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International Consultancy Lauds Malaysian HQ Regime

by Mary Swire, Tax-News.com, Hong Kong

08 January 2002

One of the first companies to secure operational headquarters incentive status in Malaysia in 1996, international multi-disciplinary consultancy Scott Wilson remains confident that Kuala Lumpur is an ideal city for a regional office.

The availability of well qualified English-speaking staff, the attractive cost base and the geographical location all contribute, said Richard Denton-Cox, managing director of Scott Wilson (Asia-Pacific) Sdn Bhd.

Foreign investors, he added, are looking for political stability, good corporate governance, rule of law supported by an independent judiciary, a fair tax structure, a level playing field and certainty of payment.

"With the global reduction in investment, Malaysia must ensure that it leads in all aspects in order to attract foreign investment in competition with its Asean neighbours and China," Denton-Cox said in a statement.

"Our local Malaysian companies face a highly competitive market and should benefit from their ability to access global resources through the Scott Wilson group."

"Malaysia's plan to continue to upgrade its infrastructure to world- class standards gives us the opportunity to bring our worldwide experience and expertise here and to share it by training our local staff to the highest standards," said Denton-Cox.

In order to qualify for the favorable fiscal incentives that apply to OHC the following criteria must be met:

  • The OHC must be wholly owned by foreigners;
  • The OHC must have a minimum capital of .5m Malaysian Ringitts (US$130,000) or a minimum expenditure of 1.5m Ringitts (US$395,000) per annum;
  • The OHC must both offer to and carry out for its offices or related companies outside Malaysia 3 of the following "specified services": general management and administration, business planning, procurement of raw materials and components, technical support, treasury and fund management services, corporate financial advisory services, marketing, control and sales promotion, training and personnel management, research and development work & assistance in the obtaining of credit facilities.

An OHC which meets the qualifying preconditions is entitled to the following fiscal benefits:

  • Profits are taxed at a 10% corporate income tax rate (instead of the national rate of 35%) provided the income is derived from the provision of "specified services" to companies located outside Malaysia.
  • Irrespective of any change in the current law, foreign source dividends received by an OHC from a foreign subsidiary are exempt from corporate income tax in the hands of the OHC for a period of 10 years.
  • Irrespective of any change in the current law, dividends which are distributed by the OHC are exempt from withholding tax for a period of 5 years irrespective of whether those dividends represent profits remitted to the OHC or profits earned by the OHC.

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