax. But the moment it starts earning an income it must pay tax to the Government. So you must get it tax-ready by registering it with the Inland Revenue Board of Malaysia as it will start paying corporate and other taxes. Other taxes are employees’ tax deduction, withholding tax for certain incomes that your company pays to foreign entities or to its foreign workers and others.
Having been registered, the following are what the company is required to do;
- Under the self-assessment system, companies are required to assess its own liabilities and submit the tax return the IRB within 7 months after closing its financial year.
- Submit tax estimation for the coming year within 3 months of generating its first income.
- Pay instalment every month if it forecasts a profit in the coming year.
- Pay the balance unpaid tax within 7 months after the end of its financial year.
- Keep tax computation and Audited Account for future inspection by the IRB tax auditor.
- Maintain and complete the following worksheets every financial year to facilitate the IRB auditors during the tax audit.
- Computation of statutory income for business, dividend, interest, royalties and rent,
- Business loss,
- Withholding tax payment to non-residents,
- Credit on dividend income received and
- Information of 5 controlling Directors and 5 Shareholders.
We strongly advise that you do not handle your taxation matters on your own as it is extremely complicated to do. Your company could well end up paying more tax and get fined too when you thought that you have made a saving by doing it yourself. Instead, we strongly suggest that you hire tax consultant so that you can concentrate on your business. They will set your company up to become tax-ready, starting from registering your company with the IRB, calculating return and then paying it, making appeals, all the way to claiming tax refund.
5. APPOINT COMPANY AUDITOR
Every company must have auditors to audit its accounts and after that report them to the members in the AGM.
- The Companies Act requires that a company auditor or audit firms must be a qualified Auditor approved by the Finance Ministry and whose approval has not been revoked, not indebted to the company, its holding or subsidiary company exceeding RM2,500, and is not a shareholder or an officer of the company. The penalty for contravening these requirements is a fine not exceeding RM30,000.
- In practice, most appointments are in the name of the Audit firm which is recognised as joint appointment of all the partners.
- Before the company can appoint an auditor, a written consent to act as auditor must be obtained from the proposed auditor. This is normally done by the Company Secretary by writing to the auditor for consent letter.
- A person who is indebted to the company exceeding RM2,500, the company’s officer, partner or shareholders cannot be appointed as auditor.
- The company can appoint the first auditor before its first AGM by a Directors’ resolution or by the Shareholders at a general meeting. But it’s advisable to appoint him earlier to enable him to prepare the account before the AGM.
- His term ends at the conclusion of the AGM and a new appointment must be made for the period until the next AGM.
- He can be removed by ordinary resolution passed at the general meeting.
- The auditors have the right of access to all the company’s record like accounting books, vouchers and agreements. He has the right to make enquiry and request documents from the officers as well as attend meetings
- His duties among others are to ensure that the company’s financial affairs are conducted diligently and to report to the Companies Commission any wrongdoing committed against the company.
6. NOTIFY EVERY CHANGES TO THE COMPANY’S PARTICULARS TO THE COMPANIES COMMISSION BY LODGING RETURN IN THE PRESCRIBED FORM
Sometimes the company may want to change its secretary, appoint new directors, change its address or admit new shareholder. So whenever changes like this is made, the company must notify the SSM by lodging the following Forms;
- FORM 49 – If there is change of Directors, Managers or Secretaries,
- FORM 44 – If its Registered Office or Office Hours is changed,
- FORM 24 – If there is any dealing made in its shares,
- FORM 11 – Whenever the company passed a resolution,
- FORM 25 – If shares were allotted otherwise than for cash,
- FORM 27 – If any preference shares were redeemed, and
- FORM 28 – If the company increased its share capital.
7. OBTAINING THE REQUIRED BUSINESS LICENCES AND PERMITS BEFORE STARTING BUSINESS
Doing business in Malaysia requires licences and they depend on what business your company wants to do. You are required to apply licenses and permits relevant to your business only. Among them are;
- MANUFACTURING LICENCE
- If your company is to engage in any manufacturing activity and its shareholders’ fund is RM2.5 million and above or employs 75 or more full-time employees, it is required by the Industrial Coordination Act 1975 to obtain a manufacturing licence.
But if your company is below these thresholds, it is exempted from acquiring the licence, but instead must apply for a confirmation letter that it’s so exempted.
- If you want to expand or diversify products, regardless whether you are already licenced or not,
- If your company is involved in High Technology or Strategic Project for New Manufacturing Activity,
- If your company is involved in High Technology, Strategic Project for Expansion or Diversification,
- If your company is involved in New Agricultural or Integrated Agricultural Project,
- If your company is involved in Expansion or Diversification of an Existing Agricultural or Integrated Agricultural Project,
- If your company is a Small Scale Manufacturing Company, and
- If your company is involved in Commercialisation of Public Sector R&D Findings in Resource-based and Non Resource-based Industries
- PUBLIC HOUSE LICENCE
If you are opening a restaurant which sells and serves liquor, the Public House Licence is required. It is applied with the local authority where your restaurant is situated. Therefore, if it’s in Kuala Lumpur the local authority to apply the licence with is the Kuala Lumpur City Hall. The requirements and conditions vary with each authority, so you are advised to check first.
