An investment holding company (IHC) in Malaysia is a company whose activities consist mainly in holding investments, and which earns at least 80% of its gross income from holding them. Section 60F of the Income Tax Act 1967 sets that definition. The Inland Revenue Board of Malaysia (LHDN) explains it in Public Ruling No. 2/2024. Income from a business of holding of an investment counts as part of the company’s gross income, but never towards the 80%. A business of holding of an investment means letting property with maintenance or support services.
An IHC is a tax classification, not a kind of company.
You register the company with the Companies Commission of Malaysia (SSM) as an ordinary Sdn Bhd, a private company limited by shares. The company becomes an IHC through what it does and what it earns.
For tax, an unlisted IHC’s investment income is not treated as business income.
The company can deduct its running costs as permitted expenses only within a cap of 5% of its gross dividend, interest and rent. It pays tax at 24%, with no small company rates.
An IHC listed on Bursa Malaysia, by contrast, has its investment income taxed as business income.
Running your company includes lodging an Annual Return with SSM and filing a Form C income tax return with LHDN every year. Closing your company takes a voluntary winding up, not a strike-off, if it owns a subsidiary or if its last audited financial statements show a dividend.
Key Takeaways
- Investment holding company status is decided for each basis period, and it can change in either direction. Starting a trade, for example, can end the status.
- Single-tier dividends are tax-free to an unlisted investment holding company, but they still shrink its deduction for permitted expenses. The rest of those expenses is lost, not carried forward.
- Moving shares or a property you own into an investment holding company can bring stamp duty, and real property gains tax on the property. Ask a tax adviser before signing.
- Every year, an investment holding company lodges an Annual Return with SSM, like any other Sdn Bhd. The company also files its income tax return, Form C, with LHDN.
- Under the Finance Act 2024, dividends an investment holding company pays you are taxed at 2% on the amount above RM100,000 a year, from the year of assessment 2025.
- An investment holding company that owns a subsidiary, or whose last audited financial statements show a dividend, cannot be struck off. The company closes by winding up instead.
What Is an Investment Holding Company in Malaysia, and What Types of Investment Holding Companies Are There?
An investment holding company (IHC) means a company whose activities and income meet two conditions that the Income Tax Act 1967 sets. First, its activities consist mainly in the holding of investments. Second, not less than 80% of its gross income, other than income from a business of holding of an investment, is derived from the holding of those investments. Your company qualifies only if it meets both conditions. A company whose main activity is holding investments, but whose investment income falls below 80%, is not an IHC. A company that earns at least 80% of its income from investments, but whose activities are mainly something else, is not an IHC either.
The exclusion in the IHC definition is easy to miss, and it changes the arithmetic. A business of holding of an investment means letting real property where the company provides maintenance services or support services for that property.
Income from that business counts as part of the company’s gross income, but never as income from holding investments. The more serviced rental income the company earns, the harder the 80% condition is to meet.
The definition sits in section 60F of the Income Tax Act 1967 (ITA). LHDN sets out how it reads that section in Public Ruling No. 2/2024, Investment Holding Company, published on 28 May 2024.
A public ruling is LHDN’s published view of how a provision of the tax law applies. It guides how LHDN will treat a company, but it does not change the Act itself.
The kinds of income the ITA counts for an IHC show what an IHC usually holds. Those holdings are the everyday answer to what types of investment holding company there are. The types the tax law itself treats differently, listed and unlisted, are covered in the tax section.
- Shares: the company receives dividends on them.
- Deposits and loans: the company earns interest on them.
- Property: the company receives rent from tenants.
- Any of these, when sold: the sale can produce a gain on the investment.
An IHC works by standing between you and your investments.
The company, not you, owns the shares or the property and receives the income from investment sources such as dividends, interest or rent. The company can do this because it has a legal personality separate from its members and continues to exist until it is removed from the register.
The company pays a few common expenses of its own, such as directors’ fees and secretarial and audit fees. It passes its profit to you and its other owners as dividends.
What Is the Difference Between a Holding Company and an Investment Company?
A holding company is defined by control, under the Companies Act 2016. An IHC is defined by what it does and earns, under the ITA. Under the Companies Act’s test, a company is the holding company of another corporation if it controls that corporation’s board or more than half of its voting power. Holding more than half of the corporation’s issued shares, excluding preference shares, is enough too. The only other route is through a subsidiary: a company is also the holding company of its subsidiary’s own subsidiaries.
