Legal requirements for foreigners
Foreigners who want to open a hotel company in Malaysia can start by buying a property. Foreigners are allowed to own property in Malaysia, making it feasible to start a hotel business. However, some restrictions should be kept in mind when buying property as a foreigner, such as:
- Foreign property ownership: In Malaysia, a minimum property price threshold applies depending on the state, meaning foreigners cannot purchase properties valued below RM 1 million ($210,000).
- Malay Reserved Lands: Properties on Malay Reserved Lands are exclusively for Malays and cannot be sold or rented to foreign buyers.
- Low—and medium-cost housing: These types of housing are designated for local citizens and are unavailable for foreign ownership.
- State-specific regulations: Each state and federal territory in Malaysia has separate land laws and regulations, so property prices and restrictions can vary. Foreigners must research the relevant state laws before purchasing a property.
Furthermore, necessary licenses must be obtained when you open a hotel in Malaysia. Your hotel business must adhere to legal formalities required by the Malaysian government. Below are some of the permits and registrations you need to follow.
1. Company registration
Company registration is mandatory when starting a hotel and tourism company in Malaysia. Hotel registration in Malaysia is done at the Companies Commission of Malaysia (SSM), just like other business entities. It is the main regulatory body for businesses and companies in Malaysia. SSM registration is mandatory for any business, ensuring legal compliance and recognition. You can open a hotel in Malaysia with different business structures, including sole proprietorships, partnerships, Private Limited Companies (Sdn. Bhd.), Public Limited Companies (Bhd.), and foreign companies. Applicants who want to register a sole proprietorship or partnership must be Malaysian citizens or permanent residents. At the same time, foreigners can fully own a company in Malaysia, with specific industries requiring 50% Malaysian ownership.
2. Business Premises License
This is a general license required for any business operation in Malaysia, regardless of the specific type of business. It ensures that the business complies with local regulations and zoning requirements. When you open a hotel in Malaysia, obtain the Business Premises License from the local council in the district where the hotel operates. Generally, the application requires a completed Business Premises License form, a copy of the business registration from SSM, an identity document (identity card or passport), and four photographs (two of the exterior and two of the interior of the business premises).
3. Tourist Accommodation Premises License
Accommodation premises licensed under local authorities (PBT) must be registered as Tourist Accommodation Premises (PPP) with the Ministry of Tourism, Arts and Culture (MOTAC). This regulation aims to manage the growing number of residential homes converted into homestays, ensure operators meet necessary conditions, and prevent consumer complaints. When opening a hotel and tourism company in Malaysia, a Tourist Accommodation Premises License can be obtained online through the tourism licensing and enforcement system (TOURIST).
Taxation and financial obligations
As a business entity, your company will most likely have obligations to the government through tax payments when you open a hotel in Malaysia. Taxes are essential in generating funds to support public services and infrastructures. Here are the taxes for the hotel industry in Malaysia:
- Corporate Income Tax: Corporate income tax is one of the taxes imposed when you open a hotel in Malaysia. Malaysia operates a territorial tax system, meaning that companies are taxed on income generated within the country. The Inland Revenue Board of Malaysia (IRBM) considers a company a resident if managed and controlled from within Malaysia. The Corporate Income Tax rate in Malaysia is 24% for resident companies.
- Tourism Tax (TTx): The Malaysian Tourism Tax (TTx) requires all accommodation providers, specifically the hotel industry in Malaysia, to collect a tax of RM 10 ($2.10) per room per night from foreign tourists. The tax is then remitted to the Royal Malaysian Customs Department (RMCD). Malaysian citizens and permanent residents are exempt from this tax. Moreover, recent amendments have expanded the scope of TTx to include any digital platform that opens a hotel in Malaysia or abroad and provides online accommodation booking services in the country.
- Property taxes: Property taxes are required when you open a hotel in Malaysia due to ownership of land and buildings used in a rental business. In Malaysia, Cukai Taksiran (also called Cukai Pintu) is a local property tax paid by property owners based on the estimated annual rental value of the property, with rates varying by location, typically between 2-7%. Furthermore, a hotel company in Malaysia is often a stratified building like an apartment or condominium, and companies must also pay Cukai Petak (Parcel Rent), a specific tax levied on rented stratified properties.
- Sales and Services Tax (SST): The SST is a consumption tax on the sale of goods and specific services in Malaysia. In March 2024, SST increased from 6% to 8%. However, a sales tax exemption allows certain goods or services to be sold without sales tax, benefiting eligible Malaysian hotels by relieving them from charging this tax on their services. This initiative aims to promote tourism and support the hotel industry in Malaysia.
