Guidelines For Foreign Investor to do Business In Malaysia

7/30/2019 Guidelines For Foreign Investor to do Business In Malaysia

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GENERAL POLICIES,

FACILITIES ANDGUIDELINES

MALAYSIA:INVESTMENT IN

THE SERVICESSECTOR


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Introduction

This booklet is one o a series o 21 booklets prepared by MIDA or the

purpose o providing investors with relevant inormation on establishing

projects in the identied services sub-sectors in Malaysia. The completelist o booklets is as ollows:

Booklet 1: General Policies, Facilities and Guidelines

Booklet 2: Regional Operations

Booklet 3: Research and Development (R&D) Services

Booklet 4: Logistics Services

Booklet 5: Specialised Technical Support Services

Booklet 6: Inormation and Communication Technology Services

Booklet 7: Environmental Management Services

Booklet 8: Distributive Trade Services

Booklet 9: Tourism and Travel Related Services

Booklet 10: Education and Industrial Training Services

Booklet 11: Legal Services

Booklet 12: Accounting, Auditing and Taxation Services

Booklet 13: Integrated Engineering Services

Booklet 14: Architectural Consultancy Services

Booklet 15: Surveying Consultancy Services

Booklet 16: Medical and Health Care ServicesBooklet 17: Engineering and Energy Consultancy Services

Booklet 18: Management Consultancy Services

Booklet 19: Market Research Services

Booklet 20: Advertising Services

Booklet 21: Quick Reerence

The Ministry o International Trade & Industry (MITI) spearheads the development o industrial activities to urther

enhance Malaysias economic growth. As an agency under MITI, the Malaysian Investment Development Authority

(MIDA) is in charge o the promotion and coordination o industrial development in the country.

MIDA is the rst point o contact or investors who intend to set up projects in manuacturing and services sector in

Malaysia. With its headquarters in Malaysias capital city o Kuala Lumpur, MIDA has established a global network o

24 overseas ofces covering North America, Europe and the Asia Pacic to assist investors interested in establishing

manuacturing projects and services activities in Malaysia. Within Malaysia, MIDA has 12 branch ofces in the various

states to acilitate investors in the implementation and operation o their projects.

I you wish to investigate investment opportunities in Malaysia, please contact MIDA or more inormation as well as

assistance in your decision-making (please see the last page o contact details o MIDAs headquarters and state and

overseas ofces).

October 2012


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GENERAL POLICIES,


BOOKLET

1CHAPTER 1: GETTING STARTED1 INCORPORATING A COMPANY FOR SERVICES BUSINESS 41.1 Methods o Conducting Business in Malaysia 4

1.2 Procedures or Incorporation 5

1.3 Registration o Foreign Companies 7

1.4 E-Services 9

2 GUIDELINES ON EQUITY POLICY 9 2.1 Autonomous Liberalisation 9

2.2 Protection or Foreign Investment 11

CHAPTER 2: TAXATION1 TAXATION IN MALAYSIA 142 CLASSES OF INCOME ON WHICH TAX IS CHARGEABLE 143 COMPANY TAX 144 PERSONAL INCOME TAX 15

4.1 Resident Individual 15

4.2 Non-Resident Individual 18

5 WITHHOLDING TAX 186 REAL PROPERTY GAINS TAX 197 SALES TAX 208 SERVICE TAX 209 IMPORT DUTY 2110 EXCISE DUTY 2111 CUSTOMS APPEAL TRIBUNAL AND CUSTOMS RULING 2112 DOUBLE TAXATION AGREEMENT 22