A holding company and an IHC differ on every point:
| Holding company | Investment holding company (IHC) | |
|---|---|---|
| Which law defines it | The Companies Act 2016 | Section 60F of the Income Tax Act 1967 |
| What the test is | Control of a subsidiary: its board, more than half of its voting power, or more than half of its issued shares, excluding preference shares | Two conditions: activities consisting mainly in holding investments and not less than 80% of gross income, other than serviced rent, derived from holding them |
| When it is tested | By the company’s structure: whether it controls another corporation | For each basis period, by what the company did and earned in it |
| What follows | Consolidated financial statements for the group, which the directors must ensure are made out under approved accounting standards | Subject to tax treatment under section 60F if it is unlisted, or section 60FA if it is listed on Bursa Malaysia |
A company can be both.
A holding company that earns mainly dividends from its subsidiaries may also be an IHC. It qualifies as long as holding those shares is its main activity and its investment income makes up at least 80% of its gross income.
An IHC needs no subsidiary at all.
“Investment company” is an everyday label, not a legal category. People use it loosely for any company that holds investments.
When someone asks whether a company is an investment company, what matters in law is usually whether it is an IHC for tax, or a holding company under the Companies Act 2016.
Our article on holding companies and subsidiaries covers groups, subsidiaries and a holding company’s obligations in more depth.
Tax Treatment of Investment Holding Companies (IHCs)
Malaysian tax laws treat investment holding companies (IHCs) in one of two ways, depending on whether a company is listed on Bursa Malaysia:
- Unlisted: the IHC is governed by section 60F of the Income Tax Act 1967, and its income from holding investments is not treated for tax purposes as business income.
- Listed on Bursa Malaysia: the IHC is taxed under section 60FA, and that same income is treated as business income.
If you want LHDN’s rules laid out category by category, Altomate’s help page on the tax treatment for investment holding companies goes through them.
Before you rely on IHC treatment, ask a tax adviser to confirm the company’s status for each basis period, and to check how the company works out its permitted expenses.
Ask for the same tax advisory help before a property moves into the company.
Unlisted Companies: Section 60F of the ITA
Under section 60F, an unlisted IHC’s income from holding investments is not treated as income from a business source. That makes it non-business income.
A single-tier dividend your IHC receives is not taxed, because a single-tier dividend paid to a company is exempt in the company’s hands.
The exempt dividend still counts as part of C in the formula for permitted expenses, set out below. It therefore lowers the deduction the company can claim.
Permitted Expenses, and the Cap on Them
An unlisted IHC deducts its running costs as permitted expenses, and the ITA lists them in full:
- directors’ fees
- wages, salaries and allowances
- management fees
- secretarial, audit and accounting fees
- telephone charges, printing and stationery costs, and postage
- rent and other expenses incidental to maintaining an office
An expense counts as a permitted expense only where it is not deductible under section 33(1).
An expense that section 33(1) already covers, such as a cost of earning the rent on a property, is deducted against the income it helps to produce, rather than through the permitted-expense formula.
The company works out its tax deduction for permitted expenses with the formula A × B / 4C:
- A is the permitted expenses the company incurred.
- B is the part of its gross income from dividends, interest and rent that is chargeable to tax.
- C is its gross income from dividends and interest, whether exempt or not, plus its rent and its gains from selling investments.
The deduction may not exceed 5% of the company’s gross income from dividends, interest and rent.
Any part of the permitted expenses that is not deducted is not carried forward. Unabsorbed expenses, those the company cannot deduct in one year, are lost, not saved for the next.
The illustration below uses round figures and is not a specific tax computation for any company.
| Illustration only, in round figures | Rent only | Rent and an exempt dividend | Rent, an exempt dividend and a gain on a sale |
|---|---|---|---|
| Permitted expenses incurred (A) | RM20,000 | RM20,000 | RM20,000 |
| Rent, chargeable to tax | RM200,000 | RM200,000 | RM200,000 |
| Single-tier dividend, exempt | none | RM200,000 | RM200,000 |
| Gain on selling an investment | none | none | RM400,000 |
| B: chargeable dividend, interest and rent | RM200,000 | RM200,000 | RM200,000 |
| C: dividend and interest, exempt or not, plus rent and gains | RM200,000 | RM400,000 | RM800,000 |
| Deduction, A × B / 4C | RM5,000 | RM2,500 | RM1,250 |
Companies Listed on Bursa Malaysia: Section 60FA
Section 60FA applies to an IHC that is resident in Malaysia and listed on the Bursa Malaysia exchange in the basis period for a year of assessment. For that year of assessment, the income of a listed IHC from holding investments is treated as gross income from a business source.
When LHDN tests a company for the small company rates, a listed IHC is deemed to have gross income from business sources, and an unlisted IHC is not.