Steps to open a hotel in Malaysia as a foreigner
Foreigners who want to open a hotel in Malaysia must understand the necessary steps to establish an accommodation business. Below is a comprehensive seven-step process for opening a hotel in Malaysia.
Step 1: Research and choose the right location
Choosing the right location to open a hotel in Malaysia is essential for business success, as it greatly influences profitability and guest satisfaction. Proximity to tourist attractions or business centers can boost occupancy rates, as travelers prefer staying close to key destinations for leisure or business. The Malaysian real estate market offers diverse locations where you can buy property and open a hotel in Malaysia. It is only a matter of researching and evaluating the suitable location for your accommodation business.
Step 2: Register your business entity
Foreigners are required to register a hotel and tourism company in Malaysia. All businesses must be registered with the Companies Commission of Malaysia (SSM) to ensure legal compliance. Moreover, foreigners can open a hotel in Malaysia with the different business structures recognized under SSM, including sole proprietorships, partnerships, Private Limited Companies (Sdn. Bhd.), Public Limited Companies (Bhd.), and foreign companies.
If you want to open a hotel in Malaysia as a sole proprietorship or partnership, applicants can submit their application online via the EzBiz platform. However, those who wish to register a sole proprietorship or partnership must be a Malaysian citizen or a permanent resident. Sole proprietorship and partnership registration fees include RM 60 ($12.60) per year for registering a business trade name and RM 30 ($6.30) per year for a personal name. On the other hand, those who prefer a private limited company (Sdn. Bhd.) to open a hotel in Malaysia can apply for an online registration process through the MyCoID platform. Currently, the incorporation fee charged by the SSM is RM 1,010 ($212), including taxes.
Step 3: Secure land or a lease agreement
Securing land is necessary if you plan to open a hotel in Malaysia by constructing the building. Malaysian companies are free to purchase any property under their name. However, you should be informed that there are restrictions for foreigners buying property in Malaysia. These include a minimum purchase price of RM 1 million ($210,000) and restrictions on buying land in Malay Reserved Lands. Moreover, State Consent must be granted by the relevant authority for land acquisition by a foreign company. To avoid complications, buying leasehold property to open a hotel in Malaysia is a viable option for foreigners. Leasehold titles grant the owner the right to occupy a property for a period ranging from 30 to 99 years.
Step 4: Apply for necessary licenses
Applying for necessary licenses is mandatory to open a hotel in Malaysia because it ensures the quality of service for an accommodation business. Hotel registration in Malaysia is essential to obtain a Tourist Accommodation Premises License for regulated hotel operations. Moreover, the hotel’s vicinity is assessed to ensure the safety of the buildings to receive a Business Premises License. Moreover, when you open a hotel in Malaysia, several other applicable licenses are required, including a Halal License for serving halal food, a permit to sell alcoholic beverages in bars, restaurants, or coffee shops, and a permit to construct and manage amenities like a swimming pool and parking lot.
How to apply for a hotel license in Malaysia?
Applying for a hotel license in Malaysia can be challenging for foreigners. Hotel licensing involves a complex procedure, and a hotel license requirement in Malaysia is necessary to obtain hotel licenses, which include the following:
- Application requirements: One hotel license requirement in Malaysia is to register with the Companies Commission of Malaysia (SSM) or the Malaysia Co-operative Societies Commission (SKM) if necessary. Additionally, applicants must obtain an Accommodation Premises Business Licence from the Local Authority (PBT), as only applications for permanent licenses will be accepted.
- Required documents: Applicants must submit various documents, including a copy of the latest SSM e-Info or Co-operative Registration Certificate and the Accommodation Premises Business License. Furthermore, the Tourism Commissioner may request additional documents as part of the hotel license application.
- Application procedures: The hotel license application begins by completing the required information on the Tourism Industry Licensing System (SPIP). Applicants must then upload all required documents to the SPIP. Once the application is approved, a registration certificate will be issued and printed with the premises’ name and address as listed on the business license.
- Timeline and fees: The MOTAC State Office processes applications within seven working days of receipt. Then, the MOTAC Headquarters in Putrajaya will issue the Registration Certificate within seven working days after receiving the application from the State Office. The application involves a processing fee of RM 20 ($4.20) and a registration fee of RM 50 ($10.50), with payment required after the application has been approved.
