An investment holding company in Malaysia allows you to hold shares, property and other investments through one company. For investors building a portfolio or owning several businesses, it brings those interests into a common ownership structure.
Before setting one up, it helps to understand how the structure fits your investments. The income you expect to receive, the costs of maintaining the company and your plans to sell assets all affect whether it makes sense for you.
In this article, we will walk you through how investment holding companies work in Malaysia, their tax treatment and the steps to register one.
What is an investment holding company in Malaysia?
An investment holding company (IHC) is a company whose main activity is holding investments. These investments can include shares in subsidiaries, securities, deposits and real property.
For Malaysian tax purposes, at least 80% of its gross income must come from holding investments, after excluding gross income from a source consisting of a business of holding investments. The main activity and income test must be considered together.
LHDN Public Ruling 2/2024 explains the classification and replaces Public Ruling 10/2015. It distinguishes passive investment income from income earned through an investment-holding business.
How rental income affects the test
Passive rent counts toward the 80%. Income from letting property with comprehensive, actively provided maintenance or support services is left out of the calculation.
A company receiving dividends, passive rent and serviced-property income must classify those sources before calculating its investment-income percentage. Management and service fees also require a review of the activities that generate them.
Adding a service business can change the company’s classification, particularly when it becomes the main activity. Review the income mix before combining operating activities and investments in the same company.
Does IHC status change each year?
Once a company has been classified as an IHC, LHDN treats it as continuing to be one in subsequent years unless it proves otherwise. A change in activities or income must be supported by records.
Review the classification when the company starts a new business, changes its property services or restructures its investments. Keep the accounts and business records that explain the change.
How investment holding companies are taxed
The tax rules distinguish between companies listed on Bursa Malaysia and those that are unlisted. Most foreign investors establishing a private limited company in Malaysia, or Sdn Bhd, to hold investments will be concerned with section 60F.
| Area | Unlisted IHC: Section 60F | Listed IHC: Section 60FA |
|---|---|---|
| Investment income | Treated as non-business income | Each investment-income source is treated as a separate business source |
| Source-specific expenses | Deductible when they satisfy the relevant tax rules | Restricted to the income from the corresponding investment source |
| General operating expenses | Permitted-expense deduction calculated under a formula | Common expenses allocated between sources and restricted accordingly |
| Excess investment-source deductions | Do not create ordinary business losses for carry-forward | Excess deductions from investment sources are disregarded |
| Capital allowances | Not available against non-business investment income | Restricted to adjusted income from the relevant investment source |
An unlisted IHC assessed under section 60F pays 24% corporate income tax on chargeable income. LHDN’s Practice Note 3/2020 excludes these companies from preferential small-company tax treatment because they are deemed to have no gross business income.
The company must separate taxable interest, rent and other receipts from exempt income before calculating its liability. Malaysian single-tier dividends received by the company, for example, are exempt.
Permitted expenses under section 60F
An unlisted IHC’s deductions fall into two categories. Expenses attributable to producing a taxable income source follow the ordinary deduction rules, while certain general operating costs qualify for the separate permitted-expense deduction.
For example, qualifying interest incurred to produce taxable investment income may be deductible against that source. Record it separately from general administrative costs so the correct deduction rules can be applied.
Permitted expenses include:
- Directors’ fees.
- Wages, salaries and allowances.
- Management fees.
- Secretarial, audit and accounting fees.
- Telephone, printing, stationery and postage.
- Office rent and expenses incidental to maintaining the office.
These are expenses that are not otherwise deductible under section 33(1). Section 60F allows a limited deduction using the following formula:
Permitted-expense deduction = (A × B) ÷ (4 × C)
| Component | Meaning |
|---|---|
| A | Permitted expenses for the period, reduced by receipts of a similar kind |
| B | Gross taxable dividend, interest and rental income |
| C | Gross dividend and interest income, including exempt amounts, plus rent and gains from realizing investments |
Dividend income for this calculation includes distributions from unit trusts. The deduction is also subject to the 5% restriction illustrated in LHDN’s ruling.
