Economic & Business Laws — Malaysia

Economic and Business Laws for Immigrants to Malaysia

*Note: Malaysian immigration and investment policy changes fairly frequently. Figures below are indicative as of recent years — verify current thresholds with the Immigration Department of Malaysia (JIM), MIDA, MM2H Centre, and Bank Negara Malaysia before making decisions.*

1. Right to Work by Visa/Pass Type

Employment Pass (EP)

• Required for foreigners taking up formal employment with a Malaysian company
• Category I: Salary RM10,000+/month, up to 5 years validity, renewable
• Category II: Salary RM5,000–RM9,999, up to 2 years
• Category III: Salary RM3,000–RM4,999, capped at 12 months, limited renewals (mainly for specific sectors)
• Tied to a specific employer and job role; changing employers generally requires a new pass application
• Employer must be registered with Expatriate Services Division (ESD)

Professional Visit Pass

• For short-term work (consulting, training, contract work) without local employment relationship
• Does not permit taking a salary from a Malaysian entity

Dependent Pass

• Spouses/children of EP holders
• Historically did NOT permit work; however, since 2022 reforms, dependent pass holders *can* apply for a Dependent Pass Endorsement to work, subject to employer sponsorship and approval — check current rules, as this was a significant policy shift

Malaysia My Second Home (MM2H)

• Not a work visa — long-term residence only
• Under current rules, MM2H holders generally cannot work locally without separate authorization; some limited business ownership/directorship allowances exist depending on program conditions at time of approval (rules have changed multiple times since 2021 revamp)

Student Pass

• Foreign students may work part-time (up to 20 hours/week) during semester breaks only, with institutional and Immigration approval — not automatic

Residence Pass-Talent (RP-T)

• For high-skilled expatriates with 3+ years in Malaysia
• Grants more flexibility — holder can work for multiple employers without needing new EP each time, valid up to 10 years

Permanent Resident (PR) / Red IC holders

• Can work freely without EP, similar to citizens for most private sector jobs
• Very rarely granted; PR status is limited and discretionary (mostly spouses of citizens, investors under special schemes, or long-term skilled residents)

Key rule: Working without the correct pass is a criminal offense under the Immigration Act 1959/63, with penalties including fines, jail, caning (in serious/repeat cases), and deportation — this applies to both worker and employer.

2. Starting a Business as a Foreigner

Company Structures

• Sdn Bhd (Private Limited): Most common vehicle; 100% foreign ownership allowed in most sectors (subject to sector-specific caps)
• Minimum one resident director required (Malaysian citizen, PR, or EP holder with residential address in Malaysia) under the Companies Act 2016
• Registration via Suruhanjaya Syarikat Malaysia (SSM)

Foreign-Owned Company Requirements

• Minimum paid-up capital often required for EP sponsorship purposes (commonly RM500,000 for 100% foreign-owned companies seeking to sponsor EPs, though this varies by sector/state and has fluctuated)
• Must register with MIDA if seeking manufacturing licenses or investment incentives
• Certain sectors require Malaysian equity participation (see restrictions below)

Sole Proprietorship/Partnership

• Generally NOT available to foreigners — restricted to citizens/PRs under the Registration of Businesses Act 1956

Licensing

• Business licenses needed at local council (PBT) level regardless of ownership
• Industry-specific licenses (F&B, education, healthcare, financial services) have additional foreign ownership caps

3. Foreign Investment Restrictions

Sectors with Equity Caps

• Distributive trade (retail/wholesale): Regulated by Ministry of Domestic Trade — foreign equity often capped or requires special approval (WRT license), especially for businesses below certain paid-up capital thresholds
• Financial services: Foreign equity limits vary by sub-sector (banking, insurance, capital markets) — governed by Bank Negara Malaysia and Securities Commission; often capped at 70% foreign ownership for banks, sometimes less
• Telecommunications: Historically capped around 70% foreign equity (rules have loosened over time)
• Oil & gas: PETRONAS-controlled sector with significant restrictions
• Rice/paddy, agriculture land matters: Restricted
• Legal, accounting, architecture: Professional licensing bodies require Malaysian qualification/citizenship for practicing licenses; foreign firms often operate via local partnerships only