Step 5: Comply with taxation requirements
Another crucial step is registering as a taxable business entity with the Inland Revenue Board (LHDN) to receive a tax identification number, vital for adhering to Malaysia’s tax regulations. You must register for a company tax file when you open a hotel in Malaysia and apply for a Tax Identification Number (TIN) for operations. Furthermore, there are taxes that you are responsible for paying, which include Corporate Income Tax, Tourism Tax, Property Tax, and Sales and Services Tax. On top of that, foreigners who buy property in Malaysia are responsible for real estate taxes, including Stamp Duty for the authentication of ownership transfer documents and Loan Agreement Stamp Duty for loan documents.
Step 6: Hire and train your team
Hotel staff are the foundation of any hospitality establishment, representing the service and operational quality that shape a hotel’s reputation. From front desk personnel to housekeeping teams, these committed professionals are crucial in delivering guest satisfaction and maintaining smooth hotel operations. The primary employment legislation in Malaysia is the Employment Act 1955 (EA), overseen by the Ministry of Human Resources. The EA sets basic terms for private-sector employees and establishes employment standards.
For foreigners who open a hotel in Malaysia and hire foreign employees, it is crucial to abide by Malaysia’s foreign employee policies. You must notify the Department of Labor at the Ministry of Human Resources (MOHR) of job vacancies in advance. Foreign worker recruitment applications can be submitted to the MOHR, but priority is always given to locals, as foreign labor is viewed as a temporary solution to industry needs. Furthermore, you must first obtain Expatriate Post or Quota Approval from the Malaysian Investment Development Authority (MIDA), which has this authority over the services sector. This approval allows you to hire a foreigner for a position a Malaysian cannot fill.
Step 7: Market your hotel and attract guests
A successful hotel company in Malaysia must have an established online presence through social media and travel platforms. Hospitality brands focus on providing memorable experiences beyond just food, accommodation, or entertainment. Social media enhances these aspects by boosting brand awareness, improving customer engagement, managing brand reputation, and generating leads. Open a hotel in Malaysia and increase its online presence by partnering with local tourism agencies to leverage hotel recommendations to tourists. You can also partner with booking platforms like Agoda and Trivago to market your hotel.
Need help starting a hotel company in Malaysia? We’re here to assist!
Opening a hotel company in Malaysia as a foreigner involves several complex steps, from legal processes to securing the right property and completing the necessary paperwork. Our expert team is here to guide you through every phase, ensuring that you meet all the legal requirements and make informed decisions throughout the process. Whether you need help with the entire journey or just specific steps, we are ready to provide personalized support. Leave your details below, and we’ll reach out to assist you, or email us directly at [email protected] for more information.
Frequently Asked Questions (FAQs)
Can foreigners fully own a hotel in Malaysia?
Yes, foreigners can fully own a hotel in Malaysia, but certain conditions and restrictions must be met, including approval from the Malaysian Investment Development Authority (MIDA) for foreign investment in the hotel industry; approvals from relevant state authorities may be necessary for purchasing land, and other sector-specific regulations, particularly for luxury hotels or those located in specific areas.
What are the main taxes to be aware of when running a hotel in Malaysia?
The main taxes to be aware of when running a hotel in Malaysia are the Corporate Income Tax, Tourism Tax (TTx), Property Taxes, and Sales and Services Tax (SST).
How much does a hotel license in Malaysia cost?
The cost of a hotel license in Malaysia can range from RM 200 ($42) to RM 1,000 ($210) or more, depending on the hotel’s size, location, and classification. Additional permits, like the license to sell alcoholic beverages or the permit to construct a pool, add to the total cost of hotel licensing.
How much does it cost to build a hotel in Malaysia?
Building a hotel in Malaysia can cost an average of RM 1,430 ($300) to RM 2,365 ($497) per square foot for a 5-star hotel, RM 1,120 ($235) and RM 1,760 ($370) per square foot for a 4-star hotel, and RM 815 ($171) to RM 1,610 ($338) per square foot for a 3-star hotel, all depending on the amenities offered and the hotel’s location.
What are the requirements to get a hotel license in Malaysia?
The requirements to get a hotel license in Malaysia include registration with the Companies Commission of Malaysia (SSM) or the Malaysia Co-operative Societies Commission (SKM), if applicable, obtaining an Accommodation Premises Business License from the Local Authority (PBT), and submitting other documents requested by the Tourism Commissioner.
Can I hire foreign staff for my hotel in Malaysia?
Yes, you can hire foreign staff for your hotel in Malaysia. However, you must adhere to specific regulations, including employees obtaining an Employment Pass from the Immigration Department, following any quota limits on foreign workers, prioritizing local employment, and demonstrating a genuine skill shortage when local workers are unavailable.
