COST OF DOING BUSINESS IN PERAK, MALAYSIA 2nd Edition March 2017 PERAK INVESTMENT MANAGEMENT CENTRE Level 4, Perak Techno Trade Centre, Bandar Meru Raya, Off Jalan Jelapang, 30020 Ipoh, Perak, MALAYSIA. Tel : +605-5292 447 / 448 Fax : +605-5292 440 Email : [email protected] Website : www.investperak.gov.my PERAK INVESTMENT MANAGEMENT CENTRE CONTENTS COST of DOING BUSINESS In Perak, Malaysia STARTING A BUSINESS 2 MAIN FEES TO BE PAID TO THE COMPANIES COMMISSION OF MALAYSIA (CCM) 2 RENTAL RATES FOR PRIME OFFICE SPACE 3 COST OF INDUSTRIAL LAND & FACTORY BUILDING 4 COST OF READY-BUILD FACTORY 4 TYPES OF INDUSTRIAL BUILDING AND RATES OF ALLOWANCES 5 AVERAGE CONSTRUCTION COSTS OF FACTORY BUILDING 5 TAXATION 6 COMPANY TAX 6 PERSONAL INCOME TAX 6 PETROLEUM INCOME TAX 7 WITHOLDING TAX 8 GOODS AND SERVICES TAX (GST) 8 EXERCISE DUTY 9 RATE OF CAPITAL ALLOWANCES 9 HUMAN RESOURCES 11 MINIMUM CONDITIONS OF EMPLOYMENT 11 STATUTORY CONTRIBUTIONS 12 EMPLOYMENT OF EXPATRIATES 15 WAGE RATES 16 SALARIES OF EXECUTIVES IN THE MANUFACTURING SECTOR 17 SALARIES OF NON-EXECUTIVES IN THE MANUFACTURING SECTOR 18 FRINGE BENEFITS FOR NON-EXECUTIVES 19 UTILITIES RATES 20 ELECTRICITY RATES 20 WATER RATES 31 SEWERAGE RATES 32 SCHEDULE WASTE TREATMENT RATES 34 GAS & FUEL COSTS 38 TELECOMMUNICATIONS RATES 39 INTERNET SERVICE 42 TRANSPORTATION COSTS 48 OCEAN FREIGHT RATE 48 COURIER SERVICE RATE 48 AIR CARGO RATE 49 AVERAGE HAULAGE RATES 52 IPOH CARGO TERMINAL SDN. BHD. (ICT) 53 LUMUT MARITIME TERMINAL SDN BHD 55 LIVING IN PERAK 58 RENTED ACCOMMODATION, FURNISHED 58 HOTEL RATES 58 GOLF CLUB MEMBERSHIP 58 INTERNATIONAL SCHOOL FEES 59 HEALTHCARE 62 DOMESTIC HELP 63 PUBLIC TRANSPORT 64 ELECTRIC TRAIN SERVICE (ETS) 65 DOMESTIC AIRFARES 70 EATING OUT IN PERAK, MALAYSIA 70 SHOPPING IN IPOH, PERAK 71 NON-DUTIABLE GOODS 71 1 1 STARTING A BUSINESS MAIN FEES TO BE PAID TO THE COMPANIES COMMISSION OF MALAYSIA (CCM): RM Registration of a name • Personal names 30 • Trades name 60 For registration of a company, fees range according to nominal share capital, e.g: • Up to RM 400,000 1,000 • RM 400,001 - RM 500,000 3,000 • RM 500,001 - RM 1,000,000 5,000 • RM 1,000,001 - RM 5,000,000 8,000 • RM 5,000,001 - RM 10,000,000 10,000 • RM 10,000,001 - RM 25,000,000 20,000 • RM 25,000,001 - RM 50,000,000 40,000 • RM 50,000,001 - RM 100,000,000 50,000 • Exceeding RM 100 Million 70,000 *Source: Companies Act 1965 (Act 125) & subsidiary legislations For the full range of fees, please visit www.ssm.com.my 2 COST OF DOING BUSINESS IN PERAK, MALAYSIA RENTAL RATES FOR PRIME OFFICE SPACE Location RM Alor Setar, Kedah 16.15 - 24.00 Georgetown, Pulau Pinang 27.00 - 35.50 Ipoh, Perak 16.15 - 21.52 Kuala Lumpur 64.60 - 102.25 Petaling Jaya, Selangor 48.44 - 59.20 Seremban, Negeri Sembilan 16.10 - 37.70 Melaka 26.00 - 38.00 JB City 30.15 - 37.70 Johor Bahru, Johor Medini Nusajaya 48.45 - 53.80 Kuantan, Pahang 13.00 - 25.00 Kuala Terengganu, Terengganu 21.50 - 27.00 Kota Bharu, Kelantan 10.70 - 27.00 Kota Kinabalu, Sabah 23.70 - 32.30 Kuching, Sarawak 27.00 - 32.30 The rental above are gross rentals per sq. metre per month inclusive of service charge. (Rental excludes Petronas Twin Towers) *Source: CH Williams, Talhar & Wong 2nd Edition • March 2017 3 COST OF INDUSTRIAL