Setting Up Manufacturing Business in Malaysia

1. How to setting up a manufacturing company in Malaysia?

 Setting up a manufacturing business in Malaysia can be a viable option, as the country has a well-developed infrastructure, a strategic location in the heart of Southeast Asia, and a skilled workforce. Setting up a manufacturing company in Malaysia requires extensive planning and knowledge of the legal and regulatory requirements. The process involves obtaining the necessary licenses and permits, registering the company, acquiring land and building facilities, hiring employees, and complying with various government regulations. The company must also be aware of tax incentives and exemptions available to them, as well as the country's labor laws and environmental regulations. With proper planning and execution, setting up a manufacturing company in Malaysia can be a lucrative and rewarding business venture.

1.1 What is Manufacturing?

A large-scale manufacture of items employing physical labor and/or machinery to transform raw materials, parts, and components into completed things is referred to as manufacturing. The final items may be sold to retailers, wholesalers, or other manufacturers for use in the creation of more complicated products. They may also be sold directly to retailers.

1.2 Definition of a Manufacturing Company in Malaysia

Manufacturing company in Malaysia related with a business in Malaysia involved in carrying out of the manufacturing activity. According to Malaysia’s Industrial Co-ordination Act of 1975, the meaning of “manufacturing activity” is making, blending, altering, blending, ornamenting, finishing, 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 but shall not include any activity normally associated with retail or wholesale trade.

1.3  Licenses to Start a Manufacturing Company in Malaysia  

 To set up a manufacturing business in Malaysia, you need to adhere a business licensing governed according to the Malaysia’s Industrial Co-ordination Act 1975;

a)       No person shall engage in any manufacturing activity unless he is issued a business license in respect of such manufacturing activity.

b)   Any person who fails to comply with subsection (1) of the Act is guilty of an offence and is liable on conviction to a fine not exceeding two thousand ringgit or to a term of imprisonment not exceeding six months and to a further fine not exceeding one thousand ringgit for every day during which such default continues.

c)     An application for a license shall be made in the prescribed form to the licensing officer.

d)      The licensing officer shall, in deciding whether an application for a licence should be approved or refused, consider whether the issue of a licence is consistent with national economic and social objectives and would promote the orderly development of manufacturing activities in Malaysia.

Approvals and licenses to be applied in Malaysia:

i. Application to Ministry of International Trade and Industry: This license is required for all manufacturing company in Malaysia. You will need to submit an application to MITI, along with supporting documents such as a business plan, details of the manufacturing process, and financial statements of a company in Malaysia. If you plan to hire foreign employees for your manufacturing business especially for private limited company in Malaysia, you will need to apply to MITI for expatriate posts. You need to provide details of the job position, salary, and qualifications of the foreign employee.

ii. Application to Malaysian Industrial Development Authority: MIDA offers various investment incentives for manufacturing businesses in Malaysia principally are for private limited company, including tax exemptions, customs duty exemptions, and grants for research and development. You will need to submit an application to MIDA, providing details of your business plan, investment amount, and expected employment.

iii. 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:

Shareholder's paid up capital should be of a minimum of 2.5 million Malaysian Ringgit; or

The company should engage at least 75 or more full-time employees.

To start a manufacturing company in Malaysia, you need to register your company with the Companies Commission of Malaysia (SSM). This involves choosing a company name, submitting the required documents, and paying the registration fee.

You need to obtain a business license from the local authorities. The requirements and fees for this license may vary depending on the location and nature of your business.

As mentioned earlier, you will need to apply for a manufacturing license from MITI or the MIDA, depending on the industry.

For the tax registration in Malaysia, you need to register for various taxes with the Inland Revenue Board of Malaysia (IRBM), including the Goods and Services Tax (GST) or the Sales and Services Tax (SST), depending on the type of business in Malaysia.

A company need to comply with various employment requirements, such as registering with the Social Security Organization (SOCSO) and the Employees Provident Fund (EPF), providing medical insurance for employees, and ensuring compliance with minimum wage laws.

Depending on the nature of your manufacturing activities, you need to obtain environmental permits or approvals from the Department of Environment (DOE) or other relevant agencies.

 Eligibility Criteria for Manufacturing Licence

• A company with paid up capital of RM2.5 million and above or engaging 75 or more full-time paid employees;

• Project’s Capital Investment Per Employee (CIPE) is at least RM140,000.00;

• You will need a otal full-time workforce of the company comprises of at least 80% Malaysians. Employment of foreign workers including outsourced workers is subject to current policies;

• At least 25% of the company’s full time workforce are managerial, technical, and supervisory (MTS) staff with degree and/or diploma/certificate or product’s value added is at least 40%;

• The project must be consistent with the national economic and social objectives and promotes an orderly development of manufacturing activities in Malaysia.

 Benefits of A Manufacturing Company in Malaysia    

These are the benefits that manufacturing companies:

The company will eligible to tax incentives such as 100 per cent exemption for the first five years along with investment tax allowance make Malaysia cost-effective for manufacturing.

Setting up company in Malaysia is cost-effective operations. Malaysia offers cost advantages for manufacturing companies which will give the opportunities for you and for your business with lower labor costs compared to other developed countries, as well as a competitive tax regime and government incentives for businesses.

Manufacturing company in Malaysia can provide businesses with a competitive advantage in the region and access to a growing market with great potential for growth and profitability. Setting up a manufacturing company in Malaysia can offer numerous benefits for businesses, including access to a large market of consumers and skilled labor at competitive rates.

Additionally, Malaysia has a strategic location that provides easy access to other markets in Asia and the Pacific, as well as various government incentives for foreign investors. These incentives include tax exemptions and incentives, as well as streamlined procedures for obtaining permits and licenses.

Other benefits of setting up a manufacturing company in Malaysia include lower costs of living and business operation, a stable political and economic environment, and a supportive legal system that protects intellectual property and promotes foreign investment.


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