How to Set Up a Manufacturing Company in Malaysia: Licenses and Compliance Guide

Malaysia is a strategic manufacturing base for businesses seeking access to Southeast Asia and international supply chains. However, incorporating a company is only the beginning. Before production starts, manufacturers must identify the company registrations, tax obligations, business licenses, safety approvals and environmental requirements applicable to their products, premises and operations.

Here is a practical guide to setting up a manufacturing company in Malaysia.

1. Incorporate a Malaysian Company with SSM

Most manufacturers operate through a Malaysian private limited company, commonly known as a Sdn. Bhd.

A private company must generally have:

1. At least one shareholder;
2. At least one director who ordinarily resides in Malaysia;
3. A registered office in Malaysia; and
4. A qualified company secretary appointed in accordance with the Companies Act 2016.

The company’s proposed manufacturing, import, export and trading activities should be properly identified during the incorporation and business-planning process.

Company incorporation does not automatically authorise the company to operate a factory. Separate manufacturing, premises and regulatory approvals may still be required.

2. Apply for a MIDA Manufacturing Licence

Under the Industrial Co-ordination Act 1975, a manufacturing company generally requires a Manufacturing Licence when it has:

• Shareholders’ funds of RM2.5 million or more; or
• 75 or more full-time paid employees.

Companies below both thresholds may apply to MIDA for confirmation of exemption from the Manufacturing Licence requirement, commonly referred to as an ICA10 exemption.

Applications for a Manufacturing Licence, ICA10 exemption, manufacturing incentives and certain duty exemptions may be submitted through MIDA’s InvestMalaysia portal.

Application portal:
https://investmalaysia.mida.gov.my/

MIDA forms and guidelines:
https://www.mida.gov.my/forms-and-guidelines/

The applicable requirements should be reviewed before committing to substantial machinery, factory premises or capital expenditure.

3. Obtain Local Authority Licences

The factory must be located in premises approved for manufacturing or industrial use.

Depending on the relevant city council, municipal council or district council, the company may require:

• Business premises or factory licence;
• Signboard or advertisement licence;
• Planning permission;
• Building-plan approval;
• Renovation approval;
• Change-of-use approval; and
• Approval for workers’ accommodation, where applicable.

The requirements differ according to the factory’s location, building classification and business activities.

Investors should confirm the zoning, approved use and license requirements before signing a tenancy agreement or purchasing industrial premises.

MalaysiaBiz business licensing portal:
https://malaysiabiz.gov.my/

The relevant local authority may also operate its own online licensing portal.

4. Confirm LHDN Registration and Tax Compliance

A company incorporated online through SSM may generally receive its company Tax Identification Number through the relevant registration process.

Nevertheless, the company must confirm its tax records and comply with the applicable Malaysian tax requirements, including:

• Corporate income tax;
• CP204 estimated tax instalments;
• Annual income tax return submission;
• Employer tax registration;
• Monthly Tax Deduction for employees;
• Withholding tax;
• e-Invoice requirements; and
• Transfer pricing rules for related-party transactions.

LHDN MyTax portal:
https://mytax.hasil.gov.my/

Manufacturing companies dealing with related companies, shareholders, directors or overseas group entities should review whether transfer pricing documentation is required.

Related-party charges involving management fees, services, royalties, financing, purchases or sales should be supported by proper agreements, commercial justification and appropriate documentation.

 

5. Register with the Royal Malaysian Customs Department

A manufacturer producing taxable goods may be required to register for Sales Tax.

Registration is generally required when the sales value of taxable manufactured goods exceeds RM500,000 within a 12-month period.

Manufacturers should also review:

• Sales Tax classification of finished goods;
• Exemptions for qualifying raw materials and components;
• Import duties;
• Import and export permits;
• Machinery or equipment exemptions;
• Licensed Manufacturing Warehouse status; and
• Free Industrial Zone facilities.

Sales Tax registration and information:
https://mysst.customs.gov.my/

MIDA duty and Sales Tax exemption applications:
https://investmalaysia.mida.gov.my/

The RM500,000 registration threshold applies to manufacturers of taxable goods. The Sales Tax treatment depends on the product classification, manufacturing activities and applicable exemption orders.

6. Comply with DOSH Requirements

The Department of Occupational Safety and Health, also known as DOSH or JKKP, regulates workplace safety and certain machinery.

Depending on the factory’s operations, the company may need to submit applications, registrations or notifications relating to:

• A new factory or workplace;
• Boilers;
• Pressure vessels;
• Lifting machinery;
• Cranes and hoists;
• Machinery inspection;
• Certificates of fitness;
• Chemical exposure;
• Noise exposure; and
• Appointment of competent persons.

DOSH provides online applications for factories, machinery, inspections and other workplace-safety matters through the MyKKP portal.

MyKKP portal:
https://mykkp.dosh.gov.my/

Manufacturers should verify the applicable DOSH requirements before installing or operating regulated machinery.

7. Comply with Environmental Requirements

Manufacturers must assess whether their activities generate:

• Air emissions;
• Industrial effluent;
• Scheduled waste;
• Sewage discharge;
• Excessive noise;
• Chemical pollution; or
• Other environmental risks.

Depending on the manufacturing process, the company may need to address:

• Environmental Impact Assessment;
• Written notification or approval;
• Air-emission controls;
• Industrial-effluent treatment;
• Scheduled-waste registration;
• Waste inventory and consignment records;
• Pollution-control equipment; and
• Appointment of environmental competent persons.

An Environmental Impact Assessment is not required for every manufacturing project. It generally applies when the proposed project falls within a prescribed activity under the relevant environmental legislation.

The Department of Environment provides online services, including eSWIS for scheduled-waste reporting and management.

DOE online services:
https://www.doe.gov.my/en/online-services-2/

eSWIS scheduled-waste portal:
https://eswisv2.doe.gov.my/

Environmental requirements should be reviewed during the factory-selection and planning stages rather than after production has commenced.

8. Review BOMBA Fire-Safety Requirements

A factory may require fire-plan approval, inspection or a Fire Certificate, depending on the building’s use, size, design and risk classification.

Common fire-safety requirements may include:

• Fire extinguishers;
• Emergency exits and lighting;
• Fire alarms;
• Hose reels and hydrants;
• Sprinkler systems;
• Controls for storing flammable materials; and
• Emergency response procedures.

Not every factory automatically requires a Fire Certificate. The requirement depends on whether the premises fall within the applicable designated-premises rules.

The company should consult the relevant local Fire and Rescue Department office before renovating the premises or commencing factory operations.

Official BOMBA portal:
https://www.bomba.gov.my/

Set Up Your Manufacturing Business with Servecorp Group

Servecorp Group provides one-stop business setup and compliance support, including:

• Malaysian company incorporation;
• Foreign-owned company setup;
• Company secretarial services;
• Accounting and financial reporting;
• Corporate tax compliance;
• Sales Tax registration support;
• Payroll and employer compliance;
• Transfer pricing advisory and documentation;
• Business license coordination; and
• Ongoing corporate advisory services.

Planning to Set Up a Manufacturing Company in Malaysia?

Contact Servecorp Group today and let our team guide you from company incorporation to accounting, taxation, transfer pricing and ongoing regulatory compliance.

Servecorp Group
Beyond Compliance, Empowering Business Success
Your Trusted Corporate Advisory Partner in Penang, Malaysia

Start your manufacturing business in Malaysia with the right structure and compliance foundation.