How the permitted-expense deduction is calculated
LHDN’s Example 10 uses RM49,000 of permitted expenses, RM115,000 of taxable investment income and RM258,000 for component C. The taxable investment income includes interest, rent, and REIT and unit-trust distributions.
| Calculation | Amount |
|---|---|
| RM49,000 × RM115,000 ÷ (4 × RM258,000) | Approximately RM5,460 |
| 5% × RM115,000 | RM5,750 |
| Permitted-expense deduction allowed | RM5,460 |
The company deducts RM5,460 of the RM49,000 in permitted expenses. The remaining RM43,540 is not deductible under this calculation and cannot be carried forward.
The income mix affects how much of the running costs the company can deduct. A company receiving mostly exempt dividends may have limited deductions for maintaining the holding company.
Can an IHC carry forward expenses or losses?
An unlisted IHC cannot carry forward unused permitted expenses. Any amount that cannot be absorbed under the relevant rules is lost.
For a listed IHC, excess deductions and capital allowances relating to its investment-income sources are also restricted. They cannot be transferred to another investment source or carried forward.
A listed IHC may also conduct an ancillary business activity. Losses from that separate business can receive ordinary business-loss treatment, including carry-forward for up to ten consecutive years where the statutory conditions are met.
Dividends received by an investment holding company
The treatment depends on whether the dividend comes from Malaysia or overseas. The company’s tax residence also determines its eligibility for foreign-income exemptions.
Dividends from Malaysian companies
Malaysian single-tier dividends are exempt in the hands of a corporate shareholder. An IHC receiving those dividends excludes them from its taxable income.
Expenses connected with earning exempt dividends are not deductible against taxable income. Keep the related financing and administrative costs identifiable in the accounts.
Foreign dividends received in Malaysia
Foreign dividends received in Malaysia by a resident company fall within the foreign-income tax rules. Qualifying dividends benefit from an exemption through 31 December 2030.
The existing exemption covers receipts through 2026. The Income Tax (Dividend Income Received in Malaysia from Outside Malaysia) (Exemption) Order 2026, P.U. (A) 367/2026, continues the relief from 1 January 2027 to 31 December 2030.
The exemption has alternative qualifying routes:
- The dividend satisfies the foreign-tax condition, and the source country’s top corporate tax rate is at least 15%; or
- The recipient meets the Malaysian employment and operating-expenditure conditions.
The 15% refers to the country’s top corporate tax rate, not the tax actually paid on the dividend. The foreign-tax condition is a separate requirement under the first route.
The exemption excludes persons conducting banking, insurance, and sea or air transport businesses. Supporting documents and reporting obligations remain necessary even when the dividend is exempt.
Malaysian incorporation and tax residence
Incorporating in Malaysia does not by itself make a company tax resident. Residence depends on where management and control are exercised.
For a foreign-owned holding company, review where investment decisions are made and how the board conducts its affairs. Appointing a resident director satisfies a company-law requirement, while the tax-residence assessment considers the actual management arrangements.
Dividends paid to shareholders
Malaysia does not impose withholding tax on dividends. A holding company can distribute dividends to a foreign corporate shareholder without Malaysian dividend withholding.
Individual shareholders have a separate obligation. From year of assessment 2025, the 2% dividend tax applies to relevant taxable dividend income where the individual’s dividend income exceeds the RM100,000 annual threshold, following the prescribed computation and exemptions.
The rules cover resident and nonresident individuals. They do not impose this individual dividend tax on dividends received by a corporate shareholder.
Capital gains tax on share disposals
A holding company must review the tax consequences when it sells an investment. Malaysian unlisted shares, listed shares and foreign assets follow different rules.
