If you’re a foreign company looking to enter Malaysia, you’ll quickly realize there are many ways to register, and two registration paths dominate the landscape:
The Private Limited Company and the Representative Office. One is built for full-scale operations, the other for strategic exploration.
This article outlines the key structures available to foreign investors, what’s required to set them up, and how to evaluate each option based on your operational goals, sector, and long-term strategy.
Entry Landscape
Offers a helicopter view of Malaysia’s business registration environment, emphasizing how structural choices reflect investor intent and regulatory engagement.
Highlights key regulatory requirements such as ownership restrictions in selected sectors including telecommunications, recruitment agencies, oil & gas, etc.
Popular Structures, their Setup and Closure Requirements
Each structure is examined in terms of registration procedures, compliance obligations, and exit pathways. Estimated costs and complexity levels are included to support strategic planning.
Structural Highlights
Centers on two widely adopted vehicles and their core features:
Sendirian Berhad (Sdn Bhd) – A private limited company suited for full-scale operations.
Representative Office / Regional Office (RE/RO) – A non-commercial entity designed for market exploration and coordination.
Focused Analysis on RE/RO
A dedicated section explores the Representative Office in greater detail, clarifying its strategic utility, operational constraints, and suitability for companies seeking low-risk market entry.
Malaysia’s Foreign Investment Framework
Malaysia adopts a sector-specific approach to foreign investment. Each industry is regulated by its respective authority under dedicated laws and policies. This structure enables international investors to participate in the economy while maintaining safeguards for strategic sectors.
Instead of blanket restrictions, Malaysia applies a tiered ownership model, where foreign equity limits vary by sector. This targeted system encourages investment in areas that support economic growth, while protecting industries deemed vital to national interest.
Foreign vs. Local Entities
Under the Companies Act 2016, a foreign entity refers to any company, corporation, association, or body incorporated outside Malaysia.
These entities may establish a presence through:
Branch offices
Representative offices
Locally incorporated subsidiaries
In contrast, a local company is one incorporated under Malaysian law, regardless of ownership. This includes Sendirian Berhad (Sdn Bhd) companies that are 100% foreign-owned. These entities are considered Malaysian for legal and trade purposes and may access regional incentives, such as those under ASEAN Free Trade Agreements, provided they meet rules of origin and certification requirements.
Ownership Restrictions by Sector
While Malaysia permits full foreign ownership in most sectors, certain industries require partial Malaysian equity participation. These include:
Agriculture and plantations
Banking and financial services
Oil and gas
Education
Telecommunications
Utilities
Recruitment agencies
These restrictions are typically enforced through minimum local or Bumiputera (indigenous) equity participation thresholds.
Common Business Structures for Foreign Investors
The most popular choice for foreign investors is the Sendirian Berhad (Sdn Bhd), Malaysia’s equivalent of a private limited company. The Sdn Bhd structure offers operational flexibility, limited liability, and access to trade agreements. Foreigners can own 100% of the company in most sectors, making it the preferred choice for long-term operations.
Representative Offices (ROs), on the other hand, are ideal for companies exploring the market or coordinating regional activities without engaging in commercial transactions.
Other structures foreign investors typically choose from include Branch Offices and Limited Liability Partnerships (LLP).
Permanent residents may also access sole proprietorships and partnerships. Each structure carries distinct implications for liability, tax exposure, and operational freedom (For a deeper dive into structural implications and setup requirements, kindly refer to this eBook).
This article explores the range of viable entry structures for foreign companies in Malaysia, with a deeper focus on the two most dominant choices, Sdn Bhd companies and RE/ROs, each serving distinct strategic purposes based on operational intent.