Bumiputera Equity Policy

• Many sectors (manufacturing licenses, government contracts, certain services) require Bumiputera equity participation (typically 30% historically, though enforcement varies by sector and has been relaxed in others)
• Applies particularly to manufacturing licenses under the Industrial Coordination Act 1975

Approved/Liberalized Sectors

• Manufacturing: Generally 100% foreign equity allowed since 2003 liberalization (most sub-sectors)
• MSC Malaysia status companies (tech/digital): 100% foreign ownership, tax incentives, no equity conditions

Foreign Investment Committee (FIC)

• FIC guidelines were largely liberalized in 2009, but real property acquisitions above certain thresholds still may need economic sector regulator or state approval

4. Property Ownership Rights

Non-Citizens (Foreigners)

• Minimum purchase price threshold: Varies by state, generally RM1,000,000 minimum (some states like Penang, Selangor set higher thresholds — RM2,000,000+ in prime areas; Johor has specific rules for certain zones like Iskandar)
• Cannot purchase:
• Malay Reserve Land
• Properties allocated to Bumiputera quotas
• Low-cost/affordable housing (below threshold)
• Agricultural land (in most states, without special approval)
• State Authority approval required for each purchase (adds 3–6 months to transactions)
• Foreigners can own strata title (condo/apartment) freehold or leasehold, subject to price threshold
• Landed property (bungalows, terrace houses) restrictions are stricter in many states

Permanent Residents

• Generally treated similarly to citizens for property purchase but rules vary by state — some states still impose foreigner-level thresholds/approvals on PR holders unless they've held PR for a specified period
• No blanket national exemption — check state-level land office regulations (property law is a state matter under Malaysia's federal structure, National Land Code 1965 framework)

MM2H Holders

• No special property ownership rights beyond standard foreigner rules; still subject to minimum price thresholds

5. Banking Access for New Immigrants

Opening a Bank Account

• Requires valid passport, visa/pass (EP, MM2H, Student Pass, Dependent Pass), and proof of address (utility bill, tenancy agreement)
• EP holders: Relatively straightforward once EP is issued; some banks accept applications with employment confirmation letter pending physical EP card
• MM2H holders: Must show approval letter; fixed deposit requirement tied to program (historically RM500,000–RM1,000,000 depending on tier under post-2021 rules) is often placed with a local bank as mandated by the program itself
• Student Pass holders: Can open basic accounts, sometimes limited to specific partner banks of the university

Regulatory Framework

• Bank Negara Malaysia (BNM) enforces Anti-Money Laundering (AMLA) compliance — foreigners face enhanced due diligence
• Non-residents face restrictions on Ringgit currency borrowing for property purchase in some cases without BNM approval
• Foreign Exchange Notices issued by BNM govern repatriation of funds, currency conversion limits, and cross-border transfers

Practical Notes

• Many banks require in-person visit; some now offer digital account opening for EP holders (Maybank, CIMB, Public Bank commonly used by expatriates)
• Credit history from abroad doesn't transfer — credit cards/loans often require local salary crediting history (3–6 months) or fixed deposit collateral

6. Labor Law Protections for Immigrant/Migrant Workers

Governing Legislation

• Employment Act 1955 (as amended 2022) — covers most private sector employees; 2022 amendments expanded coverage to all employees regardless of salary (previously capped at RM2,000/month for full protections)
• Applies to foreign workers on valid passes equally in terms of baseline protections (though enforcement gaps are well-documented, particularly for low-wage migrant labor in plantation/construction/manufacturing sectors)

Key Protections

• Minimum wage: RM1,500/month (national minimum wage, periodically revised — verify current rate) applies to foreign workers too, in principle
• Maximum working hours: 45 hours/week (post-2022 amendment, down from 48)
• Mandatory rest day, overtime pay provisions
• Termination and lay-off benefits under Employment (Termination and Lay-Off Benefits) Regulations 1980
• SOCSO (PERKESO) coverage: Foreign workers must be registered under the Employment Injury Scheme (since 2019, foreign workers contribute to SOCSO for workplace injury/invalidity coverage, employer-paid)
• EPF (retirement fund): Generally NOT mandatory for foreign workers (optional employer contribution), unlike citizens/PRs