Shares in unlisted Malaysian companies
Capital gains tax applies to covered company disposals of unlisted Malaysian shares from 1 March 2024, following the exemption for January and February 2024.
| Acquisition date | Tax treatment |
|---|---|
| On or after 1 January 2024 | 10% of the chargeable gain |
| Before 1 January 2024 | Election between 10% of the chargeable gain and 2% of the gross disposal price |
The return and tax payment are due within 60 days of the disposal date. The tax definition of disposal includes more than an outright sale, covering transactions such as share redemptions, conversions and company buybacks.
Section 15C also brings certain shares in foreign-incorporated controlled companies within the Malaysian-property-related rules. Its 75% test can include qualifying property interests held through other controlled companies, making indirect ownership part of the calculation.
Shares listed on Bursa Malaysia
Disposals of Bursa-listed shares fall outside this specific unlisted-share CGT charge. Profits from a share-trading business follow ordinary income-tax rules.
Establish whether the company holds shares as investments or trades them as a business. Keep records of the investment purpose, transactions and related activities to support that position.
Foreign shares and other foreign capital assets
Gains from foreign capital assets received in Malaysia fall within the foreign-capital-gains rules. Qualifying resident companies meeting the economic-substance conditions benefit from an exemption through 31 December 2030.
P.U. (A) 275/2026 extends the exemption beyond 2026, and LHDN’s amended guidance dated 29 September 2026 explains the treatment. Keep evidence of the disposal, receipt of funds and activities supporting the exemption.
Selling property directly
Selling a property is a different transaction from selling shares in a property-owning company. For a direct sale of Malaysian real property, review the real property gains tax rules separately.
Consider the intended exit before deciding how to hold the asset. The ownership structure affects which disposal rules and filing obligations apply.
How to register an investment holding company in Malaysia
An IHC is incorporated under the Companies Act 2016, usually as a Sdn Bhd. There is no separate SSM incorporation category or license that automatically establishes its IHC tax status.
A private company needs at least one director whose principal residence is in Malaysia, a shareholder and a Malaysian registered office. Foreign individuals or companies can own the shares, with restrictions depending on the proposed assets and activities.
There is no general IHC-specific minimum paid-up capital. The company still needs issued share capital and funding for its investments, while licensing or immigration arrangements may impose additional requirements.
1. Confirm the structure and intended investments
Identify the assets the company will hold, the expected income and the location of its subsidiaries. Consider tax residence and future disposals alongside incorporation.
The company registration process in Malaysia establishes the legal entity. Its investment activities and income then determine the IHC tax treatment.
2. Choose the company name and prepare the details
SSM permits direct incorporation or a separate name-reservation application. Name reservation costs RM50 and normally gives you 30 days to proceed with incorporation.
Prepare the directors’ and shareholders’ particulars, share capital, registered address and proposed activities. A constitution is optional for a company limited by shares, although it may help document particular shareholder arrangements.
3. Submit the incorporation application
The statutory incorporation fee is RM1,000. SSM’s current guide also lists RM10 for sharing company data with relevant agencies.
SSM’s client charter provides for processing within one working day after receipt of a complete submission and payment. Document preparation, queries and bank account opening take additional time.
4. Appoint the company secretary and record beneficial ownership
The company must appoint its first secretary within 30 days of incorporation. The secretary must meet the statutory qualification and practicing requirements.
Malaysia’s company secretary requirements cover the appointment and continuing corporate responsibilities. The company must also identify its beneficial owners, maintain the register and lodge the required information with SSM.
5. Confirm tax registration and open the bank account
LHDN provides automatic company TIN registration for newly incorporated companies registered through SSM’s MyCoID system. Confirm that the tax number has been created and arrange access to the required tax services.
For banking, prepare the incorporation records, board authorization, ownership information and evidence of the planned investments. Banks conduct their own checks and may request additional information about funding and counterparties.
