There are few ways for foreign companies to expand in Malaysia, the most common ways are via a subsidiary company or a branch office.
Branch office serves as the right hand of their parent companies abroad, but it is not a separate legal entity in Malaysia. Hence, there are few limitations for branch office operation.
Normally, the branch office is set up for foreign companies to expand their business in Malaysia. Since they are not a separate legal entity, their operation is fully dependent on the parent company. They can conduct commercial activities but the activities carried out must be the same with parent company and all debts and liabilities are liable by the parent company.
Benefits of Branch Office
Comparing to other company types, branch office has simpler registration steps
Activities of branch office is fully controlled by parent company abroad, management decision is made by parent company
Requirement of Setting up Branch Office
There are few requirements when setting up a branch office:
Maintenance of Branch Office
Financial statements of the branch office and their parent companies should be lodged within 2 months of AGM. If the office is not required to hold an AGM, then the financial statements should be lodged within 6 months of the financial year end.
Annual return of the branch office should be lodged within 30 days from the anniversary of their registration date every year.
Tax rate of branch offices is the same as companies, which is based on the corporate tax rate figure. There is no tax withheld on transfer of profits to their parent company.
In conclusion, the biggest difference among branch offices and other companies is that the branch office is not a separate legal entity, all the decisions made and all debt and liabilities are liable to their parent company. If you are planning to set up a company in Malaysia, this is one of the things that you may look into.