A Branch office is an extension of a foreign parent company and is not considered a separate legal entity. This means the parent company assumes full liability for all debts and obligations incurred by the branch. The branch must conduct the same business activities as its parent and is generally used for short-term market expansion or operational support. Establishing a branch office requires appointing a Malaysian resident agent, maintaining a registered office in Malaysia, and submitting annual financial statements of the parent company. While the setup process is relatively straightforward and allows direct control by the parent company, branch offices are subject to several limitations: they cannot own property in their own name, may face higher tax exposure compared to locally incorporated entities, and are restricted to activities approved by relevant authorities. Additionally, registration fees are typically higher, as they are based on the paid-up capital of the parent company. These factors make branch offices more suitable for companies seeking limited operational scope rather than full-scale commercial presence.
Closing a Branch Office
Method: De-registration via SSM.
Requirements: Submission of parent company’s audited financials; tax clearance from LHDN.
Estimated Cost: RM 3,000–6,000.
Complexity Level: Medium–High — foreign reporting standards and parent liability increase administrative burden.
A Limited Liability Partnership in Malaysia is a corporate body that combines the flexibility of a partnership with the limited liability of a company. It is governed by the Limited Liability Partnerships Act 2012 and recognized as a separate legal entity from its partners, who are shielded from personal liability beyond their capital contributions. LLPs require a minimum of two partners and have no upper limit, with at least one compliance officer who must be a Malaysian citizen, permanent resident, or ordinarily resident. Foreign investors are permitted to establish LLPs without residency, and the structure allows for flexible profit-sharing and reduced compliance obligations compared to private limited companies. However, LLPs are generally unsuitable for businesses seeking external investment, complex governance structures, or high institutional credibility. They may face limited recognition from banks and regulators, and are not ideal for sectors requiring formal audits, trade incentives, or large-scale operations. As such, LLPs are typically used for professional services, small joint ventures, or low-risk enterprises where operational simplicity is prioritized over expansion or financing.
Closing an LLP
Method: Voluntary or compulsory dissolution.
Requirements: Partner agreement; debt clearance; filing with SSM.
Estimated Cost: RM 2,000–5,000.
Complexity Level: Medium — simpler than Sdn Bhd but still requires formal dissolution and compliance checks.
Sdn Bhd is Malaysia’s standard private limited company structure and the most commonly used vehicle for both local and foreign-owned businesses. It is a separate legal entity that offers limited liability protection to shareholders and perpetual succession. Foreigners are permitted to own 100% of a Sdn Bhd in most sectors, subject to industry-specific regulations. The company must have at least one shareholder and one director who ordinarily resides in Malaysia, along with a licensed company secretary and a registered office address. While the legal minimum paid-up capital is RM1, certain sectors—such as retail, wholesale, and distributive trade—typically require RM1 million in paid-up capital to qualify for full foreign ownership approval. Annual maintenance includes mandatory filings such as audited financial statements, tax returns, and annual returns to the Companies Commission of Malaysia (SSM). Depending on the scale and complexity of operations, yearly compliance costs—including audit, tax, and secretarial services—can range from RM5,000 to RM15,000 or more. Sdn Bhd companies are eligible to own property, enter contracts, and access Malaysia’s trade agreements, making them suitable for businesses seeking long-term growth, operational credibility, and regional expansion.
Closing a Sdn Bhd
Method: Striking off (for dormant) or voluntary/compulsory winding up (for active or insolvent).
Requirements: Tax clearance from LHDN; audited accounts; liquidator appointment for winding up.
Estimated Cost: RM 8,000–20,000+ (winding up); RM 1,000–3,000 (striking off).
Complexity Level: High — due to regulatory filings, tax clearance, and potential liquidation procedures.
A Representative Office (RO) or Regional Office (RE) in Malaysia is a non-commercial entity established by a foreign company to oversee operations, conduct market research, and coordinate regional activities. These offices are not permitted to engage in direct business transactions, generate revenue, or sign contracts on behalf of the parent company. Their primary function is to gather market intelligence, assess feasibility, and support strategic planning for long-term investment decisions. RE/ROs are commonly used during the pre-entry phase to mitigate risk and build local understanding before committing to full commercial operations.
Applications are submitted to the Malaysian Investment Development Authority (MIDA), and approvals are typically granted for a period of two to five years, renewable upon review. The setup process is relatively straightforward, but the office must appoint a representative—usually a Malaysian citizen or resident—and maintain a physical presence in Malaysia. While RE/ROs are exempt from corporate tax and audit requirements, they must still comply with immigration regulations, including securing employment passes for foreign staff.