To list on Bursa Malaysia, a company needs the approval of the Securities Commission Malaysia under section 212 of the Capital Markets and Services Act 2007.
A company you set up to hold your own property or shares stays non-listed unless it goes through that approval process. Section 60F, not section 60FA, therefore sets its rules.
The Tax Rate: No Small Company Rates for Unlisted IHCs, as a Public Ruling Confirms
An unlisted IHC pays corporate income tax at 24%, the general company rate. It does not qualify for the small company rates of 15% on the first RM150,000 of chargeable income and 17% on the next RM450,000. Public Ruling No. 8/2025, issued by the Inland Revenue Board of Malaysia (LHDN) and published on 22 December 2025, settles this.
Capital Allowance Claims and the Industrial Building Allowance
An unlisted IHC generally cannot claim capital allowances on plant and machinery. A listed IHC can claim capital allowances on the plant and machinery it uses, because its investment income is treated as business income under section 60FA.
An IHC that lets a building may still claim the industrial building allowance on it, where the tenant uses the building as an industrial building, such as a factory.
Before the company makes the claim, consult with a tax professional to confirm it and the share of the building’s cost it covers.
Rental Income: Passive Letting, or a Business of Holding of an Investment
A business of holding of an investment is a business of letting real property where the company provides maintenance services or support services for that property. Letting a property without those services is passive letting. The property is then held as a passive investment, and its rent counts as income from holding an investment.
For the 80% test, rent from a business of holding of an investment never counts as income from holding investments. The company’s IHC status is still decided based on gross income that includes that rent. The more of that rent the company earns, the harder the 80% condition is to meet.
What the company does for the property beyond collecting rent decides whether your letting becomes a business.
- Which services count: the company has to maintain and manage both the building and its grounds, comprehensively and actively, whether it does the work itself or hires a contractor. Security services on their own do not count.
- How that rent is taxed: for an unlisted IHC, that rent is still investment income under section 60F, taxed as rent, not as business income.
- How its expenses are deducted: in an unlisted IHC, the costs of earning that rent are deducted against it under section 33(1), as for any rent, not through the permitted-expense formula.
For more on which services turn letting into a business, read Altomate’s help page on how an IHC is taxed.
Advantages and Disadvantages of Holding Investments Through a Company
When you hold investments through a company, the company owns them instead of you. Under the Companies Act 2016, a company has a legal personality separate from that of its members.
In practice, owners use investment holding companies (IHCs) to keep a family’s property and shares in one place, under one set of accounts. Owners also use an IHC to keep investments apart from an operating company’s risks.
An IHC can also make it simpler to pass wealth to the next generation, because the family can pass on shares in the company rather than transferring each asset.
Five disadvantages weigh against those advantages.
- No small company rates. An unlisted IHC pays 24% on its chargeable income, with no 15% or 17% bands. See the tax rate, above.
- Capped running costs. Permitted expenses are deductible only through the formula and within a cap of 5% of gross dividend, interest and rent. Any part not deducted is not carried forward. See permitted expenses, above.
- A company’s yearly fees and filings. The company pays SSM’s yearly fees and professional fees, and it files returns with SSM and LHDN every year. See the costs and the yearly filings, below.
- No loans to directors. The company may not lend to its directors unless it is an exempt private company, apart from some loans made with its prior approval by resolution. See taking money out, below.
- A harder exit. A holding company, or a company whose last audited financial statements show a dividend declared or paid, cannot simply be struck off. See closing the company, below.
For tax planning, comparing company tax and personal tax on the same figure shows why 24% is not automatically the cheaper rate.
On RM600,000 of chargeable income, an unlisted IHC pays RM144,000 at 24%. On the same RM600,000, a resident individual pays RM136,400 under LHDN’s scale for the years of assessment 2023 to 2025, if that is their only income.
Separate legal personality does not keep the directors out of the company’s borrowing. Banks ask a Sdn Bhd’s directors to guarantee its financing.
It is worth checking a bank’s terms before the company commits to a purchase.
Who an Investment Holding Company Suits, When to Hold Assets Personally, and Why to Ask a Personal Tax Advisor
An investment holding company (IHC) tends to suit an owner in one of three situations.
- Investment income on top of a high income. For the years of assessment 2023 to 2025, LHDN’s personal scale taxes chargeable income above RM100,000 at 25% and more. Investment income that lands above RM100,000 of chargeable income is therefore taxed personally at more than an unlisted IHC’s 24%. An owner in this situation is the most likely to find that the company’s lower rate outweighs its yearly costs.
- Shares in more than one operating company. An IHC can sit above several operating companies and collect their dividends in one place.
