The differences between the subsidiary and the branch in Malaysia lie mainly in the foreign company’s liability. The branch is not a separate legal entity in the country, thus, the foreign company will merely perform its activities through an extension of its head office abroad. As for a subsidiary, this is a fully locally incorporated legal entity, with legal rights as well as liabilities, that can enter into agreements and debts just like any other legal entity in Malaysia. The experts at our law firm in Malaysia can help you with detailed information about the registration and taxation principles for each type of company you can incorporate in the country.
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Foreign company registration in Malaysia in 2026
All companies in Malaysia must be registered with the Companies Commission of Malaysia. Foreign companies are defined as those types of legal entities that are incorporated outside of the country. These foreign corporations may conduct business activities in Malaysia provided that they register the foreign company in the country or they incorporate a new local company.
To be registered in Malaysia, foreign companies must provide:
- a copy of their Articles of Association,
- proof of registration in the country of origin,
- a special registration form,
- proof of appointment/power of attorney for the individual or individuals who will act on behalf of the company in Malaysia,
- additional documents may be needed, especially for subsidiaries that need to have their name approved in the country.
The authorities in Malaysia can issue a name confirmation for a branch in this country in about 30 days. Having an approved name for a branch in Malaysia means observing the following procedures, such as submitting the solicited documents with details about the business owners, the residence of such owners, names, nationalities, etc.
Differences between a Malaysian branch and a subsidiary
The branch and the subsidiary are both good options for foreign companies that want to establish their presence in the Malaysian market in 2026. The choice may depend on the parent company’s available capital as well as the nature of the business. Our team of attorneys in Malaysia highlights the main differences between a branch and a subsidiary in the table below:
| Characteristic | Branch | Subsidiary |
| Independence | Dependent on the parent company abroad; will report to it and will perform the same business activities | Independent from the parent company abroad; it acts as a separate legal entity |
| Local Structure | Not a separate legal structure in Malaysia; has to be registered nevertheless | Incorporated as a new legal structure in Malaysia; has to follow the usual steps for company formation |
| Accounting management | Will manage its accounts either in connection with the foreign company or separately | Manages the accounting and reporting completely separate from the foreign parent company |
| Ownership | The parent company abroad has a complete ownership interest in its Malaysian branch | The foreign company has limited ownership interest in the Malaysian subsidiary |
Just like in the case of branches in Malaysia, the name reservation is mandatory for subsidiaries in Malaysia. A flat fee of around RM 50 is required in this endeavor. More than that, such a name verification and reservation can be made online with the SSM, with a reservation of 30 days.
Liability is one of the most important concerns when choosing to set up a legal structure in Malaysia. For this purpose, the branch is simply an extension of the parent company abroad. It must have the same name and perform the same business activities, and the parent company is completely liable for the debts and obligations of its Malaysian branch. The incorporation costs, as well as the maintenance costs, are lower in this case. Most banks in Malaysia, as well as other financial institutions, will operate via a branch that will serve as a local agency for the larger banks abroad.
The subsidiary is a separate legal entity from the foreign company, and it can be incorporated as a local Malaysian company. This means that the subsidiary is not dependent on its foreign counterpart and can engage in business activities in Malaysia. This company will need to observe all of the local registration, taxation, and reporting requirements. The subsidiary will have a Board of Directors in Malaysia, and the individuals who will serve this role can be appointed by the parent company abroad.
Branch and subsidiary taxation in Malaysia
Both the branch and the subsidiary are subject to observing the local laws for the taxation of profits. There is no separate branch tax rate, these two types of establishments are taxed at the corporate income tax rate of 24%, and the basis for taxation is territorial, except for certain types of income, such as that from banking and insurance activities, transport by air or sea.
Double taxation relief is possible in Malaysia through a broad network of treaties that allow for a single point of taxation when a foreign legal entity derives income from both Malaysia and another jurisdiction. For example, a branch in Malaysia will be protected from being taxed on its profits made in the country both by the Malaysian tax authorities and the tax authorities in the country where the head office of the parent company is located.
The video below also highlights the main differences between the branch and the subsidiary:
Business updates in 2026
Developing branches and subsidiaries in Malaysia is a great decision in terms of business and expansion in this country. International entrepreneurs can benefit from excellent opportunities, a solid business climate, and a booming economy. With AI development, Malaysia opens the doors for new business possibilities. Let’s review some business updates in Malaysia:
- Aligning with the efforts of many countries worldwide in terms of sustainability and the environment, Malaysia is also positioning itself with current trends, projecting to achieve 0 carbon emissions by the end of 2050.
- Malaysia continues in 2026 with the digital transformation. Many bank branches are now offering services through virtual banking in exchange for the traditional ones.
- Starting in January 2026, phase 4 taxpayers in Malaysia are in a 12-month transition period. As such, all business branches must adopt renewed electronic invoicing systems.
- Malaysia is implementing the Carbon Tax for specific business sectors. As such, a 15% Global Minimum Tax (GMT), which is now under audit, will be enforced in 2026.
Our corporate lawyer in Malaysia can give in-depth assistance in business-related matters. Moreover, our experts can help foreigners get residency in Malaysia, or, as the case may be, and with respect to the main conditions, citizenship in Malaysia. For more information, please contact the experts at our law firm in Malaysia. Our team can offer assistance for opening branches and subsidiaries in Malaysia, following the 2026 procedures.