In practice, RE/ROs are suitable for companies that are not yet ready to incorporate but want to establish a strategic foothold in Malaysia. However, their non-commercial status limits operational flexibility, and transitioning to a full-fledged entity (such as a Sdn Bhd) requires a separate incorporation process. Maintenance costs are modest compared to commercial entities, but companies must budget for office rental, staff salaries, visa processing, and periodic renewals. This structure is best suited for feasibility studies, liaison functions, and regional coordination—not for revenue-generating activities.
Closing a RE/RO
Method: De-registration with MIDA.
Requirements: Formal notification; cancellation of expatriate work passes.
Estimated Cost: RM 500–1,500.
Complexity Level: Low — minimal paperwork, no tax exposure, and no legal entity to dissolve.
Incorporation Checklist
Hiring expatriate and Work Permits Sponsorship
Mandatory requirements
Optional
Detailed breakdowns of each structure are mapped out in this eBook.
Differences between RE and RO
RE: Gathers data on investment opportunities (especially in manufacturing and services), enhances bilateral trade, promotes Malaysian exports, and conducts R&D.
RO: A coordination hub for affiliates, subsidiaries, and agents in Southeast Asia and Asia Pacific. Oversees designated regional activities.
Setup requirement is minimal:
Appoint a chief representative
Submit an annual report to MIDA
Maintain a modest operating expenditure
Typically approved for 2 years, renewable and subject to approval by MIDA
Strategic Flexibility:
No corporate tax
No audit requirement
Allocation of Work Permits for foreign personnel tied to the RE/RO approval
Local Hiring permitted for support roles
Other Key Characteristics
Use of parent entity’s name and represent the head office/principal for designated functions.
Fully funded from outside Malaysia with proposed annual operational expenditure (OPEX) ≥ RM300,000
Not an entity incorporation under CA 1965/2016
Approval is obtained from the Malaysian government
Suitable Activities:
Gathering and analysis of information, or feasibility studies on investment/business opportunities.
Planning or coordination of business activities.
Identifying sources of raw materials, components, or industrial products.
Undertaking research & product development.
Acting as a coordination centre for regional affiliates, subsidiaries, and agents.
Other activities not resulting directly in actual commercial transactions.
Prohibited Activities:
Engaging in any trading (including import and export), business, or commercial activity.
Leasing warehousing facilities (shipment/transshipment/storage must be handled by a local agent/distributor).
Signing business contracts on behalf of the foreign corporation or providing services for a fee.
Participating in the daily management of Malaysian subsidiaries, affiliates, or branches.
Detailed breakdowns of each structure are mapped out in this eBook.
For foreign companies eyeing Malaysia as a potential market, the question often arises:
Why bother with a Representative Office (RE) when I can just enter on a tourist visa and explore informally?
It’s a fair challenge. After all, REs don’t generate revenue, can’t sign contracts, and come with bureaucratic strings. But beneath the surface, the RE structure offers strategic advantages that go far beyond mere compliance.
Before we explore the nuances between tourist visas and Representative/Regional Office (RE/RO) structures, let’s ground ourselves in a few key facts and figures. In 2023 alone, Malaysia approved 82 RE/RO setups, representing RM132.6 million in committed investments and creating 255 job opportunities. These offices serve as strategic footholds for foreign companies to assess market feasibility, gather intelligence, and build regional presence—without engaging in direct commercial activity. The top countries establishing RE/ROs include Singapore, China, South Korea, Japan, and Spain, reflecting Malaysia’s role as a gateway to the Asia Pacific.
