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The consumer

Consumer Profile

Malaysia has a population of 32.6 million people (2020 est.) growing at a 1.29% rate. The median age in Malaysia is 29.2 years; 26.8% of the population is 14 years old or younger, 16.6% is between 15 and 24 years old, 40.8% is between 25 and 54 years old, 8.8% is between 55 and 64 years while 6.9% of the population is 65 or older. The official religion of the state is Islam: while 61.3% of the population is Muslim, 19.8% of the population is Buddhist, 9.2% is Christian, 6.3% is Hindu and the 1.3% of the population practises traditional Chinese religions. In terms of gender, the male population stands at 16.7 million, while the female population is at 15.7 million in Malaysia. The sex ratio remains at 107 males per 100 females in the country.

10% of the labour force works in agriculture, 27% in industry and 63% in services (World Bank, 2020). The average household size is 4.6 people; 7% of the household count 1 person, 26% of the household count 2 or 3 people, 38% of the household count 4 or 5 people, and 29% of the household count 6 people or more.
77.2% of the population live in urban areas, with an urbanisation rate of 2.13% annually. There is a highly uneven distribution of population in Malaysia, with over 80% of the population residing on the Malay Peninsula. The capital city, Kuala Lumpur counts 7.997 million people, Johor Bahru has 1 million inhabitants and Ipoh has around 814,000 inhabitants.

People over 15 who can read and write represent 93.7% of the overall population. Education may be obtained from the multilingual public school system, which provides free education for all Malaysians, or private schools, or through homeschooling. International and private institutions charge school fees. By law, primary education is compulsory.

Purchasing Power

The Malaysian GDP per capita (purchasing power parity) is USD 29,525 (World Bank, 2019 est.), up from USD 24,801 in 2015. The Gini coefficient stood at 0.407 in 2019, up from 0.399 in 2016 (Household Income & Basic Amenities Survey Report 2019). According to figures from the national Department of Statistics, median household income in urban areas recorded an increase from MYR 5,860 in 2016 to MYR 6,561 in 2019. Similarly, median household income in rural areas increased from MYR 3,471 to MYR 3,828 over the same period. At state level, W.P. Kuala Lumpur recorded the highest median income with MYR 10,549 followed by W.P. Putrajaya (MYR 9,983), Selangor (MYR 8,210), W.P. Labuan (MYR 6,726), Johor (MYR 6,427), Pulau Pinang (MYR 6,169) and Melaka (MYR 6,054).

Based on the 2020 Global Gender Gap Report published by World Economic Forum (WEF), Malaysia stands at 104th place out of 153 countries. Malaysia gender gap index is estimated at 0.677. This portrays the existence of gender inequality, although the gap reduced in recent years. Equality has been achieved for the sub-index educational attainment, with a score of 0.989. Health & Survival sub-index recorded a score of 0.970, followed by Economic Participation & Opportunity (0.639) and Political Empowerment (0.108).

Consumer Behaviour

Malaysia's consumer lifestyle has been evolving due to rising affluence and education levels. Malaysians are becoming more westernised, sophisticated and cosmopolitan. Consumers, though highly price sensitive, are also brand-conscious and increasingly concerned about quality. Compared to promotional campaigns and goods variety, the influence of prices on consumer purchasing behaviour have less importance.

Malaysian consumers are increasingly going online to shop. Although some are worried about providing financial details, most of them are attracted to online shopping due to transparency in deciding prices, values and availability of products. The popularity of online shopping has grown in line with greater internet access, particularly via mobile devices. Most Malaysians choose to travel during their holidays, but most of them are intent on finding a bargain. Households in Malaysia have been on a borrowing spree over the last years, and debt levels have increased considerably, threatening to disrupt consumer spending in uncertain economic times. Most of the debts occurred due to Malaysians treating the property market as new deposit boxes. Most consumers borrowed money from banks to purchase new automobiles. Modern Malaysian consumers are choosing to dine out more often. Ever growing traffic jams and parking scarcity contribute to the rise in drive-through or home delivery. Middle-class consumers spend the most, but are starting to control their expenses as a result of the government's decision to relax subsidies, but also due to inflation rates, high property prices and slow wage growth. Malaysians are displaying a growing preference for global brands rather than locally manufactured products. As numbers increase, single, urban working women are expected to become a more influential consumer segment.

Use of collaborative platforms such as Grab, Uber and Airbnb are trending in Malaysia. Nevertheless, the government is searching new ways to regulate these emerging collaborative systems.

