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FOREIGN DIRECT INVESTMENT (FDI) Guide (3) Setting Up A Representative Office in Malaysia

FOREIGN DIRECT INVESTMENT (FDI) Guide (3) Setting Up A Representative Office in Malaysia

A Representative Office/Regional Office of a foreign company/ organisation 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.

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).

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.

Activities Allowed:

The representative office/regional office established is not allowed to carry out any business transaction nor derive income from its operations. An approved representative office/regional office is allowed to carry out the following activities:
a) Planning or coordination of business activities
b) Gathering and analysis of information or undertaking feasibility studies on investment and business opportunities in Malaysia and the region
c) Identifying sources of raw materials, components or other industrial products
d) Undertake research and product development
e) Act as a coordination centre for the corporation’s affiliates, subsidiaries and agents in the region
f) Undertake other activities which will not result directly in actual commercial transactions

Activities Not Allowed:

However, an approved representative office/regional office is not allowed to carry out the following activities:
a) Be engaged in any trading (including import and export), business or any form of commercial activity
b) Lease warehousing facilities; any shipment / transshipment or storage of goods shall be handled by a local agent or distributor
c) Sign business contracts on behalf of the foreign corporation or provide services for a fee
d) Participate in the daily management of any of its subsidiaries, affiliates or branches in Malaysia

Duration of Establishment:

a) Government and Trade Association- Duration is based on the requirement of the applicant.
b) Company- Minimum of two (2) years depending on the merits of each case.
c) Others (including non-profit organisations not relating to trade)- Minimum of two (2) years depending on the merits of each case.

Expatriate Posts:

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 work permit will be considered for a minimum of two-years and is renewable.

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.

Procedure for Application:

An application (excluding banking, financial and tourism services) should be submitted in three (3) copies to Malaysian Industrial Development Authority(Manufacturing Services Division).

The applicant company shall prepare the following documents:-

(i) Company incorporation documents;

(ii) Company’s profile;

(iii) Company’s audited financial statement for the past 2 years;

(iv) Company’s budget for the representative office for the coming 2 years.

The following documents should be submitted together with the application:
(i) Certified true copy of passport containing particulars of the expatriate;
(ii)  Curriculum Vitae of the expatriate to be employed; and
(iii)  Certified Academic Qualification of the expatriate.

Upon submission of the application papers, the approving period is approximately 3 weeks to 1 month.

For application related to banking and financial services, please contact Bank Negara Malaysia

For application related to tourism services, please contact the Ministry of Tourism, Malaysia

You are advised to seek consultation with a Malaysia Law Firm. Any further enquires, please contact us at consult@lylu.com.my

For consultation on the issue of foreign investment in Malaysia, please proceed to send in your enquiry by clicking here.

By : L Y Lu & Co.