- A family pooling property or shares. An IHC gives a family one owner for its assets and one set of accounts, with each person’s interest held as shares in the company.
Holding the assets personally tends to suit two other kinds of owner.
- An owner with a small portfolio or a single property. Professional fees come on top of what SSM charges. A company secretary typically costs about RM600 to RM2,000 a year. A registered office address typically costs about RM300 to RM1,200 a year. Audit and accounting typically cost about RM2,000 to RM5,000 a year, rising with the company’s size and the number of its transactions. On a small portfolio or a single property, those yearly costs can outweigh any tax difference the company makes.
- An owner who needs the money out regularly. An owner who lives on the investment income may find that the company stands between them and the money more than it helps.
Your own figures decide which way suits you.
A tax adviser should run those figures with you, because no number in this article can make that decision for you.
What an Investment Holding Company Costs to Set Up and Keep
Registering an investment holding company (IHC) costs the same at SSM as registering any other Sdn Bhd. SSM charges a company registration fee of RM1,000.00, plus RM10.00 for Supply of Corporation Information to Agencies.
Once the company is registered, SSM charges it these yearly fees:
- Annual Return: RM150.00 each year.
- Audited financial statements: RM50.00 to lodge them.
- Unaudited financial statements: RM20.00 to lodge them, for a company that takes the audit exemption.
Professional fees come on top of what SSM charges.
| Professional service | What it costs each year |
|---|---|
| Company secretary | Typically costs about RM600 to RM2,000 a year |
| Registered office address | Typically costs about RM300 to RM1,200 a year |
| Audit and accounting | Typically cost about RM2,000 to RM5,000 a year, rising with the company’s size and the number of its transactions |
Most companies also pay a tax agent or an accountant to prepare their tax return.
Setting Up an Investment Holding Company, and How It Gets Its Tax Classification
You set up an investment holding company (IHC) by registering an ordinary Sdn Bhd, a private limited company. IHC status is a tax classification under section 60F of the Income Tax Act 1967. A company gains that status through what it does and earns, not through how it is registered. Our guide to the types of company in Malaysia, and what each one means compares the Sdn Bhd with the other forms.
To register the Sdn Bhd, you need the following.
- A director: at least one, aged 18 or over, who ordinarily resides in Malaysia, with a principal place of residence here.
- A member: at least one, who may be an individual or a body corporate.
- A company secretary: you have 30 days from the company’s registration to appoint one. The secretary must consent in writing and be qualified.
- A registered office address: in Malaysia, open to the public during ordinary business hours.
- SSM’s fee: RM1,000.00, plus RM10.00 for Supply of Corporation Information to Agencies.
- An application through the Corporate Registry System (CRS): you reach CRS through the SSM4U portal.
How to register a Sdn Bhd, step by step walks through the application.
On the company secretary route, where a company secretary prepares and lodges the registration for you, you pay a one-time agent fee on top of SSM’s fee. The company secretary then provides compliance services, keeping the company’s statutory records and filings in order and checking each document before it goes to SSM.
Take Altomate’s Company Secretary & Incorporation package as an example. The plan Altomate recommends with it is the Essential Company Secretary Plan, at RM100 a month, billed annually at RM1,296 including tax. The plan runs on a two-year term, with a RM1,000 early termination charge.
The package adds a one-time incorporation fee of RM1,399 through the Altomate app, and that fee includes SSM’s fee. Through the package, you do not need an SSM4U account or a counter visit.
Altomate’s company secretarial service includes a registered office address at no extra charge. Altomate’s company secretaries are members of the Malaysian Association of Company Secretaries (MACS) and hold practising certificates from SSM.
Registering a Sdn Bhd with Altomate sets out what the package covers.
The test for determining IHC status applies to each basis period, and looks at what the company did and earned in that period.
Have the rent and dividends paid into a bank account in the company’s name, never into your own.
Moving a property or shares you already own into the company is a transfer from you to the company.
That transfer can bring real property gains tax on a property. It can also bring stamp duty, a transaction tax charged on the transfer.
This is the step in setting up where professional tax advice matters most. It is worth getting that advice before anything is signed.
What an Investment Holding Company Files Every Year
An investment holding company (IHC) lodges the same yearly filings with SSM as any other Sdn Bhd.
- Annual Return: the company lodges it within 30 days of the anniversary of its incorporation.
- Financial statements: the company circulates them to the members within six months of the financial year end (FYE), then lodges them with SSM within 30 days of circulating them.
An IHC may not need its financial statements audited. SSM’s audit exemption, set out in its Practice Directive 10/2024, is a choice that needs no application.