Consumer Recourse to Credit

Households use consumer credit to a large extent; use of credit in the country can be compared to Korea, Hong Kong and Singapore. There are about 9.1 million credit cards in circulation as of 2020 (up from 7.2 million in 2015), with the volume of credit line increasing to RM151.8 million (Bank Negara Malaysia). Malaysians under the age of 30 are the main movers pushing online shopping. They use credit cards to purchase airline tickets and book accommodations while travelling. Luxuries such as fashion items and smart devices are also on the list. Three out of five people still prefer to use their credit card, despite uncertainties of a higher salary.
Mortgage loans accounted for 60% of consumer loans in Malaysia in 2019; however, the number of new loans is estimated to have decreased in 2020, mostly due to the COVID-19 pandemic (although the Malaysian central bank announced an automatic six-month loan payment deferral for existing loans).

Growing Sectors

Traditionally, incomes were spent with a primary focus on food. However, with a large portion of the population now living an urban, single and independent life, younger Malaysians are able to spend their salaries on cars, cell phones, satellite televisions, leisure activities and proactive health care. The major sectors that perform well with internet retailing are electronics, clothing, footwear, beauty and personal care.

Consumers Associations
Federation of Malaysian Consumers Associations
Education and Research Association for Consumers
 

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Importing & Distributing

Import Procedures
All goods to be imported whether or not subject to import duties must be declared in writing on Customs Form No. 1. All declarations should indicate a full and true account of the number and description of goods and packages, value, weight, measurement or quantity, and the country of origin or the final destination. Declarations must be submitted to the Customs station at the place where the goods are to be imported. All duties/custom taxes imposed on imported goods will need to be paid in advance before the goods can be released (import tax and goods and services tax). Documents required by Malaysian Customs include: Custom Form No.1, bill of lading/airway bill; commercial invoice or Pro-forma invoice; packing list; any relevant permits, licenses or certificates.

For more information, please visit the website of the Malaysian Customs.
Specific Import Procedures
The following products require specific authorisations: meat, eggs, milk, wine, plants, cosmetics, pharmaceuticals, firearms, explosives, medicines and dangerous products. Meat, processed meat products, poultry, eggs and egg products must have a Halal certificate issued by the Department of Islamic Development of Malaysia (JAKIM).
For a full list of restricted/prohibited items, refer to the dedicated page on the website of the Malaysian Customs.
Distribution channels
Malaysia has a large and growing food retail market supplied by local and imported products. Total retail sales of food and beverages totalled USD 26 billion in 2019 according to Retail Group Malaysia.

The Malaysia food retail industry is comprised of a range of large supermarkets/hypermarkets, convenience stores, “mom and pop” traditional stores, and specialty retailers. Large food retail stores such as supermarkets, hypermarkets and department stores that also operate supermarkets within the premises are generally located in the major cities, urban centres and larger towns in Malaysia, where most middle to high income consumers reside. Major food retailers usually operate chain stores strategically located to capture target consumers. Convenience stores and petrol station stores are mainly found in the cities, larger towns and along the North-South highway. The majority of these stores are franchise operations with support from their franchisers in the form of advertising support, staff training, financing, bulk purchasing and distribution facilities.

Traditional stores continue to make up the largest number of food retailers in Malaysia today. They are commonly found in all the cities, towns and villages in Malaysia. They are made up of open-fronted grocery stores in shop houses or in the dry markets. This sub-sector is dominated by small family-run businesses and target the price sensitive consumers as well as those who seek convenience for a small number of grocery items and other daily essentials. These retail stores generally carry local traditional and Asian products and some branded products with a small number of the more popular imported ones. In 2019, the Consumer Economic Shop Initiative (i-KeeP) was launched by the government in order to sell essential items at a reasonable price, in cooperation with large retail players such as Tunas Manja Group (TMG), KK Supermart & Superstore Sdn Bhd (KK Super Mart) and Big Supermart Sdn Bhd (BIG Supermart).

With a Muslim population of more than 60%, the demand for halal foods by Malaysian consumers has increased over the years. Foreign meat (except pork) and poultry plants intending to export to Malaysia must be accredited by the Malaysian Department of Veterinary Services (DVS) and the Department of Islamic Development for halal purposes. In addition to poultry and meat products, eggs and dairy products are now required to be halal certified, as well as all food products and ingredients. Malaysian halal standards are perceived as stricter than those of other Islamic countries, and products with halal certificates are perceived to have added marketing value in Malaysia.
A growing e-commerce marketplace has resulted in major supermarkets offering online services as a convenience to their customers. Moreover, many Malaysian supermarkets are now offering in-store dining facilities.

