Taxation in Malaysia

Malaysia uses a territorial taxation system. Residents are only taxed on Malaysian sourced income, and the progressive tax rate on chargeable income reaches a maximum of 24%.

A 20% capital gains tax is levied on the real estate belonging to non-citizens if the property is disposed of within four years of the purchase date.

The standard rate of GST is 6%.

Malaysia has an extensive network of double tax agreements with other countries, which means a resident of Malaysia may be able to claim a tax refund on foreign income taxed in overseas countries.

Establishing A Private Trust In Malaysia

 Trust that is created for the benefit of one or more ascertainable beneficiaries.

What is the Type of Trusts are most commonly used

1. Single Parent Trust
2. Special Child Trust
3. Golden Age & Healthcare Trust
4. Insurance Trust
5. Charitable Trust
6. Investment Trust
7. Property Trust

Detail Explanation of each trust:

Single Parent Trust

For a single parent who is divorced or widow

You are the only person your child depends on financially. You are worried that when you pass away, your children’s education, maintenance & healthcare is not taken care of because there’s no one to take care of their welfare.

Special Child Trust

For a child with special needs (down syndrome, disabled etc.)

Planning for your child is never easy, especially when you are not around. It is even more difficult if your child is a unique child or disabled, or suffering from a major illness. How can you ensure that your child will be cared for when you are not around?

When planning, you may wish to consider the few points below:-

• Who will care for your child should you become critically ill or permanently disabled, or have departed?
• Would your special child be able to fend for himself when you are no longer around?
• Suppose your child needs constant medical attention or suffers from a significant illness. Would your appointed Guardian have the time and resources to provide such attention, considering that they are working or has a family of their own?
• Does your child need nursing care in the comfort of their home? How do you ensure continuous nursing care for your child upon her demise?
• How do you ensure your unique child gets the proper education and training?
• What is the cost of taking care of a particular child?
• Is the Guardian able to provide full attention to a particular child?
• What are the financial resources of the Guardian?
• Is they competent in handling financial matters?
• Can the Guardian afford to pay the school fees for the unique child?
• Who will ensure the funds you have allocated for your child are well managed?
• Whom can you entrust to ensure the assets you have set aside for your children are not taken or manipulated by unscrupulous third parties?

Golden Age & Healthcare Trust

For singles who have to depend on themselves during old age or for those whose children are staying overseas or you do not want your assets to be mismanaged by your spendthrift beneficiaries.

• You wish to maintain your lifestyle during your golden age
• You do not want your loved ones to be burdened with financial responsibility for your maintenance when you have retired.
• You want to be financially independent to take care of yourself if you are disabled or critically ill.
• You do not wish to entrust your hard-earned assets to your spendthrift children to manage when you are old.
• You wish for someone professional to handle all your finances when you are disabled and unable to conduct financial transactions.

Insurance Trust

For a couple that bought insurance policies but nominated each other as beneficiaries. What if both husband and wife pass away in a shared tragedy? An insurance trust can help distribute income to your young children.

As parents, you, too, would protect your children. For example, you may purchase insurance so that in case something happens to you while they are young, there will at least be cash to provide for their needs. If you have taken insurance, chances are, you may think that you have done enough in providing security to your loved ones by nominating them as your beneficiaries in your insurance policies. Think again.

Are your loved ones completely protected when you nominate them as beneficiaries in your insurance policies? Is that enough? You may want to consider:-

• If your spouse is the sole beneficiary of your insurance policy, what happens to the insurance proceeds upon your spouse’s passing?
• If your young children are the beneficiaries, who should claim the insurance proceeds for them if both you and your spouse cannot?
• Are your beneficiaries mature enough to handle large sums of money?
• Is there someone competent enough to assist the beneficiaries?

Charitable Trust

For those who want to leave a legacy for charity purposes

You wish to set aside some of your assets for charitable purposes either while you are still around or after you have passed on but need to address some questions in your mind:

• Do you want to ensure that your wishes are followed?
• You wish to appoint a Trustworthy person who can execute your instructions by determining which charities your assets will be distributed to.
• You wish to make a periodical donation and appoint the right person to perform these tasks taking into account the time, infinity and expertise required.
• You wish to leave alternative instructions should the charity organisation you intend to benefit from has closed down.

Investment Trust

For those who want to create a Trust with their investment portfolio to protect their family in case of death, total permanent disability & critical illness

• You wish to ensure that the amount of money you want to give to your loved ones is enough once you have passed on.
• You wish to ensure that the amount is enough to cover your child’s education fees.
• You wish to protect your loved ones from future high living costs.
• You want to be sure there are enough funds to maintain yourself in the future.

