{"id":109,"date":"2026-10-13T01:25:00","date_gmt":"2026-10-13T01:25:00","guid":{"rendered":"https:\/\/vivosgroup.com\/my\/?p=109"},"modified":"2026-10-12T00:24:56","modified_gmt":"2026-10-12T00:24:56","slug":"malaysia-branch-vs-subsidiary","status":"publish","type":"post","link":"https:\/\/vivosgroup.com\/my\/insights\/malaysia-branch-vs-subsidiary\/","title":{"rendered":"Branch or Subsidiary in Malaysia: Registration, Tax and Liability for Foreign Companies in 2026"},"content":{"rendered":"\n
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Insights \u00b7 Malaysia Incorporation<\/p>\n\n\n\n

Branch or Subsidiary in Malaysia: Registration, Tax and Liability for Foreign Companies in 2026<\/h1>\n\n\n\n

Most foreign companies enter Malaysia through a Sdn Bhd subsidiary rather than a branch. A branch registers with the Companies Commission of Malaysia (SSM) as a foreign company, pays a fee of RM5,000 to RM70,000 depending on the parent\u2019s share capital, and leaves the parent liable for all its debts. It is usually taxed as a non-resident at 24% on Malaysian profits, with no SME rates. A wholly foreign-owned Sdn Bhd also pays 24%, but it limits liability and fits Malaysia\u2019s licensing and Employment Pass rules.<\/p>\n\n\n\n

This guide is for foreign groups choosing their first Malaysian vehicle. It covers registering a foreign company under the Companies Act 2016, ongoing filings, tax, liability, licences and expatriate hiring, MIDA\u2019s representative and regional office route, and a decision checklist.<\/p>\n<\/div>\n\n\n\n

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Position at 2 October 2026<\/th>Branch (registered foreign company)<\/th>Sdn Bhd subsidiary<\/th><\/tr>
Legal status<\/td>Part of the foreign parent, with no separate legal personality<\/td>Separate Malaysian company<\/td><\/tr>
Liability<\/td>Parent liable for all branch debts and obligations<\/td>Shareholders liable only for any amount unpaid on their shares<\/td><\/tr>
SSM fee<\/td>RM5,000 to RM70,000, scaled to the parent\u2019s share capital<\/td>RM1,000 incorporation fee<\/td><\/tr>
Local representation<\/td>An agent resident in Malaysia, personally liable for penalties<\/td>At least one director ordinarily resident in Malaysia, plus a company secretary<\/td><\/tr>
Annual filings<\/td>Annual return; parent\u2019s accounts plus an audited Malaysian statement within two months of the parent\u2019s AGM<\/td>Annual return and the company\u2019s own financial statements<\/td><\/tr>
Corporate tax<\/td>Usually non-resident; 24% on Malaysian profits; no SME rates<\/td>24%; SME rates denied where more than 20% of capital is foreign-owned<\/td><\/tr>
Expatriate hiring (ESD)<\/td>No published capital threshold; approvals generally harder<\/td>RM500,000 paid-up capital if wholly foreign-owned<\/td><\/tr>
Sector licences<\/td>Not accepted for many, including foreign-owned distributive trade<\/td>The vehicle most licences expect<\/td><\/tr><\/tbody><\/table><\/figure>\n<\/div>\n\n\n\n
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Registering a Branch Under the Companies Act 2016<\/h2>\n\n\n\n

Under section 562 of the Companies Act 2016, a foreign company must register with SSM before it carries on business in Malaysia, using the name it holds in its country of origin. Within 30 days of name approval it lodges certified copies of its certificate of incorporation and constitution (translated if not in English or Malay), particulars of its directors and shareholders, its registered office and its agent\u2019s appointment.<\/p>\n\n\n\n

The fee follows the parent\u2019s share capital in ringgit: RM5,000 up to RM1 million, rising in bands to RM70,000 above RM100 million or where no share capital is prescribed. The agent must be resident in Malaysia, is answerable for everything the branch must do under the Act and is personally liable for penalties unless a court decides otherwise.<\/p>\n\n\n\n

The branch then keeps a registered office open during business hours and Malaysian accounting records, and lodges an annual return within 30 days of each anniversary of registration. Within two months of the parent\u2019s annual general meeting it lodges the parent\u2019s financial statements under section 575, with an audited statement of the assets and liabilities of its Malaysian operations.<\/p>\n<\/div>\n\n\n\n

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Tax: Why the 24% Rate Usually Applies Either Way<\/h2>\n\n\n\n

A company is tax resident in Malaysia if its management and control are exercised here. A branch is managed by its foreign parent, so it is normally treated as non-resident and taxed at 24% on profits derived from Malaysia. Where a double taxation agreement applies, Malaysia taxes only the profits attributable to the permanent establishment. The preferential SME rates of 15% and 17%, which Budget 2027 proposes cutting to 14% and 16%, are reserved for companies that are resident and incorporated in Malaysia, so a branch never qualifies.<\/p>\n\n\n\n

A foreign-owned subsidiary rarely does better on the headline rate. Since year of assessment 2024, the SME rates are denied where more than 20% of paid-up capital is owned by foreign companies or non-Malaysian citizens, so a wholly foreign-owned Sdn Bhd also pays 24%. Profits leave cleanly either way: Malaysia levies no withholding tax on dividends and no separate tax on branch profits sent to head office. Budget proposals, including those in Budget 2027 tabled on 9 October 2026, take effect only once legislated.<\/p>\n\n\n\n

The differences lie elsewhere. Malaysian customers paying a non-resident branch for contract work or services performed here may have to withhold tax for the Inland Revenue Board (LHDN), which the branch then credits against its final bill. A resident subsidiary invoices like any local company and can access incentives that a branch may not.<\/p>\n<\/div>\n\n\n\n

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Liability, Licences and Hiring Expatriates<\/h2>\n\n\n\n

A branch has no separate legal personality, so its contracts and debts are the parent\u2019s. A Sdn Bhd ring-fences them: shareholders risk only any amount unpaid on their shares. Licensing often settles the choice. Many approvals assume a locally incorporated company, and the distributive trade guidelines of the Ministry of Domestic Trade and Cost of Living, as published by MIDA, require foreign-owned retail formats to incorporate locally, including former branches.<\/p>\n\n\n\n

Hiring is the other test. The Immigration Department\u2019s Expatriate Services Division (ESD) sets paid-up capital thresholds by shareholding: RM500,000 for a wholly foreign-owned company and RM1 million where a wholesale and retail trade licence is needed. It publishes no equivalent for branches, which have no Malaysian share capital, and practitioners report that branch approvals are harder. If the plan depends on Employment Passes, choose a subsidiary.<\/p>\n<\/div>\n\n\n\n

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The Representative or Regional Office Alternative<\/h2>\n\n\n\n

If you are not ready to trade, the Malaysian Investment Development Authority (MIDA) approves representative offices (RE), which gather market information, promote trade and carry out research, and regional offices (RO), which coordinate affiliates across the region. Neither is registered with SSM. Each must be funded from abroad and spend at least RM300,000 a year, with higher minimums for some extensions.<\/p>\n\n\n\n

An RE or RO may not trade, import or export, sign contracts for the parent, earn fees, lease warehouses or manage group companies day to day. It must use commercial premises, its staff contribute to the EPF and SOCSO, and MIDA approves it for a fixed term. Once you start selling, you need a branch or a Sdn Bhd.<\/p>\n<\/div>\n\n\n\n

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Checklist for Choosing Your Malaysian Vehicle<\/h2>\n\n\n\n