LAND & FACTORY BUILDING Annual Selling price per ft2 Quit rent per assessment rate Location annum (% of property (m2) RM value) Ipoh 20-25 RM1.17 16 Kamunting Raya 15-20 RM0.58 9.5 Kampung Acheh, Manjung 20-25 RM0.60 10.5 Bemban Industrial Estate, 15-20 RM0.58 13 Batu Gajah Proton City, Tanjung Malim 20-25 RM0.60 11.5 Seri Iskandar 15-20 RM1.04 12 - 15 *Source: Land Office, Local Council & Perak State Development Corporation COST OF READY-BUILD FACTORY Sale price per ft2 floor Rental per ft2 per Location area month Ipoh RM95.00 – 115.00 RM0.50 – 0.70 Kamunting Raya RM95.00 – 115.00 RM0.50 – 0.70 Kampung Acheh, Manjung RM95.00 – 115.00 RM0.50 – 0.70 Bemban Industrial Estate, Batu Gajah RM95.00 – 115.00 RM0.50 – 0.70 Proton City, Tanjung Malim RM95.00 – 115.00 RM0.50 – 0.70 Seri Iskandar RM95.00 – 115.00 RM0.50 – 0.70 *Source: Malaysian Industrial Estates Berhad - www.midfproperty.com.my 4 COST OF DOING BUSINESS IN PERAK, MALAYSIA TYPES OF INDUSTRIAL BUILDING AND RATES OF ALLOWANCES Annual Buildings which qualify as industrial buildings (%) Initial Allowance (%) Allowances Constructed or purchased building which is used - 10 as an old folks care centre. Constructed or purchased building which is used by a MSC status company. - 10 Constructed or purchased building which is used - 10 by a Bio Nexus status company. Building constructed under a privatisation project 10 6 and private financing initiatives. Constructed or purchased building which is used - 10 as a kindergarten. Constructed or purchased building which is used - 10 as a child care centre. Constructed or purchased commercial building in the Tun Razak Exchange used by a Tun Razak - 10 Exchange Marquee status company. *Source: Inland Revenue Board of Malaysia AVERAGE CONSTRUCTION COSTS OF FACTORY BUILDING (PER FT2) RM Factory with reinforced concrete structure 65 - 75 Steel portal frame on reinforced concrete 75 - 80 Factory with clean room facilities 120 - 130 *Source: MIDF Property Berhad. – www. midf.com.my & State Economic Development Corporation (SEDCs) 2nd Edition • March 2017 5 2 TAXATION COMPANY TAX Company Tax i) Resident companies with paid-up capital not more than of RM2.5 million * on the first RM500,000 chargeable income 18% * on subsequent chargeable income 20%-24% ii) Resident companies with paid-up capital more than of RM2.5 million 20%-24% iii) Non-resident companies 24% *Source: Inland Revenue Board of Malaysia PERSONAL INCOME TAX Resident individuals with chargeable income of RM15,000 and above 1% - 28% (after reduction of personal reliefs) Non-resident individuals (not entitled to any personal reliefs) 28% *Source: Inland Revenue Board of Malaysia Reduction in the corporate tax i. Recognising the economic challenges faced by companies, a reduced corporate tax rate is proposed for companies, Limited Liability Partnerships and other persons (such as a trust body, executor of an estate of an individual who was domiciled outside Malaysia at the time of his death and a receiver appointed by the Court) who successfully increase their taxable income in the years of assessment 2017 and 2018. The reduction in the corporate tax rate is based on the percentage of increase in a company’s chargeable income as follows: Increased percentage