Property Trust

For those who want to retain the property

• You wish to leave your house to your spouse. But your age-old mother is also living under the same roof. You are worried that your spouse may sell off the house leaving your mother with no place to live.
• You have a mentally disabled child. You wish to allow your child to stay in the house during his lifetime.
• You are worried that after you pass away, the creditors of your estate may claim the family home.

Incorporation of a company in Malaysia

The two types of companies that can be incorporated under the Companies Act 1965 (CA 65) are:

1. A company limited by shares
2. An unlimited company

 1. company Limited by Shares

A company having a share capital may be incorporated as a private company (identified through the words’ Sendirian Berhad’ or ‘Sdn. Bhd.’ appearing together with the Company’s name) or public company ‘Berhad’ or ‘Bhd’ appearing together with the Company’s name).

The requirements to form a company are:

(i) A minimum of two subscribers to the shares of the Company (Section 14 CA);
(ii) A minimum of two directors (Section 122); and
(iii) A company secretary who can be either :

• An individual who is a member of a professional body prescribed by the Minister  of Domestic Trade Cooperative and Consumerism; or
• An individual licensed by the Companies Commission of Malaysia (SSM)

The director and company secretary shall have their principal or only place of residence in Malaysia.

A. Incorporation Procedures

1. application of Name Search

A name search must be conducted to determine whether the Company’s proposed name is available. refer to Government Gazette No. 716 dated 30 January 1997, Gazette (Amendment) dated 11 October 2001, Guidelines For Naming A Company and Guidelines For Application Of A Company Name. the steps involved are:

(i) Completion and submission of Form 13A CA (Request For Availability Of Name) to SSM; and
(ii) Payment of an RM30.00 fee for each name applied.

Where SSM approves the proposed Company’s name, it shall be reserved for three months from the approval date.

2. lodgement of Incorporation Documents

Incorporation Documents (as further explained in Part B below) must be submitted to SSM within three months from the date of approval of the Company’s name by SSM, failure of which a new application for a name search must be made. Steps (i) and (ii) above shall have to be repeated).

B. Incorporation Documents to be Lodged with the SSM

1. memorandum and Article of Association

An original of the Memorandum and the association’s Article shall be stamped at RM100.00. Stamps are affixed to the Inland Revenue Board’s stamp office.

• The first directors and secretaries shall be named in the Memorandum and Article of Association.
• The subscribers to the Company’s shares shall sign the Memorandum and Articles of Association before a witness.
• Table A of the Fourth Schedule in the CA can be adopted as the Article of Association of the Company (Section 30 CA).

*NOTE: For incorporation of a private company, the articles of association shall contain the following stipulations.

(i) Restriction  on the right  to transfer the Company’s shares;
(ii) Limitation on the number of members to not exceed fifty;
(iii) Prohibition to an invitation to the public to subscribe to the shares/debentures of the Company; and
(iv) Prohibition on a public invitation to deposit money with the Company.

2. form 48A (Statuary Declaration By A Director Or Promoter Before Appointment)

The director or promoter declares under oath that:

• He/She is not a bankrupt; and
• He/She has not been convicted and imprisoned for any prescribed offences.

3. form 6 (Declaration of Compliance)

This declaration states that all the requirements of the CA have been complied with. This must be signed by the company secretary named in the Memorandum and Articles of Association.

4. additional Documents:

• Original copy of Form 13A.
• A copy of the letter from SSM approving the name of the Company.
• A copy of the identity card of each director and company secretary.

C. Registration Fees

Each application for the incorporation of a company shall be accompanied with payment as per the schedule following:

D. Certificate of Corporation

SSM will issue a Certificate of Incorporation upon compliance with the incorporation procedures and submission of the duly completed Incorporation Documents.

2. unlimited Company

The procedures and Incorporation Documents for the incorporation of an unlimited company are the same as a company limited by shares. The only difference is that for an unlimited company, the liability of its members must be stated in the Memorandum of Association as unlimited.

Booking a Consultation

Complete our online enquiry form, and one of our senior managers will arrange a confidential consultation to discuss your requirements and potential options.

At Sterling Migration, our team are highly acclaimed as ready to manage even the most complex of cases. Our thesis, however, is to keep things as simple as possible. We believe our clients must be comfortable and remain in control of their international plans throughout the process. We endeavour to protect our client’s best interests while delivering outstanding results.

If you are still in the exploratory stage of investing overseas to secure residency or second citizenship. We recommend taking a look at the Australian investor visa programme. It is now one of the world’s most popular residency by investment schemes.