Distribution market players
In urban and suburban areas of Malaysia, consumers do most of their food and drink shopping in traditional grocery retailers outlets located within their immediate neighbourhood. The supermarket retail sector in Malaysia is dominated by five key players:

  • Dairy Farm Group, the largest food retailer in Malaysia in terms of sales as well as number of retail outlets. It operates hypermarkets and supermarkets nationwide under the Giant, Cold Storage and Jason's brands. The Giant supermarkets and hypermarkets are known as a home-grown trusted brand. Giant is well-known to local shoppers as the store that offers the best value-for-money products. Giant targets the mass market and is the largest supermarket chain in Malaysia. Cold Storage and Jason's target the upper middle to high income shoppers as well as high income expatriates residing in Malaysia. It carries a wide variety of local products as well as imported products;
  • Mydin Mohamed Holdings, which operates Mydin supermarkets;
  • Trendcell Sdn Bhd, the fastest growing premium food retailer in Malaysia. It operates under the brand Jaya Grocer supermarkets;
  • Village Grocer Holdings, which operates under the brands Village Grocer and Ben's Independent Grocer supermarkets;
  • AEON Malaysia, which operates under several formats: AEON, AEON Big, and AEON MaxValu supermarkets/hypermarkets. AEON bought Carrefour Malaysia in 2012 and renamed it to AEON Big;

7-Eleven is the largest convenience store chain operating 24-hour stores. 7-Eleven stores are treated like car race pit stops by children, teenagers and young adults who usually shop for magazines, newspapers, candies, crisps and other snacks, ice cream or other single-serve food and beverages consumed "on-the-go".

Retail Sector Organisations
Malaysia Retailers Association
Ministry of International Trade and Industry

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Operating a Business

Type of companies

Sendiran Berhador SDN BHD is a Private Limited Company.
Number of partners: Minimum: 2
Maximum: 50
Capital (max/min): Minimum two ordinary shares of MYR 1 each
Shareholders and liability: Liability is limited to the nominal value of the subscribed shares.
Berhad is a Public Limited Company.
Number of partners: Minimum: 2
Maximum: No limit
Capital (max/min): Minimum two ordinary shares of MYR 1 each
Shareholders and liability: Liability is limited to the nominal value of subscribed shares.
Perkongsion Liabiliti Terhad or PLT is a General Partnership
Number of partners: Minimum 2 and maximum 20.
Capital (max/min): No minimum
Shareholders and liability: Liability is limited to the nominal value of subscribed shares.
 
Setting Up a Company Malaysia East Asia & Pacific
Procedures (number) 8.0 7.3
Time (days) 17.5 29.7

Source: Doing Business - Latest available data.

 

Cost of Labour

Minimum Wage
According to the government data, the minimum wage was MYR 1,2000 per month in 2020.
Average Wage
Average montly salary for employees: MYR 3,224; median montly salary: MYR 2,441(source: Department of Statistics Malaysia, 2019).
Social Contributions
Social Security Contributions Paid By Employers: Employees’ Provident Fund (EPF)

  • below 60 years of age: 12% for income up to MYR 5,000, 13% for income equal or above MYR 5,000
  • age 60 and above: 4%

Employment Injury Insurance Scheme (EIIS) and Invalidity Pension Scheme (IPS): based on the employee’s monthly wages, up to a maximum of MYR 69.05 for the employer.
Social Security Contributions Paid By Employees: 11% or 5.5% (depending on the age) for retirement pension and 0.50% for insurance and workplace accident (capped at MYR 4 000 per month).

 

Intellectual Property

National Organisations
Inside the Ministry of Trade and Consumption (Ministry of Domestic Trade, Cooperatives and Consumerism) the Enforcement Division deals with problems of counterfeiting and pirating.

The central organisation in charge of the protection and promotion of intellectual property rights is the Intellectual Property Corporation of Malaysia (MyIPO).

In order to register a trademark, it is necessary to seek its registration from the Registrar of Trade Marks and to indicate a user of the brand in the country. As soon as the trademark is registered, it becomes protected and its use is continuous.

Regional Organisations
Malaysia is a signatory to the ASEAN framework agreement on cooperation regarding intellectual property.
International Membership
Member of the WIPO (World Intellectual Property Organization)
Signatory to the Paris Convention For the Protection of Intellectual Property
Membership to the TRIPS agreement - Trade-Related Aspects of Intellectual Property Rights (TRIPS)
 

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Tax Rates

Consumption Taxes

Nature of the Tax
  • Sales Tax
  • Services Tax
Tax Rate
Sales Tax: 10% or 5%
Services Tax: 6%
Reduced Tax Rate
A reduced rate of 5% applies to basic foodstuffs; petroleum oils; construction materials; IT, telecommunications and printing hardware and materials; and timepieces.
Oil and petroleum are subject to quantity-based rates.
Other Consumption Taxes
Excise duties are levied on tobacco, beer and liquor, playing cards and mahjong tiles.
Taxes on motor vehicles can go up to 105% of the value of motorcars, depending on engine capacity.
 

