While a foreign employer is not required to form a legal entity in Malaysia in order to set up a payroll in the country (see 5.3.1), a decision may still be made, for commercial or other reasons, to establish a local entity.
The most common entity structures considered by foreign businesses are as follows:
| Types of entity and key points | Detail |
Branch
– no legal personality
– has fiscal independence
– subject to local taxation
– all local social insurance and employment laws apply | A branch has no legal personality, but it can take legal action on behalf of the home parent company. As a consequence, a branch may not own assets, benefit from rights or incur liabilities, and the foreign company is fully liable for all debts and liabilities arising from the operations carried out by the branch. However, it does have fiscal independence and can form contracts with third parties.
It may be deemed to be a permanent establishment (PE) of the foreign company in Malaysia under local domestic law or under the definition of PE in |
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Web page updated on 17 Mar 2025 16:07