of chargeable income Reduction in tax Income tax rate compared with immediately preceding year rate after reduction Less than 5% - 24% 5% - 9.99% 1 23% 10% - 14.99% 2 22% 6 COST OF DOING BUSINESS IN PERAK, MALAYSIA 15% - 19.99% 3 21% 20% and above 4 20% ii. Reduction 1% to 4% in the corporate income tax rate are given based on the increasing of chargeable income. iii. For all Small and Medium Enterprises (SMEs), the tax rate on chargeable income up to the first RM500, 000 is reduced from 19% to 18%. iv. To boost the local vendor development programme in the manufacturing and services sectors, double deduction on expenses incurred by the anchor company, will be extended until December 31, 2020. *Source: Inland Revenue Board of Malaysia PETROLEUM INCOME TAX Companies and persons engaged in petroleum operations are subject to a rate of 38% Searching for, winning or obtaining of petroleum in Malaysia (by drilling, mining, extracting, etc.); all operations incidental thereto and sale or “Petroleum disposal of that petroleum; or transportation within Malaysia of that operations” petroleum; but excludes transportation outside Malaysia; refining or liquefying; service involving the supply and used of rigs, derricks, ocean tankers and barges. a. Petroleum Nasional Berhad, b. Malaysia -Thailand Joint Authority “Chargeable person” c. In relation to each petroleum agreement, any other person carrying on petroleum operations with a) or b) Includes a company, a partnership or other body of persons and a “Person” corporation sole. *Source: Inland Revenue Board of Malaysia 2nd Edition • March 2017 7 WITHHOLDING TAX Withholding tax is an amount withheld by the party making payment (payer) on income earned by a non-resident (payee) and paid to the Inland Revenue Board of Malaysia. Withholding Payment Type Tax Rate Contract Payment 10%, 3% Interest 15% Royalty 10% Special classes of income: Technical fees, payment for services, rent/ 10% payment for use of moveable property Interest (except exempt interest) paid by approved financial institutions 5% Income of non-resident public entertainers 15% Real Estate Investment Trust (REIT) (i) Other than a resident company 10% (ii) Non Resident company 25% (iii) Foreign investment institution effective from 01/01/2007 10% Family Fund/Takaful Family Fund/Dana Am (i) Individual and others 8% (ii) Non Resident Company 25% Income under Section 4(f) ITA 1967 10% *Source: Inland Revenue Board of Malaysia - www.hasil.gov.my GOODS AND SERVICES TAX (GST) During the 2014 Budget Announcement, the Prime Minister of Malaysia has announced the implementation of a goods and services tax (GST) of 6% commencing on 1 April 2015. The introduction of GST is part of the overall Government tax reform programme towards making the taxation system more efficient, effective, transparent, business friendly and capable of generating a stable source of revenue. GST is to replace the current consumption tax comprising of Sales and Services Tax (SST) to eliminate its inherent weaknesses such as cascading and compounding effects, transfer pricing and value shifting, no complete relief on goods exported, discourage vertical integration, administrative bureaucratic red tape, classification issues and etc.