Corporate Taxes

Company Tax
24%
Tax Rate For Foreign Companies
A company is deemed to be tax resident in Malaysia in a financial year if, at any time during the basis year, the management and control of its affairs are exercised in Malaysia (may be in the case that one meeting of the Board of Directors is held in Malaysia).
Capital Gains Taxation
Malaysia does not tax capital gains from the sale of investments or capital assets other than those related to land and buildings.
A real property gains tax (RPGT) applies to the sale of land in Malaysia and any interest, option or another right in or over such land. The rate is 30% for disposals of real property made within three years of the date of acquisition. The rates are 20% and 15% for disposals in the fourth and fifth years after the acquisition, respectively, and 10% for disposals in the sixth year after acquisition and thereafter. For companies incorporated outside Malaysia, the rate is 30% for disposals made within five years and 10% thereafter.
Main Allowable Deductions and Tax Credits
Deductions are allowed for any revenue expenditure incurred wholly and exclusively in the production of income, including interest, royalty payments and certain taxes.
Interest expense is allowed as a deduction if the expense was incurred on any money borrowed and employed in the production of gross income or laid out on assets used or held for the production of gross income. Where a borrowing is partly used to finance non-business operations, the proportion of interest expense will be allowed against the non-business income.
A deduction is allowed for cash donations to approved institutions, capped at 10% of the aggregate income of the company for a year of assessment. Contributions and donations in cash and in kind by individuals and corporates to the COVID-19 Fund and the Ministry of Health are officially tax-deductible.
Incorporation and recruitment expenses are deductible, same as bad debts (which however need to be identified and reasonably estimated to be irrecoverable).
Net operating losses can be carried forward indefinitely (except in the case of a significant change in the ownership structure of a dormant company). The carryback of losses is not permitted.

Tax incentives are granted in exchange of investments in certain sectors (including manufacturing, hotels, tourism, energy conservation and environment protection) in the form of tax exemption (up to 10 years) or a tax credit (varying between 60% and 100% of the capital investment up to 10 years).
Other Corporate Taxes
Employers and employees alike must contribute to the Malaysian Social Security Organisation (SOCSO), with the employer's contributions generally at 1.75% of salaries. Employer contributions to Employees' Provident Fund (EPF) range from 12% to 13% of the salary. Employers and employees contribute 0.2% of the employee's salary (capped at MYR 4,000 per month) to Employment Insurance Scheme (EIS).

Employers engaged in the manufacturing and services sectors that employ more than a specified number of employees must contribute to the Human Resource Development Fund (HRDF), at the rate of 0.5% (5 to 9 employees) or 1% (10 employees or more) of the monthly wage.

Gains from disposals of real property are subject to a real property gains tax (RPGT). The rate is 30% for disposals of real property made within three years of the date of acquisition. The rates are 20% and 15% for disposals in the fourth and fifth years after the acquisition, respectively, and 10% for disposals in the sixth year after acquisition and thereafter. For companies incorporated outside Malaysia, the rate is 30% for disposals made within five years and 10% thereafter.

Petroleum income tax is imposed at the rate of 38% on income from petroleum operations in Malaysia. An effective petroleum income tax rate of 25% applies on income from petroleum operations in marginal fields.
A levy is imposed on crude palm oil and crude palm kernel oil where the price exceeds MYR 2,500 per ton in Peninsula Malaysia, and MYR 3,000 per ton in the states of Sabah and Sarawak.

A levy of 0.125% on contract works having a contract sum above MYR 500,000 is imposed on every registered contractor by the Construction Industry Development Board.
Local companies are subject to an incorporation fee of MYR 1,000, while foreign companies pay a higher fee (from MYR 5,000 to MYR 70,000).

Stamp duty is levied at rates ranging from 1% to 4% of the value of property transfers, and at 0.3% on share transaction documents.

Other Domestic Resources
Inland Revenue Board
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
See the list of the double taxation avoidance agreements on the website of the Inland Revenue Board of Malaysia.
Withholding Taxes
Dividends: 0%; Interest: 0% (paid to a non-resident by a bank operating in Malaysia) /15%; Royalties: 10%

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