CHAPTER 3: IMMIGRATION PROCEDURES1 ENTRY REQUIREMENTS INTO MALAYSIA 24

1.1 Passport or Travel Document 24

1.2 Visa requirement 24

1.3 Passes Requirement 26

2 EMPLOYMENT OF EXPATRIATE PERSONNEL 282.1 Types o Expatriate Post 29

2.2 Guidelines on the Employment Expatriate Personnel 29

3 APPLYING FOR EXPATRIATE POST 304 EMPLOYMENT OF FOREIGN WORKERS 30

CHAPTER 4: MANPOWER FOR INDUSTRY1 MALAYSIAS LABOUR FORCE 322 MANPOWER DEVELOPMENT 32

2.1 Facilities or Training in Industrial Skills 322.2 Human Resource Development 33

2.3 Management Personnel 34

3 LABOUR COSTS 35


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4 FACILITIES FOR RECRUITMENT 355 LABOUR STANDARDS 35

5.1 Employment Act, 1955 355.2 The Labour Ordinance, Sabah and the Labour 36

Ordinance, Sarawak

5.3 Employees Provident Fund Act, 1991 36

5.4 Employees Social Security Act, 1969 37

5.5 Workmens Compensation Act, 1952 38

5.6 Occupational Saety and Health Act, 1994 38

6 INDUSTRIAL RELATIONS 40 6.1 Trade Unions 40

6.2 Industrial Relations Act, 1967 41

6.3 Relation in Non-unionised Establishments 41

CHAPTER 5: BANKING, FINANCE AND EXCHANGEADMINISTRATION1 THE BANKING SYSTEM IN MALAYSIA 42

1.1 The Central Bank 42

1.2 Financial Institutions 42

1.3 Malaysia International Islamic nancial Centre 44

2 EXPORT CREDIT REFINANCING 452.1 Method o Financing 45

2.2 Period and Amount o Financing 46

2.3 Repayment 46

3 THE SECURITIES MARKET IN MALAYSIA 46

3.1 Securities Commission Malaysia 463.2 Bursa Malaysia 47

4 LABUAN FINANCIAL SERVICES 484.1 Labuan Financial Services Authority (Labuan FSA) 48

4.2 Business Activities o Labuan IBFC 49

4.3 Business Incentives in the Labuan IBFC 49

5 EXCHANGE CONTROL PRACTICE 515.1 Rules applicable to Non-Residents 51

5.2 Rules applicable to Residents 52

CHAPTER 6: FINANCIAL ASSISTANCE1 FINANCIAL ASSISTANCE FOR SMALL AND MEDIUM 54

ENTERPRISES (SMES)1.1 SME Corporation Malaysia 54

1.2 Malaysian Industrial Development Finance Berhad (MIDF) 58

2 MAJLIS AMANAH RAKYAT (MARA) FINANCING SCHEME 61FOR PROFESSIONALS

3 TABUNG USAHAWAN SISWAZAH (TUS)/GRADUATE 61ENTREPRENEUR FUND

4 MARKET DEVELOPMENT GRANTS 62


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CHAPTER 7: INTELLECTUAL PROPERTY PROTECTION1 INTELLECTUAL PROPERTY PROTECTION 69

1.1 Patents 691.2 Trade Marks 69

1.3 Industrial Designs 70

1.4 Copyrights 70

1.5 Layout Design o Integrated Circuit 71

1.6 Geographical Indications 71

CHAPTER 8: ENVIRONMENTAL MANAGEMENT1 POLICY 722 ENVIRONMENT REQUIREMENTS 73

2.1 Environmental Impact Assessment or Prescribed Activities 73

2.2 Who Can Conduct EIA Study 76

2.3 Site Suitability Evaluation 77

2.4 Written Notication or Permission to Construct 77

2.5 Written Approval or Installation o Incinerator, 78

Fuel Burning Equipment and Chimney

2.6 Licence to Occupy Prescribed Premises and 78

Prescribed Conveyance

2.7 Gaseous Emission and Euent Standards 78

2.8 Control on Ozone Depleting Substances 79

2.9 Scheduled Waste Management 79

CHAPTER 9: INFRASTRUCTURE SUPPORT

1 INDUSTRIAL LAND 811.1 Industrial Estates 81

1.2 Free Zones 81

1.3 Licensed Manuacturing Warehouse 81

2 ELECTRICITY SUPPLY 813 WATER SUPPLY 824 TELECOMMUNICATION SERVICES 825 AIR CARGO FACILITIES 836 SEA PORTS 847 CARGO TRANSPORTATION 84

7.1 Container Haulage 84

7.2 Freight Forwarding 85

8 HIGHWAYS 859 RAILWAY SERVICES 8510 MSC MALAYSIA 85

CHAPTER 10: INTERNATIONAL TRADE AGREEMENTS1 GENERAL AGREEMENT ON TRADE IN SERVICES (GATS) 882 ASEAN FRAMEWORK AGREEMENT ON SERVICES (AFAS) 883 FREE TRADE AGREEMENTS (FTAS) 90

SUMMARY OF COMMITMENTS OF FREE TRADE AGREEMENTS 91


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4 General Policies, Facilities and Guidelines

CHAPTER 1: GETTING STARTED

1. INCORPORATING A COMPANY FOR SERVICES BUSINESS

1.1 Methods o Conducting Business in Malaysia

In Malaysia, a business may be conducted:

i. By an individual operating as a sole proprietor, or

ii. By two or more (but not more than 20) persons in partnership, or

iii. By a locally incorporated company or by a oreign company registered under the

provisions o the Companies Act, 1965.

All sole proprietorships and partnerships in Malaysia must be registered with the Companies

Commission o Malaysia (CCM) under the Registration o Businesses Act, 1956. In the case o

partnerships, partners are both jointly and severally liable or the debts and obligations o

the partnership should its assets be insucient. Formal partnership deeds may be drawn up

governing the rights and obligations o each partner but this is not obligatory.

1.1.1 Company Structure

The Companies Act, 1965 governs all companies in Malaysia. The Act stipulates that a company

must be registered with the CCM in order to engage in any business activity.

There are three (3) types o companies that can be incorporated under the Companies Act,

1965:

i. A company limited by shares is a company ormed on the principle that the members

liability is limited by the memorandum o association to the amount, i any, unpaid on the

shares taken up by them.

ii. In a company limited by guarantee, the liability o the members is limited by the

Memorandum and Articles o Association to the amount which the members have

undertaken to contribute to the assets o the company in the event the company is

wound up.