Migrant Worker-Specific Issues

• Employers must hold valid quota approval from Immigration/Ministry of Home Affairs to hire foreign workers in permitted sectors (construction, manufacturing, plantation, agriculture, services, domestic work)
• Passport retention by employers: Technically prohibited under Passport Act interpretation and ILO standards, but remains a widespread enforcement problem — workers have a legal right to hold their own passport
• Recruitment fee protections: Malaysia has faced international scrutiny (US forced labor import bans on specific companies, e.g., palm oil/glove manufacturers) over debt bondage and excessive recruitment fees charged to migrant workers
• Freedom of association: Migrant workers can join trade unions but face practical restrictions; collective bargaining rights weaker in practice
• Domestic workers (maids) are explicitly excluded from many Employment Act protections and covered by separate, weaker provisions — a significant gap
• Anti-Trafficking law: Anti-Trafficking in Persons and Anti-Smuggling of Migrants Act 2007 (ATIPSOM) provides protections and victim support mechanisms for trafficked/exploited migrant workers

Enforcement Bodies

• Department of Labour (JTKSM) handles wage disputes, unpaid salary claims
• Industrial Court handles unfair dismissal claims (available to foreign workers too, though practical access is limited by visa status tied to employment)
• Labour attachés and NGOs (e.g., Tenaganita) assist migrant workers with complaints

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Recommended Verification- Immigration Department of Malaysia (JIM/Jabatan Imigresen) — jim.gov.my — for current pass types, quotas, fees, and validity periods

• Malaysian Investment Development Authority (MIDA) — mida.gov.my — for manufacturing licenses, equity conditions, and incentive packages
• Companies Commission of Malaysia (SSM) — ssm.com.my — for company incorporation rules, resident director requirements, paid-up capital rules
• Bank Negara Malaysia (BNM) — bnm.gov.my — for foreign exchange administration rules, banking sector equity limits, AMLA/KYC requirements
• Malaysia My Second Home (MM2H) Centre — mm2h.gov.my — for current tier structure, deposit requirements, and permitted activities
• Ministry of Human Resources (Kementerian Sumber Manusia) / JTKSM — mohr.gov.my — for Employment Act amendments, minimum wage updates, migrant worker protections
• State Land Offices / Pejabat Tanah (varies by state: Selangor, Penang, Johor, etc.) — for property price thresholds and FIC-related approvals, since land matters are state jurisdiction
• PERKESO (SOCSO) — perkeso.gov.my — for foreign worker injury scheme registration requirements
• Securities Commission Malaysia — sc.com.my — for capital markets foreign equity rules
• Expatriate Services Division (ESD) — esd.imi.gov.my — for Employment Pass employer registration and category thresholds

Practical Due Diligence Steps

• Before relocating: Confirm your specific pass category's work rights directly with JIM or through a licensed immigration consultant/corporate secretary, as category thresholds and sector quotas shift with each Budget announcement
• Before incorporating: Engage a local company secretary (mandatory under the Companies Act 2016) who can confirm current paid-up capital and Bumiputera equity requirements for your specific industry code (MSIC classification)
• Before buying property: Check the specific state's minimum price threshold and approval process — thresholds differ significantly between, e.g., Kuala Lumpur, Penang, and Johor, and some states impose additional levies on foreign buyers (e.g., Melaka, Johor)
• Before hiring foreign workers (as an employer): Confirm current sectoral quota allocations and levy rates with the Ministry of Home Affairs, as these are revised frequently and vary by nationality of worker (bilateral MOUs exist with source countries like Indonesia, Bangladesh, Nepal)
• For tax matters: Note that immigration status and tax residency are separate — tax residency under the Income Tax Act 1967 depends on days physically present (182-day rule), not visa type, and affects applicable tax rates significantly (non-residents taxed at flat 30% vs. progressive rates for residents, subject to periodic revision)

Given the pace of policy change — particularly around MM2H tiers, Employment Pass salary thresholds, and foreign equity liberalization — treat this overview as a framework for questions to ask professionals (immigration lawyers, corporate secretaries, licensed real estate agents familiar with foreign purchase rules) rather than a final reference for transactional decisions.

More about immigrating to Malaysia