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Sohaib Ikram
Sohaib Ikram serves as the Director of Emerhub in Malaysia.
For entrepreneurs and investors looking to establish manufacturing operations in Malaysia, obtaining a Manufacturing License is a key step in the process.
This license is issued by the Malaysian Investment Development Authority (MIDA) to ensure compliance with regulations and opens doors to various incentives and benefits for manufacturers.
In this article, we will explore the essentials of securing a manufacturing license in Malaysia including requirements and step-by-step process.
What is a Manufacturing License?
A Manufacturing License in Malaysia is an official permit issued by the government that allows companies to engage in manufacturing activities.
The Industrial Coordination Act (ICA) defines “manufacturing activity” as “the making, altering, blending, ornamenting, finishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal”
Certain business activities that are exempt from obtaining a manufacturing license include:
- Milling of paddy into rice
- Milling of oil palm fresh fruits into crude palm oil
- Production and processing of raw natural rubber of all types
This license is regulated by the Malaysian Investment Development Authority (MIDA) as per the Industrial Coordination Act (ICA) 1975.
Who Needs to Apply for a Manufacturing License in Malaysia
According to MIDA guidelines, a company needs to apply for a Manufacturing License if it meets either of these criteria:
In addition to these basic requirements, the Malaysian Investment Development Authority (MIDA) introduced additional eligibility criteria through an amendment:
- Minimum Capital Investment Per Employee (CIPE) of RM140,000
- At least 80% of the total full-time workforce must be Malaysian
- Managerial, Technical, and Supervisory (MTS) staff with degrees and/or diplomas should comprise at least 25% of the full-time workforce, or the product’s added value must be at least 40%
However, if your business does not meet these requirements, you can apply for an exemption letter to MIDA. This exemption letter / exemption license allows you to operate without a manufacturing license until your company meets the requirements.
Companies with the exemption letter are eligible to apply for benefits such as import duty and sales tax exemptions subject to meeting specific criteria.
It is advisable to talk to Emerhub’s local experts to discuss your needs. Our business advisors will apply for the exemption on your behalf and help you start your manufacturing operations in Malaysia.
Benefits of Getting a Manufacturing License in Malaysia for Your Business
Securing a manufacturing license in Malaysia offers several benefits for companies in the form of tax incentives and exemptions. The key benefits include:
- Pioneer Status: Companies granted Pioneer Status enjoy partial exemption from income tax payment for 5 years. During this period, they pay tax on only 30% of their statutory income. Additionally, if you have any unabsorbed capital allowances or accumulated losses, you can carry them forward.
- Investment Tax Allowance (ITA): Companies with a manufacturing license in Malaysia can also apply for ITA. The ITA offers a 60% allowance on qualifying capital expenditure such as plant, machinery, etc incurred within 5 years. This allowance can reduce your taxable income by up to 70%.
- Exemptions from Import Duties for Raw Materials and Machinery: Licensed manufacturers are eligible for duty exemptions on imported raw materials, components, machinery, and equipment used directly in the manufacturing process.
- Reinvestment Allowance (RA): The RA provides a 60% allowance on qualifying capital expenditure for expansion, modernization, or diversification projects. This benefit can be claimed for 15 consecutive years to support the growth of your company.
Steps to Apply for a Manufacturing License
1. Register Your Business in Malaysia
To apply for a manufacturing license, your company must have a legal presence in Malaysia. Therefore, the first step in the process is to register your company in Malaysia with SSM.
For manufacturing companies, a Private Limited Company (Sdn Bhd) is often the most suitable choice.
2. Obtain Mandatory Permits to Operate Your Business
Once you have the company incorporation certificate, the next step is to apply for the mandatory permits. These include:
- Business license issued by local authorities
- Signboard License
- Environmental permits (if applicable)
Moreover, depending on the activities you plan to carry out, you might need additional licenses. For instance, you might need an import license if you plan on importing raw materials or other items. Similarly, a WRT license might be necessary if the company is foreign-owned.
3. Apply for a Manufacturing License with MIDA
Once your business is registered and has basic permits, the next step is to apply for a manufacturing license with the Malaysian Investment Development Authority.
Following are the key documents required to apply for the manufacturing license in Malaysia:
- Certificate of Incorporation issued by SSM
- Business License
- Company profile
- Latest audited financial statements
- Detailed business plan
- List of machinery and equipment
- List of products
- Factory layout plan
Once you have all your documents in order, you can submit your application to MIDA.
Emerhub’s experts will gather the required documents on your behalf to ensure accuracy and compliance and submit the application for initial review.
4. Submit the Interim Approval Letter with Required Documents
After initial review, MIDA will issue an Interim Approval Letter if your application meets basic criteria as well as a list of additional documents.
To obtain the final approval, you need to submit these documents along with the Interim Approval Letter to MIDA within the specified timeframe
MIDA will then conduct a final review. If everything is in order, they will issue your official Manufacturing License.
Get Your Manufacturing License in Malaysia with Emerhub
Ready to secure your manufacturing license in Malaysia? Emerhub will handle the entire process on your behalf.
Our business advisors will gather all necessary documents and apply for a manufacturing license or exemption letter as per eligibility requirements.
For a more tailored consultation, fill out the form below and we will put you in touch with one of our local experts.
