Keeping Accounting Records Outside Malaysia

A Malaysian subsidiary running SAP out of a Singapore data centre, with the finance function in a Kuala Lumpur-to-Manila shared service arrangement, is a completely normal 2026 structure. It is also, read strictly, a structure two statutes did not contemplate — and they disagree with each other.

What the Companies Act permits

Section 245(4) sets the default: records are kept at the registered office or at such other place as the directors think fit, and are open at all times for inspection by the directors. There is no geographic word in that subsection.

Section 245(5) then carves out a specific offshore permission, and its scope is narrower than it is usually quoted. It permits the accounting and other records of operations outside Malaysia to be kept at a place outside Malaysia — provided that those records shall be sent to and kept at a place in Malaysia and be made available for inspection by the directors at all times.

Two things follow.

The carve-out is about foreign operations, not foreign systems. A Malaysian company’s records of its Malaysian operations are not within s.245(5) at all. The subsection contemplates a Malaysian company with a branch or business abroad, letting that branch’s ledgers sit locally.

Even inside the carve-out, a Malaysian copy is mandatory. The proviso is not optional. The records must be sent to and kept at a place in Malaysia.

Section 245(6) tightens it further: those records must include such statements and returns as will enable true and fair financial statements to be prepared. A summary trial balance uploaded to group consolidation is unlikely to meet that.

Section 245(7) is the enforcement lever. Where records are kept outside Malaysia under s.245(4) or s.245(5), the Registrar may require the company to produce those records at a place in Malaysia, or determine the type and manner of the records to be kept in Malaysia. That is a standing power over your data architecture, exercisable without a court order.

The section 245(9) penalty applies throughout: on conviction, a fine up to RM500,000 or imprisonment up to three years, or both, on the company and every officer.

The Income Tax Act is stricter

Most guidance stops at the Companies Act. The harder rule is in the tax statute, and it has no offshore carve-out at all.

Section 82(8) of the Income Tax Act 1967: all records that relate to any business in Malaysia shall be kept and retained in Malaysia. Flat, unqualified, no operations-abroad exception.

Section 82A(5) applies the same rule to documents relating to income in Malaysia.

Section 82(7) adds a format rule that bites on any digital-first finance function: records kept electronically must be retained in an electronically readable form and kept so as to be readily accessible and convertible into writing; and where records originally kept in manual form were later converted to electronic form, the original manual records must still be retained.

Contravening s.82(1), (1A), (6), (7) or (8) without reasonable excuse is an offence under section 119A, carrying a fine of not less than RM300 and not more than RM10,000, or imprisonment up to one year, or both.

What this means in practice

Arrangement	Companies Act 2016	Income Tax Act 1967
Malaysian operations, ERP hosted offshore, no Malaysian copy	Not within the s.245(5) carve-out	Contrary to s.82(8)
Malaysian operations, ERP offshore, complete records replicated and retained in Malaysia	Consistent with s.245(4) and open to director inspection	Consistent with s.82(8)
Foreign branch records held abroad only	Breaches the s.245(5) proviso	Not within s.82(8) — it reaches only Malaysian business records
Foreign branch records held abroad and also sent to and kept in Malaysia	Permitted under s.245(5), subject to s.245(6) content	Consistent

The workable design is the same in every case: whatever the primary system, a complete, readable, retrievable set of records lives in Malaysia and stays there for the full retention period.

Common mistakes

• Reading s.245(5) as general permission to host accounting data offshore. It applies to records of operations outside Malaysia, and only with a Malaysian copy.
• Assuming remote access is the same as keeping records in Malaysia. Neither statute says accessible from Malaysia; both say kept in Malaysia.
• Ignoring the ITA entirely. It is the stricter of the two and it has a penalty that does not require a conviction on Companies Act facts.
• Migrating ERP without an export. A system decommissioned by group leaves you unable to satisfy either statute, and the obligation runs for the full retention period.
• Retaining a converted electronic copy and destroying the paper. Section 82(7)(b) requires the pre-conversion manual records to be retained in their original form.

What’s next

If e-Invoicing is part of your architecture, the retention question gets a third layer, because a validated document held in the MyInvois database is not by itself a sufficient record under either statute.