GENERAL POLICIES,



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5General Policies, Facilities and Guidelines

iii. An unlimited company, is a company ormed on the principle o having no limit placed

on the liability o its members.

1.1.2 Company Limited by Shares

The most common company structure in Malaysia is a company limited by shares. Such limited

companies may be incorporated either as a Private Limited Company (identied through thewords Sendirian Berhad or Sdn Bhd as part o the companys name) or a Public Limited

Company (identied through the words Berhad or Bhd as part o the companys name).

A company having a share capital may be incorporated as a private company i its

Memorandum and Articles o Association:

i. Restricts the right to transer its shares

ii. Limits the number o its members to 50, excluding employees in the employment o the

company or its subsidiary and some ormer employees o the company or its subsidiary

iii. Prohibits any invitation to the public to subscribe or its shares and debentures

iv. Prohibits any invitation to the public to deposit money with the company or xed periodso payable at call, whether interest-bearing or interest-ree.

A public company can be ormed or, alternatively, a private company can be converted into a

public company subject to Section 26 o the Companies Act, 1965. Such a company can oer

shares to the public provided:

i. It has registered a prospectus with the Securities Commission.

ii. It has lodged a copy o the prospectus with the CCM on or beore the date o its issue.

A public company can apply to have its shares quoted on the Bursa Malaysia subject to

compliance with the requirements laid down by the exchange. Any subsequent issue o

securities (e.g. issue by way o rights or bonus, or issue arising rom an acquisition, etc.) requires

the approval o the Securities Commission.

1.2 Procedure or Incorporation

To incorporate a company, an application must be made to the CCM using Form 13A together

with a payment o RM30 (or each name applied) in order to determine i the proposed name

o the intended company is available. The application will be approved i name is available and

the proposed name will be reserved or the applicant or three months.

The ollowing incorporation documents are to be submitted to the CCM within the three

months rom the date o the approval o the companys name:

i. Memorandum and Articles o Association

ii. Declaration o Compliance (Form 6)

iii. Statutory Declaration by a person beore appointment as a director, or by a promoter

beore incorporation o a company (Form 48A).

iv. Additional documents which would include:

TheoriginalForm13A

AcopyoftheletterfromCCMapprovingthenameofthecompany

Acopyoftheidentitycardofeachdirectorandcompanysecretaryoracopyofthe

passport where a oreign director is appointed.


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The Memorandum o Association documents the companys name, the objectives, the amount

o its authorised capital (i any) proposed or registration and its division into shares o a xed

amount.

The Articles o Association describes the regulations governing the internal management o

the aairs o the company and the conduct o its business.

Once the Certicate o Incorporation is issued, the company shall be a body corporate, capable

o exercising the unctions o an incorporated company and o suing and being sued. It has

a perpetual succession under common seal with power to hold land, but with such liability

on the part o the members to contribute to its assets in the event o it being wound up, as

provided or in the Companies Act, 1965.

At present, the incorporation o local companies can be completed within one (1) day through

the introduction o the single interaction counter which was introduced since 1 April 2010.

Incorporation o Companies Clients Charter as at 1 April 2010

CCM undertakes to process, approve and register a complete application in a speedy and

ecient manner within the time period stated as ollows:

Activity Time

COMPANY REGISTRATION

Incorporation o a company 1 day

Conversion o status 1 day

Change o company name 1 day

Commencement o business or public companies 1 day

Registration o charge 2 days

Approval o a trust deed 5 days

Registration o prospectus 3 days

Uncertied copy o company documents 30 mins

Certied copy o company documents 1 hour

* Application or the approval o company name only, may be made without incorporating the

company.** Time taken begins rom the moment payment is received until the certicate is issued.

1.2.1 Requirements o a Locally Incorporated Company

A company must maintain a registered oce in Malaysia where all books and documents

required under the provisions o the Act are kept. The name o the company shall appear in

legible romanised letters, together with the company number, on its seal and documents.

A company cannot deal with its own shares or hold shares in its holding company. Each equity

share o a public company carries only one vote at a poll at any general meeting o the company.

A private company may, however, provide or varying voting rights or its shareholders.


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The secretary o a company must be a natural person o ull age who has his principal or only

place o residence in Malaysia. He must be a member o a prescribed body or is licensed by the

Registrar o Companies. The company must also appoint an approved company auditor to be

the company auditor in Malaysia.

In addition, the company shall have at least two directors who each has his principal or only

place o residence within Malaysia. Directors o public companies or subsidiaries o publiccompanies normally must not exceed 70 years o age. A director o the company need not

necessarily be a shareholder o the company.

1.3 Registration o Foreign Companies

A oreign company may carry on business in Malaysia by either:

i. incorporating a local company; or

ii. registering a branch in Malaysia.

Foreign company is dened under the Companies Act, 1965 as:

i. a company, corporation, society, association or other body incorporated outside Malaysia;

or

ii. an unincorporated society, association, or other body which under the law o its place o

origin may sue or be sued, or hold property in the name o the secretary or other ocer

o the body or association duly appointed or that purpose and which does not have its

head oce or principal place o business in Malaysia.