A private company is eligible if it stays within at least two of three limits, on turnover, assets and full-time employees, in the current financial year and in the two years before it. A new company that is not dormant cannot take the exemption until it has two past financial years to test against those limits.
An audit-exempt company still lodges documents with SSM, and some companies cannot take the exemption at all.
- What it still lodges: within 30 days of circulating its financial statements, the company lodges its unaudited financial statements, a directors’ report and an Audit Exemption Certificate signed by a director.
- Who cannot take it: a private company that is a subsidiary of a public company or is jointly controlled by one, an exempt private company (EPC) that opts to lodge the EPC certificate, and a foreign company. A public company here includes a public limited company.
With LHDN, the company’s obligations start at registration.
- First tax estimate: a new company whose first basis period is at least six months files its first tax estimate (CP204), as e-CP204, within three months of starting operations. Its monthly instalments begin in the sixth month of the basis period.
- Even when dormant: a company that is dormant or has not started business must still register for tax and file Form E, as it has had to from the year of assessment 2014. Form E is an employer’s yearly return to LHDN about its employees. It is due even when the company paid nobody.
- Yearly income tax return: the company files its income tax return, Form C, with LHDN every year, within seven months of its financial year end.
Keep the accounting records up to date as you go.
Under the Companies Act 2016, the company and its directors and managers must keep accounting records that sufficiently explain the company’s transactions and financial position. They must make entries within 60 days of each transaction, and keep the records for seven years after the transactions are completed.
What to Watch Out for Once an IHC Is Running
Once an investment holding company (IHC) is running, four things need watching.
- The status can change, in either direction. A change in what the company earns, such as letting property with maintenance or support services or starting a trade, can take the company out of the definition. A trading company that winds down its trade can come into the definition. Once a company is determined to be an IHC, it is presumed to keep that status until the contrary is proved. It therefore stays an IHC in subsequent years unless the company can prove that its position has changed.
- The capped expenses. See permitted expenses, above.
- A property sold at a gain. The company may owe real property gains tax on the disposal.
- Shares sold at a gain. The company may owe capital gains tax on selling shares in an unlisted company incorporated in Malaysia. It files a return and pays the tax within 60 days of the sale.
Taking Money and Assets Out of the Company
A dividend is the ordinary way to take money out of an investment holding company (IHC). From the year of assessment 2025, under the Finance Act 2024, dividends paid to you as an individual are exempt up to RM100,000 in a year. Above RM100,000, you pay tax at 2% on the chargeable income in respect of the dividends over that amount. Single-tier dividends were tax-free to the shareholder in full before the year of assessment 2025.
Unless the company is an exempt private company, a loan is not a way to take money out.
Under the Companies Act 2016, a company may not make a loan to a director of the company or of a related company. The company also may not guarantee or secure a loan that anyone else makes to such a director.
Some loans to directors are allowed with the company’s prior approval by resolution, such as a loan to meet expenses incurred for the company. Directors who authorise a loan without the approval required are jointly and severally liable to indemnify the company against any loss.
Taking a property or shares out of the company is a transfer by the company to you.
That transfer can bring the company real property gains tax on a property, or capital gains tax on shares in an unlisted company. Stamp duty is also charged on the transfer.
Closing an Investment Holding Company: Winding Up Rather Than Striking Off
An investment holding company (IHC) cannot simply be struck off if its last audited financial statements show a dividend declared or paid, or if it is a holding company.
A company barred from striking off for either reason winds up voluntarily instead. A members’ voluntary winding up, for a company that can pay its debts, takes these steps, in this order.
- The directors make a declaration of solvency: that the company will be able to pay its debts in full within twelve months after the winding up begins. They make the declaration before the notices of the meeting to pass a special resolution go out to the members.
- The members pass a special resolution to wind the company up voluntarily.
- The company lodges the resolution with the Registrar of Companies within seven days.
- The company advertises the resolution in one national-language and one English-language newspaper within ten days.
- A liquidator appointed by the members collects the company’s assets, pays its debts and distributes what is left to the members.
- Once the company’s affairs are wound up, the liquidator holds a final meeting and lodges a return of the meeting with the Registrar and the Official Receiver. The company is dissolved three months after that.
Deciding Whether to Hold Investments Through a Company
Your decision on holding investments through an investment holding company (IHC) turns on what the company will do and earn, because IHC status follows from both. An unlisted IHC pays 24%, with no small company rates, and its permitted expenses are capped. It also carries a company’s yearly fees and filings for as long as it exists. An IHC that owns a subsidiary, or whose last audited financial statements show a dividend, closes by winding up rather than by striking off. If your figures still favour a company, your next step is to register a Sdn Bhd, as the section on setting up an investment holding company explains.
