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Given the innumerable benefits that the Malaysian business ecosystem provides, manufacturers around the world are inclined to set up a manufacturing company in Malaysia. This article is a discourse on how to set up a manufacturing company in Malaysia.
Table of Contents
A manufacturing company in Malaysia is one that is involved in carrying out the manufacturing activity. According to Malaysia’s Industrial Co-ordination Act of 1975, “manufacturing activity” is defined as the making, blending, altering, finishing, ornamenting or otherwise treating or adapting any article or substance with a view to its sale, use, delivery, disposal or transport; and includes the assembly of parts and ship repairing. Manufacturing activity will not include any activity that is normally associated with retail or wholesale trade.
Application to Ministry of International Trade and Industry: Malaysia’s statutory law Industrial Co-ordination Act of 1975 mandates the investor to apply for a manufacturing license with the Ministry of International Trade and Industry (MITI).
Submission of application to Malaysian Industrial Development Authority: The application for the manufacturing license shall be submitted to the Malaysian Industrial Development Authority (MIDA), which is an agency under the MITI. MIDA is responsible for the promotion and coordination of industrial development in Malaysia.
Statutory Requirements: The Industrial Co-ordination Act, 1975 of Malaysia prescribes the following statutory requirements for the companies who wish to apply for a manufacturing license:
Here, the “shareholders’ funds” refers to the aggregate amount of the company’s paid-up share capital, reserves, the balance of profit and loss appropriation account where:
Further, “full-time paid employees” refer to the all the persons who are normally working in the manufacturing establishment for at least six hours a day and at least 20 days a month for twelve months during the year. Such full-time paid employees should also be receiving a salary for the said work.
The following criteria need to be met by the promoters in order to obtain government approvals for Industrial projects in Malaysia:
Those companies whose shareholders’ fund does not exceed 2.5 million Malaysian Ringgit and who do not employ more than 75 full-time paid employees are eligible to apply for an exemption from the manufacturing license.
Those companies that have been exempted from acquiring Manufacturing license is confirmed through an exemption letter assigned to them by the appropriate authority.
Such companies are eligible for the various facilities that have been granted by the government, such as exemptions from import duties for machinery and equipment and raw materials under Customs Duties (Exemption) Order 2017 and Sales Tax (Persons exempted from Payment of Tax) order 2018.
These companies are also eligible for investment incentives under the Promotion of Investments Act 1986 and the Income Tax Act 1967[1]. These incentives are available if the companies fulfil all the required criteria and conditions.
Following are some of the benefits that manufacturing companies:
With the abovementioned benefits and the business-friendly ecosystem offered by Malaysia, the Malaysian manufacturing sector has attracted foreign investment which accounts for around 60 per cent of the total number of investments approved by the Malaysian Investment and Development Authority. Apart from the abovementioned statutory requirements, promoters need to incorporate a fully foreign-owned subsidiary, obtain other government approvals and licenses, secure office and industrial space, and hire locating agents and suppliers for raw materials in order to set up a manufacturing company in Malaysia.
Read Our Article: Procedure of Company Incorporation in Malaysia
Prabhat has done his BA LLB (Hons) and has been writing research papers since his law school days. His interest in content writing made him pursue a career in legal research and content writing. His core areas of interest are indirect taxes, finance and real estate.
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