1.3.1 Registration Procedures

i. An applicant must rst conduct a name search in order to determine i the proposed

name or the intended company is available. The name to be used to register the oreign

company should be the same as registered in its country o origin.

Applications should be submitted to the CCM using Form 13A with a payment o RM30

or each name applied. When the proposed companys name is approved by CCM, it shall

be valid or three months rom the date o approval.

ii. Upon approval, applicants must submit the ollowing registration documents to the CCM

within three months rom the date o approval:

a. A certied copy o the certicate o incorporation or registration o the oreign

company;

b. A certied copy o the oreign companys charter, statute or Memorandum and

Articles o Association or other instrument dening its constitution;

c. Form 79 (Return by Foreign Company Giving Particulars o Directors and Change o

Particulars)

I the list includes directors residing in Malaysia who are members o the local board

o directors o the oreign company, a memorandum stating their powers that are

executed by or on behal o the oreign company, should be submitted to CCM.


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d. A memorandum o appointment or power o attorney authorising the person(s)

residing in Malaysia, to accept on behal o the oreign company, any notices required

to be served on such oreign company;

e. Form 80 (Statutory Declaration by Agent o Foreign Company); and additional

documents consisting o the original Form 13A as well as a copy o the letter rom

CCM approving the name o the oreign company.

Note:

I any o the described registration documents are in languages other than Bahasa Malaysia or

English, a certied translation o such documents in Bahasa Malaysia or English shall be required.

iii. Registration ees shall be made to the CCM as per the ollowing schedule:

Authorised Share Capital RM Fees Payable RM

Up to 100,000 1,000

100,001 - 500,000 3,000

500,001 - 1,000,000 5,000

1,000,001 - 5,000,000 8,000

5,000,001 - 10,000,000 10,000

10,000,001 - 25,000,000 20,000

25,000,001 - 50, 000,000 40,000

50,000,001 - 100,000,000 50,000

100,000,001 and above 70,000

In determining the amount o registration ees, the nominal share capital o the oreign

company should rst be converted to the Malaysian currency (Ringgit Malaysia) at the

prevailing exchange rate.

In the event a oreign company does not prescribe any share capital, a fat rate o RM1,000

shall be paid to CCM.

iv. A Certicate o Registration will be issued by CCM upon compliance with the registration

procedures and submission o duly completed registration documents.

v. Upon approval, the company or its agent is responsible or ensuring compliance o the

Companies Act, 1965. Any change in the particulars o the company or in the companys

name or authorised capital must be led with CCM within one month rom the date o

change together with the appropriate ees. Every company is required to keep proper

accounting records. Annual return must be lodged with CCM once in every calendar year.

Note:

Foreigners are advised to seek the services o an advocate and solicitor, an accountant or a

practising company secretary or urther assistance.


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1.4 E-Services

E-Services were introduced as an alternative to the traditional method o conducting business

with CCM i.e. via counter services. It allows or the lodgement o documents (e-Lodgment

Service) and the procurement o corporate and business inormation (e-Ino Service). Payments

can be made via credit card, direct debit or prepaid accounts.

E-lodgment or also known as e-ling would enable companies, business or their authorised

personnel to lodge selected statutory required documents over the Internet through the

myGovernment portal/Public Service Portal (PSP). Whereas e-Ino service enables or the

online purchase o corporate and business inormation.

For urther inormation please visit the CCM website at www.ssm.com.myor www.ssm-eino.com.my

2. GUIDELINES ON EQUITY POLICY

The Companies Act, 1965 does not stipulate any equity conditions on Malaysian incorporatedcompanies. However, to increase local participation in business, the government encourages

joint-ventures between Malaysian and oreign investors. Specic equity conditions may be

imposed or specic approvals, operating licences, permits or registrations by the regulating

Ministries/Agencies, depending on the activities undertaken. Specic equity policy or services

activities covered in this series o guidebooks can be obtained rom the relevant booklets.

2.1 Autonomous Liberalisation

Recognising the growth potential in the services sector, the Government liberalised 27 services

sub-sectors on 22 April, 2009, with no equity condition imposed. These sub-sectors are:

Computer and Related Services

(i) Consultancy services related to the installation o computer hardware (CPC 841);

(ii) Sotware implementation services - systems and sotware consulting services:

systems analysis services; systems design services; programming services and systems

maintenance services (CPC 842);

(iii) Data processing services - input preparation services: data processing and tabulation

services; time sharing services and other data processing services (CPC 843);

(iv) Data base services (CPC 844);

(v) Maintenance and Repair Services o Computers (CPC 845); and

(vi) Other services - data preparation services: training services; data recovery services; and

development o creative content (CPC 849).


