A Representative Office (RO) or Regional Office (ReO) is a useful option for foreign companies exploring the Malaysian market or coordinating regional activities without immediately committing to a full subsidiary. These offices are non-commercial in nature – they cannot generate income or sign contracts – but they provide a legal, recognised base for early-stage market research, feasibility studies, and management coordination.
When considering entry into Malaysia, foreign companies often hesitate to establish a subsidiary before fully testing the waters. For these companies, a Representative or Regional Office may be the ideal structure. Approved by the Malaysian Investment Development Authority (MIDA), these offices allow foreign investors to position staff in Malaysia legally and engage in preparatory or coordination activities – while avoiding the full compliance burden of a company.
This article explains what Representative and Regional Offices can (and cannot) do, the approval process, compliance requirements, and when this structure makes sense. Case studies highlight how international groups have used these offices to enter the Malaysian market strategically.
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Legal Foundation of Representative and Regional Offices
Unlike subsidiaries and branches, Representative and Regional Offices are not incorporated under the Companies Act 2016. Instead, they are administrative structures authorised by MIDA, the Malaysian Investment Development Authority.
Key features include:
- No separate legal entity: the office is entirely dependent on the foreign parent.
- Non-commercial scope: not allowed to generate revenue or sign contracts.
- Approval by MIDA:granted for up to 2 years at a time, renewable to a maximum of 5 years.
- Funding requirement: all expenses must be covered by the foreign parent company.
Case Study: European Consumer Goods
Company
A European FMCG group was exploring Malaysia as a new retail
market. Instead of rushing into a subsidiary, it established a
Representative Office. The RO coordinated market surveys, supplier
meetings, and regulatory due diligence. After three years, the
company had sufficient data to launch a full Malaysian subsidiary,
avoiding costly mistakes and misallocated investment.
Functions Permitted for Representative and Regional Offices
Representative and Regional Offices have narrowly defined scopes of activity.
Permitted activities:
- Market research and feasibility studies.
- Coordination of sourcing, marketing, and promotional activities.
- Regional management or liaison functions.
- Reporting to the foreign parent on market conditions and opportunities.
Prohibited activities:
- Engaging in trade or business.
- Signing contracts on behalf of the parent.
- Generating revenue in Malaysia.
- Invoicing or collecting payments locally.
These restrictions make ROs and ReOs unsuitable for companies ready to engage in commercial operations – but invaluable for early-stage exploration.
Case Study: US Tech Start-Up
A Silicon Valley start-up wanted to expand into ASEAN but was
unsure whether Malaysia or Singapore would provide the best
launchpad. It established a Regional Office in Kuala Lumpur to
coordinate regional research, attend industry events, and liaise
with potential partners. This provided local visibility without
triggering tax liabilities or the cost of incorporating a company
before its strategy was finalised.
Approval Process and Requirements
The approval process is handled by MIDA, with strict eligibility criteria.
Eligibility:
- The applicant must be a foreign company incorporated outside of Malaysia.
- The foreign parent must have at least USD 250,000 in shareholder funds.
- Activities must fall within the permitted scope.
Documentation:
- Application form submitted to MIDA.
- Certified copies of the parent's certificate of incorporation and latest audited financial statements.
- Business plan outlining intended activities of the RO/ReO.
- Commitment letter confirming funding by the parent company.
Timeline:
- Approval is typically granted within 6-8 weeks, depending on completeness of documents.
- Initial approval: up to 2 years.
- Renewal possible, but maximum duration is 5 years.
Case Study: Japanese Manufacturing Group
A Japanese electronics manufacturer set up a Regional Office in
Malaysia to coordinate procurement for its ASEAN factories. MIDA
approved the application, and the ReO operated for five years as a
non-commercial hub. Once sufficient procurement channels were
secured, the group transitioned to a full subsidiary to enable
direct sales and invoicing.
Staffing and Immigration for Representative and Regional Offices
An RO or ReO may employ expatriates, but approvals are tightly controlled.
- Expatriate positions are assessed by MIDA based on necessity and qualifications.
- A typical office may employ 1–3 expatriates.
- Expatriates must be engaged in management, technical, or specialist roles.
- Local staff may be employed for support roles.
Work permits for expatriates are tied to the duration of the RO/ReO approval and renewable only within the maximum five-year limit.
Compliance Obligations
Although they are not incorporated entities, ROs and ReOs must comply with certain ongoing obligations:
- Annual reporting to MIDA on activities and staffing.
- Maintenance of proper office premises in Malaysia.
- Ensuring all operating costs are funded from abroad – local revenue is strictly prohibited.
Failure to comply can lead to non-renewal or revocation of approval.
Advantages and Limitations of Representative and Regional Offices
Advantages:
- Low-cost entry point for market testing.
- Legal framework for housing expatriate staff.
- No corporate tax liability, since there is no income.
- Useful as a transitional vehicle before setting up a subsidiary.
Limitations:
- Strict prohibition on revenue-generating activities.
- Maximum approval duration of 5 years.
- Limited number of expatriate positions.
- Dependency on parent funding.
Case Study: German Industrial Supplier
A German supplier of industrial components used a
Representative Office in Kuala Lumpur to monitor tenders and engage
with local contractors. However, when opportunities arose that
required bidding for contracts, the RO's limitations became
clear. The group quickly moved to incorporate a Sdn. Bhd., using
the knowledge gained through the RO to set up a compliant and
well-prepared subsidiary.
Practical Use Cases
Representative and Regional Offices are most useful for:
- Market-entry studies – testing demand before committing capital.
- Regional coordination hubs – managing ASEAN operations.
- Industry engagement – building networks without commercial risk.
- Transitional presence – maintaining a footprint during restructuring or before full incorporation.
Conclusion
For foreign investors, Representative and Regional Offices provide a low-risk and cost-effective way to enter Malaysia. They allow companies to conduct research, coordinate regional activities, and place staff on the ground without the full commitment of a subsidiary.
But investors must understand the limits: no revenue, no contracts, and a maximum five-year lifespan. For companies ready to trade, sell, or contract in Malaysia, a Sdn. Bhd. subsidiary or Branch Office will be required.
Case Study Recap:
- European FMCG group – RO used to test market before launching subsidiary.
- US tech start-up – ReO for ASEAN strategy evaluation.
- Japanese manufacturer – ReO as procurement hub before expansion.
- German industrial supplier – RO transitioned to Sdn. Bhd. after tender opportunities.
The original article was published on Aqran Vijandran's website at [ Setting Up A Representative Or Regional Office In Malaysia: Rules, Process, And Restrictions (2025)].
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