Annual compliance for an investment holding company
An IHC remains subject to the company-law obligations of its corporate structure. For a private company, the main requirements include:
| Obligation | Standard requirement |
|---|---|
| Annual return | Lodge within 30 days of the incorporation anniversary |
| Financial statements | Circulate within six months after financial year-end and lodge within 30 days after circulation |
| Beneficial ownership | Maintain current records and lodge information within 14 days after it is recorded in the beneficial ownership register |
| Corporate tax return | File Form C within seven months after financial year-end |
| Tax estimates and installments | Submit the required estimate and pay installments under the company tax-payment rules |
| Covered share disposals | File the relevant CGT return and pay within 60 days of disposal |
Keep dividend vouchers, financing documents, investment records and expense allocations alongside the accounts. These support the IHC classification, deductions and exemption claims.
Emerhub’s accounting services in Malaysia cover bookkeeping, financial statement preparation and tax filings. The work can be coordinated with the company secretary’s annual lodgements.
Audit exemption
Some private companies qualify for audit exemption under SSM Practice Directive 10/2024. For financial periods commencing in 2026, the phased thresholds are RM2 million in turnover, RM2 million in total assets and 20 employees.
Eligibility requires meeting at least two criteria, together with the historical-period tests and other conditions. An audit exemption does not remove the obligation to prepare and lodge the required financial statements.
Malaysian holding company or Labuan holding company?
A Malaysian Sdn Bhd and a Labuan company operate under different corporate and tax frameworks. Compare the tax treatment of the planned income, substance requirements, treaty access and annual running costs before choosing between them.
The distinction between pure equity holding and other investment-holding activities is particularly important for Labuan. The guide to Labuan investment holding companies introduces that structure and its setup requirements.
Set up your investment holding company with Emerhub
Emerhub’s Malaysia team helps foreign investors establish and maintain holding companies. We coordinate incorporation and ongoing administration around the company’s ownership, investments and reporting requirements.
Our team can support you with:
- Incorporating the company and preparing shareholder documentation.
- Providing company secretarial and registered-office services.
- Maintaining beneficial ownership records.
- Confirming tax registration and preparing corporate tax filings.
- Preparing accounts and coordinating financial-statement lodgements.
- Supporting the records needed for investment income and disposals.
Contact our Malaysia team to discuss your planned investments and holding structure.
Frequently asked questions
What is an investment holding company?
An investment holding company mainly holds investments such as shares, deposits or property. Malaysian tax classification also requires it to satisfy the prescribed 80% investment-income test.
The calculation distinguishes passive investment income from income arising from a business of holding investments. The company’s actual activities must also support the classification.
What is the tax rate for an investment holding company in Malaysia?
An unlisted IHC assessed under section 60F pays the standard 24% corporate tax rate on chargeable income. Exempt income, including Malaysian single-tier dividends received by the company, is excluded from the taxable amount.
The deduction rules also affect the result. General permitted expenses are restricted, while qualifying source-specific expenses are assessed separately.
What are permitted expenses under section 60F?
They include specified general costs such as directors’ fees, salaries, management fees, secretarial and audit fees, and office expenses. The deduction is calculated using the statutory formula and restriction.
These expenses are separate from qualifying costs directly attributable to producing taxable income. The company must classify expenses before calculating the deduction.
Can an IHC carry forward losses?
Unused permitted expenses of an unlisted IHC cannot be carried forward. Listed IHCs also face restrictions on excess deductions relating to their investment sources.
A listed IHC’s separate ancillary business can generate losses eligible for ordinary business-loss treatment. The answer depends on the source and type of loss.
Are foreign dividends tax-exempt until 2030?
Qualifying foreign dividends received in Malaysia by a resident company benefit from an exemption through 31 December 2030. The extension from 2027 is provided by P.U. (A) 367/2026.
The company must meet the foreign-tax and top corporate tax rate conditions or the alternative Malaysian substance conditions. Residence, documentation and reporting requirements still apply.
Can a foreigner own 100% of a Malaysian holding company?
Yes, a Malaysian holding company can be fully foreign-owned, with restrictions depending on its assets and activities. It must still meet the resident-director and other company-law requirements.
Tax residence is a separate assessment based on management and control. Plan it alongside the company’s governance arrangements.