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Health and Social Services

(i) All veterinary services (CPC 9320);

(ii) Welare services delivered through residential institutions to old person and the

handicapped (CPC 93311);

(iii) Welare services delivered through residential institutions to children (CPC 93312);

(iv) Child day-care services including day-care services or the handicapped (CPC 93321);

(v) Vocational rehabilitation services or handicapped (CPC 93324);

Tourism Services

(i) Theme Park (CPC 96194);

(ii) Convention and Exhibition Centre (seating capacity o above 5,000) (CPC 87909);

(iii) Travel Agencies and Tour Operators Services (For inbound travel only) (CPC 7471);

(iv) Hotel and Restaurant services (or 4 and 5 star hotels only) (CPC 64110 and CPC 64199);

(v) Food Serving Services (or services provided in 4 and 5 star hotels only) (CPC 642);

(vi) Beverage Serving Services or consumption on the premises (or services provided in 4

and 5 star hotels only) (CPC 643);

Transport Services

(i) Class C Freight Transportation (Private Carrier License to transport own goods) (CPC

7123)

Sporting and other recreational services

(i) Sporting Services (CPC 9641) (Sports event promotion and organisation services)

Business Services

(i) Regional Distribution Centre (CPC 87909)

(ii) International Procurement Centre (CPC 87909)

(iii) Technical Testing and Analysis Services - composition and purity testing and analysis

services, testing and analysis services o physical properties, testing and analysis services

o integrated mechanical and electrical systems, and technical inspection services (CPC

8676).

(iv) Management Consulting Services - general, nancial (excluding business tax) marketing,

human resources, production and public relations services (CPC 8650).


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Rental/Leasing Services without Operators

(i) Rental/Leasing services o ships that excludes cabotage and oshore trades (CPC 83103).

(ii) Rental o cargo vessels without crew (Bareboat Charter) or international shipping (CPC

83103).

Supporting and Auxiliary Transport Services

(i) Maritime Agency services (CPC 7454)

(ii) Vessel salvage and refoating services (CPC 7454)

The Government had urther liberalised an additional 18 services sub-sectors in 2011 to allow

up to 100% oreign equity participation in phases. These sub-sectors are:

(i) Telecommunication services (Network Service Providers and Network Facilities

Providers licences);(ii) Telecommunication services (Application Service Providers licence);

(iii) Courier services;

(iv) Private hospital services;

(v) Medical specialists services;

(vi) Dental specialists services

(vii) Private higher education institution with university status;

(viii) International schools;

(ix) Technical and vocational secondary education services;

(x) Technical and vocational secondary education services or students with special

needs;

(xi) Skills training centres;

(xii) Accounting and taxation;

(xiii) Architectural services;

(xiv) Engineering services;

(xv) Legal services;

(xvi) Departmental stores and specialty stores;

(xvii) Incineration services; and

(xviii) Quantity surveying services.

The Government will be progressively undertaking liberalisation o the other services sub-

sectors on an on-going basis.

Please reer to MITI website www.miti.gov.my or inormation on liberalisation.

2.2 Protection o Foreign Investment

Malaysias commitment in creating a sae investment environment has attracted more than

8,000 international companies rom over 40 countries to make Malaysia their oshore base.


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Investment Guarantee Agreements

Malaysias readiness to conclude Investment Guarantee Agreements (IGAs) is a testimony o

the governments desire to increase oreign investor condence in Malaysia.

IGAs will:

Protectagainstnationalisationandexpropriation

Ensure prompt and adequate compensation in the event of nationalisation or

expropriation

Providefreetransferofprots,capitalandotherfees

Ensure settlementof investmentdisputesunder theConventionontheSettlementof

Investment Disputes o which Malaysia has been a member since 1966.

Malaysia has concluded Investment Guarantee Agreements (IGAs) with the ollowing

groupings and countries (in alphabetical order):

Groupings

* Association o South-East Asian Nations (ASEAN)

* Organisation o Islamic Countries (OIC)

Countries

Albania

Algeria

Argentina

AustriaBahrain

Bangladesh

Belgo-Luxembourg

Bosnia Herzegovina

Botswana

Burkina Faso

Cambodia

Canada

Chile, Republic o

China, Peoples Republic o

CroatiaCuba

Czech Republic

Denmark

Djibouti, Republic o

Egypt

Ethiopia, Republic o

Finland

France

Germany

Ghana

Guinea

Hungary

IndiaIndonesia

Iran

Italy

Jordan

Kazakhstan

Korea, North

Korea, South

Kuwait

Kyrgyz, Republic o

Laos

LebanonMacedonia

Malawi

Mongolia

Morocco

Namibia

Netherlands

Norway

Pakistan

Papua New Guinea

Peru

Poland

Romania

Saudi ArabiaSenegal

Slovak, Republic o

Spain

Sri Lanka

Sudan, Republic o

Sweden

Switzerland

Syrian Arab Republic

Taiwan

Turkey

TurkmenistanUnited Arab Emirates

United States o America

United Kingdom

Uruguay

Uzbekistan

Vietnam

Yemen

Zimbabwe


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Convention on the Settlement o Investment Disputes

In the interest o promoting and protecting oreign investment, the Malaysian government

ratied the provisions o the Convention on the Settlement o Investment Disputes in 1966.

The Convention, established under the auspices o the International Bank or Reconstruction

and Development (IBRD), provides international conciliation or arbitration through the

International Centre or Settlement o Investment Disputes located at IBRDs principal ocein Washington.