Country Trends
Additionally, MIDA’s 2023 data confirms that the highest number of RE/RO approvals came from:
Singapore (15 approvals)
China (11)
South Korea (8)
Japan (6)
Spain (5)
The RE Advantage: Strategic Legitimacy Without Commercial Commitment
These companies typically use REs or ROs to:
Conduct market research, feasibility studies, and business intelligence gathering
Promote the brand and coordinate regional activities
Liaise with local partners, regulators, and industry bodies
Employ a small team (typically an expatriate manager and support staff)
Operate without corporate tax liability or full incorporation costs
This makes the RE a low-risk, high-legitimacy vehicle for strategic exploration.
Why Not Just Use a tourist visa?
Operating under a tourist visa may seem simpler, but it comes with limitations. A tourist visa offers no formal business presence, limited access to government channels, no ability to hire staff legally, and no access to business infrastructure. In contrast, a Representative Office is recognized by MIDA and regulators, enables structured engagement with authorities, allows hiring of approved personnel, signals serious intent and strategic commitment, and can lease office space, host meetings, and build visibility.
In short, a tourist visa is fine for casual exploration. But if you’re building relationships, gathering intelligence, or preparing for market entry, an RE gives you optics, access, and structure.
When Is a Representative Office the Right Move?
If your goal is to establish a strategic presence in Malaysia without immediate commercial exposure, an RE offers a uniquely efficient pathway. It’s not just useful—it’s structurally elegant. Consider it when you’re aiming to:
Signal Brand Credibility: Operate under your official company name, appear in directories, and build local recognition.
Engage Regulatory Channels: Liaise with ministries, attend trade events, and secure work permits for key personnel.
Extract Strategic Intelligence: Conduct structured market research to inform regional expansion and investment decisions.
Minimize Compliance Burden: No tax filings, no paid-up capital, and no commercial obligations.
Test Market Viability: Assess demand, competition, and regulatory fit before full incorporation.
Coordinate Regional Partnerships: Align with distributors or partners across Southeast Asia.
Lay Groundwork for Future Ventures: Prepare for joint ventures, acquisitions, or full operational rollout.
In short, if you’re seeking agility, insight, and credibility without the weight of commercial setup, the RE structure isn’t just a placeholder—it’s a precision tool for strategic entry.
Malaysia adopts a sector-specific approach to foreign investment. Each industry is regulated by its respective authority under dedicated laws and policies. This structure enables international investors to participate in the economy while maintaining safeguards for strategic sectors. In Malaysia, your chosen structure determines what you can do, how you’re taxed, and how regulators and partners perceive your intent. Sdn Bhd enables full operations and long-term scale. RE/RO supports coordination and market research, but limits commercial activity.
The setup process in Malaysia has improved over time. Sector-specific rules, ownership thresholds, and documentation standards vary and still present challenges in gaining clarity.
XpatMobi helps foreign investors navigate this complexity. We align structure with strategy, ensure regulatory compliance, and support long-term execution. The goal is simple: reduce friction, increase clarity, and position your business for success.
Entering Malaysia isn’t just about choosing the right structure, it’s about executing with precision across legal, operational, and regulatory dimensions. XpatMobi offers integrated support across four key service areas to help you establish a compliant, scalable presence:
Market Entry Advisory
We help you assess and select the most suitable entry pathway—whether through full incorporation, a Representative Office, or Employer of Record—based on your business model, timeline, and operational priorities. Our guidance ensures your setup aligns with long-term goals and regulatory expectations.
Visa & Immigration
You’ll have access to end-to-end support for Employment Passes, Professional Visit Passes, and Dependent Passes. We manage filings, renewals, and compliance so your team can enter and operate legally, without delays or administrative friction.
Employer of Record (EOR)
If you’re not ready to incorporate, we can onboard your local or foreign talent under our legal entity. You maintain control over your team’s work while we handle payroll, statutory contributions, and HR compliance—giving you operational flexibility without legal overhead.
Business Licensing
From manufacturing and retail licenses to incentive-linked approvals like Malaysia Digital Status and Pioneer Status, we help you navigate licensing frameworks. We prepare documentation, liaise with ministries, and ensure you’re licensed to operate and scale.
With XpatMobi, you gain a strategic partner committed to helping you enter, integrate, and grow in Malaysia with confidence.