- WHOLESALE & RETAIL TRADE LICENCE (WRT)
If your company is more than 50% foreign owned and is involved in retail, restaurant, franchise, trading, import and export in Malaysia, you are required to obtain the WRT licence. It is to be applied with the Ministry of Domestic Trade, Cooperatives and Consumerism. The licence is valid for 2 years and processing time is from 1 to 2 months. But your company is exempted from this requirement if more than 50% of its shares is owned by a Malaysian citizen
To know more about the requirements and application procedures please click here.
- TEMPORARY EXTERNAL ADVERTISEMENT LICENCE OR PERMIT
If you want to hang a banner outside, on or off your business premise, you are required to apply the Temporary External Advertisement Licence from the respective local authority. The application must be made within 7 days from the date of display. Approval time is within 5 days from application and each license is valid for a maximum of 3 months. The requirements and conditions vary according to each authority. So we advise that you check first with the authority.
- HALAL CERTIFICATION
If you operate a restaurant and want your Muslim diners to have no doubt of the kosherness of your restaurant’s menu, apply for Halal Certification with the Department of Islamic Development (JAKIM) or State Islamic Religious Department (JAIN) for the dining area and kitchen. Application can be made at the counter or online here.
- PUBLICATION PERMIT
Any kind of publication that your business premise wants to publish like magazine, newspaper or circulars must have Publication Permit. But one-off publication like leaflet offering the latest combo meal is exempted from this requirement. The Permit is to be applied with the Home Ministry under the Printing Presses and Publication Act 1984 by either the company Secretary or Director.
- HOTEL COMPOSITE LICENCE
If you want to operate a hotel in Malaysia, you are required to apply these Composite Licence with the local authority to carry out business activities that a hotel normally provides. They can be applied simultaneously and the forms are available from the local authority’s website or at the counter. The composition of the licences and approval that you must obtain vary according to the hotel’s star rating. For a 5 star hotel, the Composite Licence is comprised of;
- Hotel or lodging house,
- Banquet or conference hall,
- Entertainment or performance activities,
- Restaurant or coffee house,
- Swimming pool for adult and children,
- Parking lot,
- Health club, gymnasium, sauna, outdoor and indoor facilities,
- Beauty salon,
- Souvenir shop and drugstore selling newspapers and magazines, books, postcards, tobacco and photographic films, and
- Signboard advertisement.
- REGISTRATION OF TOURIST ACCOMODATION PREMISE
If you are a hotelier you are essentially operating an accommodation premise. Therefore, you are required under the Tourism Industry Act to register your hotel as tourist accommodation premise with the Ministry of Tourism.
- REGISTRATION OF ELECTRICAL INSTALLATIONS IN HOTEL PREMISE
If you operate a hotel, you are also required to by the Electricity Supply Act 1990 to register all the electrical installations in the premise with the Energy Commission of Malaysia. You may appoint the very consultant or electrical contractor you hired to make the installation to do the application on your behalf, but he must be registered with the EC.
- AUTHORISATION LETTER TO PURCHASE DIESEL
Your hotel are also required under the Control of Supplies Act 1961 to apply for an Authorisation Letter to Purchase Diesel for any standby generator installed in the hotel building with the Ministry of Domestic Trade and Consumer Affairs.
- BUSINESS PREMISE & SIGNBOARD LICENSE.
Business premise and signboard licences are issued by the respective State Authorities. The licences depend on the nature of the business. The requirements may vary according to each local authority. Applicants are therefore advised to check with the respective local authorities.
- BUILDING & CONSTRUCTION CONTRACTOR LICENCE
If your company is a foreign contractor (if the company’s foreign shareholding is 31% or more) involved in a construction work, it is required under the Construction Industry Development Board Act 1994 to obtain a contractor licence with the Construction Industry Development Board (CIDB).
Construction means practically any kind of work like the construction, extension, installation and dismantling or demolition of any kind of structure carried out anywhere. It includes preparatory and temporary works, site clearance, soil investigation and improvement, earth-moving, excavation, laying of foundation, site restoration and others.
- HOUSING DEVELOPER LICENCE
Licence from the Ministry of Urban Wellbeing, Housing and Local Government is required before any housing development can be carried out. Advertising and sales permit are also required before the housing can be advertised and sold. Application for the licence can be done online here by following the guidelines here.
- GOVERNMENT CONTRACTOR LICENCE TO SUPPLY THE GOVERNMENT
Any company including foreign company is required to be registered with the Government, its bodies or agencies before it can become a supply contractor. For example if our company wants to supply goods or services to the national oil company PETRONAS, it is required to obtain a contractor licence with PETRONAS.