Kuala Lumpur Regional Centre or Arbitration

The Kuala Lumpur Regional Centre or Arbitration was established in 1978 under the auspices

o the Asian-Arican Legal Consultative Organisation (AALCO) - an inter-governmental

organisation cooperating with and assisted by the Malaysian government.

A non-prot organisation, the Centre serves the Asia Pacic region. It aims to provide a system

to settle disputes or the benet o parties engaged in trade, commerce and investments with

and within the region.

Any dispute, controversy or claim arising out o or relating to a contract, or the breach,

termination or invalidity shall be decided by arbitration in accordance with the Rules or

Arbitration o the Kuala Lumpur Regional Centre or Arbitration.


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CHAPTER 2: TAXATION

1. TAXATION IN MALAYSIA

Income o any person including a company, accruing in or derived rom Malaysia or received

in Malaysia rom outside Malaysia is subject to income tax.

However, income received in Malaysia by any person other than a resident company carrying

on business o banking, insurance or sea or air transport or a year o assessment derived rom

sources outside Malaysia is exempted rom tax.

To modernise and streamline the tax administration system, the sel-assessment system was

implemented or companies, sole proprietors, partnerships, cooperatives and salaried groups

and the assessment o income tax is based on a current year basis.

2. CLASSES OF INCOME ON WHICH TAX IS CHARGEABLE

The income which tax is chargeable is income in respect o:

gainsorprotsfromabusiness,forwhateverperiodoftimecarriedon;

gainsorprotsfromanemployment(salaries,remunerations,etc.);

dividends,interestsordiscounts;

rents,royaltiesorpremiums;

pensions,annuitiesorotherperiodicalpayments;

othergainsorprotsofanincomenature.

Chargeable income is arrived at ater adjusting or allowable expenses incurred in theproduction o the income, capital allowances and incentives where applicable. Section 34

o the Income Tax Act, 1967 allows specic provisions or bad or doubtul debts. However,

no deduction or book depreciation is allowed although capital allowances are granted.

Unabsorbed business losses may be carried orward indenitely to oset against business

income including companies with pioneer status, provided that the cessation o the period

alls on or ater 30 September 2005.

3. COMPANY TAX

A company, whether resident or not, is assessable on income accrued in or derived romMalaysia. Income derived rom sources outside Malaysia and remitted by a resident company

is exempted rom tax, except in the case o the banking and insurance business, and sea and

air transport undertakings. A company is considered a resident in Malaysia i the control and

management o its aairs are exercised in Malaysia.


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Eective rom the year o assessment 2009, the corporate tax rate is at 25%. This rate is also

applicable to the ollowing entities:

i. a trust body;

ii. an executor o an estate o an individual who was domiciled outside Malaysia at the time

o his death; and

iii. a receiver appointed by the court.

A person carrying on petroleum upstream operations is subject to a Petroleum Income Tax o

38%. With eect rom the year o assessment 2010, the assessment system on income derived

rom upstream petroleum companies under the Petroleum (Income Tax) Act, 1967 be changed

to the current year assessment system; and sel assessment system. Income tax or the year o

assessment 2010 based on income received in 2009 shall be allowed to be paid by installments

or ve years.

The deduction or payment o zakat made by a company, cooperative society or trust body

shall not exceed 2.5% o its aggregate income in the relevant year o assessment.

Deductions are allowed or contributions made to:

i. the Government, State Government, local authorities; or

ii. institutions or organisations approved by the Director General o Inland Revenue Board

Malaysia; or

iii. sports activities approved by the Minister o Finance or Commissioner o Sports; or

iv. project o national interest approved by the Minister o Finance.

The contributions in respect o ii, iii, and iv shall not exceed 10% o the aggregate income o

the company in the relevant year o assessment with eect rom the year o assessment 2009.

4. PERSONAL INCOME TAX

All individuals are liable to tax on income accrued in and derived rom Malaysia or received

in Malaysia rom outside Malaysia. Income remitted to Malaysia by a resident individual is

exempted rom tax. A non-resident individual will be taxed only on income earned in Malaysia.

The rate o tax depends on the individuals resident status, which is determined by the duration

o his stay in the country as stipulated under Section 7 o the Income Tax A, 1967. Generally,

an individual who is in Malaysia or at least 182 days in a calendar year is regarded as a taxresident.

4.1 Resident Individual

A resident individual is taxed on his chargeable income ater deducting personal relies at a

graduated rate rom 0% to 26% with eect rom the year o assessment 2010.


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4.1.1 Personal Relie

The chargeable income o resident individuals is computed by deducting the personal relies

rom the total income. The types o relie available are as ollows:

No. Individual Relie Types Amount RM

1 Sel and Dependent 9,000

2 Medical expenses or parents 5,000 (Limited)

3 Basic supporting equipment 5,000 (Limited)

4 Disabled Individual 6,000

5 Education Fees (Individual) 5,000 (Limited)

6 Medical expenses or serious diseases 5,000 (Limited)

7 Complete medical examination 500 (Limited)

8 Purchase o books, journals, magazines and publications 1,000 (Limited)9 Purchase o personal computer 3,000 (Limited)

10 Net saving in SSPNs scheme 3,000 (Limited)

11 Purchase o sport equipment or sport activities 300 (Limited)

12 Subscription ees or broadband registered in the name o 500 (Limited)

the individual

13 Interest expended to nance purchase o residential 10,000 (Limited)

property. Relie o up to RM10,000 a year or three

consecutive years rom the rst year the interest is paid.

Subject to the ollowing conditions:

(i) the taxpayer is a Malaysian citizen and a resident;

(ii) limited to one residential unit;

(iii) the sale and purchase agreement is signed between

10th March 2009 and 31st December 2010; and

(iv) the residential property is not rented out.

Where:

(a) 2 or more individuals are eligible to claim relie or

the same property; and(b) total interest expended by those individuals exceeds

the allowable amount or that year.

Each individual is allowed an amount o relie or each year

based on the ollowing ormula:

A x B

C

where: A = total interest allowable in the relevant year;

B = total interest expended by the relevant

individual in the relevant year;C = total interest expended by all the individuals.


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No. Individual Relie Types Amount RM

14 Husband/Wie/Alimony Payments 3,000 (Limited)

15 Disable Wie/Husband 3,500

16 Ordinary Child relie 1,000

17 Child age 18 years old and above, not married and receiving 1,000

ull-time tertiary education

18 Child age 18 years old and above, not married and pursuing 4,000

diplomas or above qualication in Malaysia @ bachelor

degree or above outside Malaysia in program and in Higher

Education Institute that is accredited by related Government

authorities

19 Disabled child 5,000

Additional exemption o RM4,000 disable child age 18 years

old and above, not married and pursuing diplomas or above

qualication in Malaysia @ bachelor degree or above outside

Malaysia in program and in Higher Education Institute that

is accredited by related Government authorities

20 Lie insurance and EPF 6,000 (Limited)

21 Premium on new annuity scheme or additional premium

paid on existing annuity scheme commencing payment

rom 01/01/2010 (amount exceeding RM1,000 can be

claimed together with lie insurance premium) 1,000 (Limited)

22 Insurance premium or education or medical benet 3,000 (Limited)

4.1.2 Tax Rebate

The tax charged on a resident individual is reduced by way o the ollowing rebates:

i. Income Tax Rebates For Resident Individual With Chargeable Income Less Than RM35,000

An individual with a chargeable income not exceeding RM35,000 enjoys a rebate o

RM400 eective rom year o assessment 2009. Where the wie is not working or the wies

income is jointly assessed, she also enjoys a urther rebate o RM400. Similarly, a wie whois assessed separately will also enjoy a RM400 rebate, provided her chargeable income

does not exceed RM35,000.


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ii. Other Tax Rebates

No. Tax Rebate Year o Assessment2009 Onwards RM

a Separate Assessment

Wie 400

Husband 400

b Combined Assessment

Wie 400

Husband 400

Total 800

c Assessment Where Husband Or Wie Does Not

Have Any Total Income

Wie 400

Husband 400

Total 800

No. Tax Rebate RM

a Zakat/Fitrah Subject to the maximum o tax charged

b Fees/Levy on Subject to the maximum o tax charged

Foreign Workers

4.2 Non-Resident Individual

Eective rom year o assessment 2010, a non-resident individual is liable to tax at the rate o

26% without any personal relie. However, he can claim rebates in respect o ees paid to the

government or the issuance o an employment work permit.

5. WITHHOLDING TAX

Non-resident individuals are subject to a nal withholding tax o:

10% on special classes o income such as:

a. in consideration o services rendered by the person or his employee in connection with

the use o property or rights, installation o or operation o any plant, machinery or other

apparatus;

b. in consideration o technical advice, assistance or services rendered in connection with

technical management or administration o any scientic, industrial or commercial

undertaking, venture, project or scheme;

c. rent or other payments made under any agreement or arrangement or the use o any

moveable property.

Withholding tax will not be applicable or income received in respect o the services (a) and (b)

rendered or perormed outside Malaysia.


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Eective rom 30 August 2008 until 31 December 2012, withholding tax exemption is given

to non-residents experts on income received by providing technical training services in the

ollowing elds:

a. Post graduate courses in inormation and communication technology (ICT), electronics

and lie sciences;

b. Post basic courses in nursing and allied health care; andc. Aircrat maintenance engineering courses.

Eective rom 1 January 2009, to reduce the cost o technical services provided by non-

residents, reimbursements or disbursement relating to hotel accommodation in Malaysia will

not be included in the computation o gross technical ees or the purpose o withholding tax.

In respect o withholding tax not paid, a penalty o 10% is imposed only on the amount o

unpaid tax and not on the total payment made to a non-resident.

6. REAL PROPERTY GAINS TAX

Capital gains are generally not subject to income tax in Malaysia. However, real property

gains tax is charged on chargeable gains arising rom the disposal o real property situated

in Malaysia or o interest, options or other rights in or over such land as well as the disposal o

shares in real property companies.