Approval to operate a private international school is required from the Education Ministry. Among the conditions are;
- The applicant must be a private limited company, but there is no equity condition,
- Minimum RM100,000 paid up share capital,
- Applicant must form a Board of Governors to govern the school,
- Details of the curriculum, examining body, syllabus, school activities, principal and teachers must be included, and
- Location of the school
See our featured articles for a more extensive coverage on business licences and permits in Malaysia. But mind you, even those are not complete. There are more and we strongly advise you to obtain advisory from business consultant to help you in this matter.
8. MAINTAIN REGISTERED OFFICE AND OFFICE HOUR
The Companies Act requires every company to maintain a Registered Office within Malaysia which will be its official address, and to which all communications and notices may be addressed. It must be established from the day the company begins to carry on business or from 14 days after the date of its incorporation.
In practice, if you hire the service of a company secretary firm like us, the Registered Office will be the address of the firm itself and it will be stated in the Memorandum and Articles of Association.
The office must be open daily during office hour except on holiday. One month after incorporation, a Notice must be filed with the Companies Commission informing its Registered Office, Office Hours and any changes made thereto.
While Registered Office is a requirement under the Companies Act, it is not a requirement that it must have an actual office, physical or virtual. However, the need to have one will inevitably arise when the company starts business.
9. REGISTER FOR THE GOODS & SERVICES TAX (GST)
With the passing of the Goods and Services Tax Act 2014, the Government had introduced the Goods and Services Tax (GST) starting 1 April 2015 which also replaced the Sales Tax and Services tax. With its introduction your business must now pay 6% GST to the Government if it
- supplies a taxable supplies (goods, services or import that are charged a 6% GST) and
- makes more than RM500,000 in annual sale
If your business has the 2 elements above, it is regarded as and called a taxable person and must then register with the GST Office of the Royal Malaysian Customs Department. Having become a registered person, it
- must charge and collect the GST from its customers and
- can claim back the GST (called input tax credit) it had been charged for the supplies it acquired.
If your business makes less than RM500,000, it is not necessary to register and consequently cannot charge and collect the GST either. Nevertheless, it can apply to register voluntarily but must remain in the system for at least 2 years.
But if your business supplies a zero-rated supply (goods, services or import that are not charged GST), it cannot charge GST, but nevertheless can claim back the input tax credit it had paid in acquiring those supplies.
Under the GST, goods and services are now divided into 3 namely;
- Standard-rated supplies: goods and services that are charged a 6% GST.
- Zero-rated supplies: goods and services that are not charged a GST.
- Exempt supplies: These are non-taxable supplies which is not charged GST. Your business cannot claim input tax credit and cannot charge GST to customers either.
The GST collected is then paid to the government and the input tax it has paid it can claim back. If the input tax is bigger than the GST collected, it can get a refund. But if the GST is bigger than the input tax, the difference goes to the Government.
- Issuing Tax Invoice
When your business charges GST, it must issue a tax invoice showing separately the GST amount and the price of the supplies within 21 days after the supply.
- Filing Tax Return
Your business must submit GST return to the GST office not later than 1 month after the taxable period. The taxable period is as follow;
|Turnover not exceeding RM5 million||3 month|
|1. Turnover above RM5 million or
2. On request subject approval
|Special cases||6 month.|
- Paying the GST
If the GST you charged to your customers is more than the input tax you paid, the difference goes to the Government. It must be paid together with the GST returns not later than 1 month after the taxable period
- online or
- by cheque, bank draft or money order to the RMCD’s Director General.
We strongly advise that you do not handle your GST compliance on your own as it is extremely complicated to do. Your company could well end up paying more tax and get fined too when you thought that you have made a saving by doing it yourself. Instead, we strongly suggest that you hire tax consultant so that you can concentrate on your business. They will set your company up to become tax-ready, starting from registering your company with the IRB, calculating return and then paying it, making appeals, all the way to claiming tax refund.
10. REGISTER WITH THE EMPLOYEES’ PROVIDENT FUND (EPF) & SOCIAL SECURITY ORGANISATION (SOCSO) WHEN THE COMPANY HAS STARTED EMPLOYING WORKERS.
If your company employ workers, it must be registered as an employer with the Employees Provident Fund within 7 days of it hiring employees. After that it is liable to contribute to the EPF at a rate of 11% contribution from employees’ salary and 12% from you as the employer. It must also register with the EPF all employees that start working for the first time and have not yet been registered with the EPF.
As an employer it is also required by the Employees’ Social Security Act 1969 to register as an employer with the Social Security Organisation. After that it will be liable to contribute a monthly contribution to 2 SOCSO Insurance Funds at the following rate;
|Employment Injury Insurance Scheme||Invalidity Pension Scheme|
|EMPLOYER||1.25% of employee’s wages||0.5% of employees’ wages|
|EMPLOYEES||Nil||0.5% of employees’ wages|
It must also register all employees eligible for coverage under the Act. After that it must contribute to the SOCSO Funds irrespective of their employment status whether it is permanent, temporary or casual.