Eective rom 1 January 2012, gains rom the disposal o residential and commercial properties

are taxed between 0% and 10% depending on the holding period o real properties as ollows:

The RPGT rates will not burden genuine property owners as they are given exemption and the

payment o RPGT is based on net gains as ollows:

i. RPGT exemption on gains rom the disposal o one unit o residential property once in a

lietime by an individual who is a citizen or a permanent resident o Malaysia;

ii. RPGT exemption on gains rom disposal o property between parents and children,

husband and wie, grandparents and grandchildren;

iii. RPGT is charged only on net gains ater deducting all related costs such as purchase price,

renovation costs and incidental costs e.g. legal ees and stamp duty; and

iv. Exemption up to RM10,000 or 10% o the net gains, whichever is higher, is given to an

individual.

For urther inormation on company and individual tax, visit www.hasil.gov.my.

Holding Period RPGT Rates

Companies Individual IndividualCitizen & PR Non-Citizen

Up to 2 years 10% 10% 10%

Exceeding 2

until 5 years 5% 5% 5%

Exceeding 5 years 0% 0% 0%


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7. SALES TAX

Sales tax is a single stage tax imposed at the import or manuacturing levels. In Malaysia,

manuacturers o taxable goods are required to be licensed under the Sales Tax Act, 1972.

Companies with a sales turnover o less than RM100,000 and companies with Licensed

Manuacturing Warehouse (LMW) status are exempted rom this licensing requirement.

However, companies with a sales turnover o less than RM100,000 have to apply or a certicateo exemption rom licensing.

Licensed manuacturers are taxed on their output while manuacturers that are not licensed or

exempted rom licensing need to pay tax on their inputs. To relieve small-scale manuacturers

rom paying sales tax upront on their inputs, they can opt to be licensed under the Sales Tax

Act, 1972 in order to purchase tax-ree inputs. With this, small-scale manuacturers can opt to

pay sales tax only on their nished products.

Sales tax is generally at 10%. However, raw materials and machinery or use in the manuacture

o taxable goods are eligible or exemption rom the tax, while inputs or selected non-taxable

products are also exempted.

Certain non-essential oodstus, alcoholic beverages, tobacco/cigarettes and building

materials are taxed at 5%, general goods at 10%, compounds or making beverages at 20% and

certain petroleum products and motor oil are taxed at individual specic rates. Certain primary

commodities, basic oodstus, basic building materials, certain agricultural implements and

heavy machinery or use in the construction industry are exempted. Certain tourism and

sports goods, books, newspapers and reading materials are also exempted.

8. SERVICE TAXA service tax applies to certain prescribed goods and services in Malaysia including ood,

drinks and tobacco; provision o rooms or lodging and premises or meetings, conventions,

and cultural and ashion shows; health services, and provision o accommodation and ood by

private hospitals.

The tax also applies to proessional and consultancy services provided by accountants,

advocates and solicitors, engineers, architect, surveyors (including valuers, assessors and

real estate agents), advertising agencies, consultancy rms, management service provider,

insurance companies, motor vehicle service and repair centres, telecommunication services

companies, security and guard services agencies, recreational clubs, estate agents, parkingspace services operators and courier service rms.

However, proessional services provided by a company to companies within the same group

will be exempted rom the current service tax o 6%. Courier services provided rom a point

within Malaysia to a destination outside Malaysia will also be exempted rom the service tax

o 6%.

Generally, the imposition o service tax is subject to a specic threshold based on an annual

turnover ranging rom RM150,000 to RM500,000 such as those

i. car rental agencies licensed under the Commercial Vehicles Licensing Board Act, 1987

having an annual sales turnover o RM150,000 and above,


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ii. employment agencies having an annual sales turnover o RM150,000 and above;

iii. companies providing management services, including project management and

coordination services, having an annual sales turnover o RM150,000 and above;

iv. hotels having more than 25 rooms and restaurants within such hotels.

Eective rom 1 January 2010, service tax shall be imposed on credit cards and charge cards

including those issued ree o charge as ollows:

i. RM50 per year on the principal card; and

ii. RM25 per year on the supplementary card

Service tax will be collected on the date the card is issued, on the completion o year or on the

date o renewal.

9. IMPORT DUTY

In Malaysia, import duty is mostly imposed ad valorem although some specic duties areimposed on a number o items. Nevertheless, in line with trade liberalisation, import duties

on a wide range o raw materials, components and machinery have been abolished, reduced

or exempted.

Furthermore, Malaysia is committed to the ASEAN Common Eective Preerential Taris (CEPT)

scheme under which all industrial goods traded within ASEAN are imposed import duties o

0% to 5%.

Malaysia continues to participate in negotiations o ree trade arrangements in areas o trade

in goods, rules o origin, and investments. To date, Malaysia has concluded bilateral ree trade

agreements with Japan, Pakistan, New Zealand and India and the regional agreements under

ASEAN with China, Japan, Korea Australia/New Zealand and India. Import duties between FTA

partners are subject to specic reduction and elimination schedules under these agreements.

10. EXCISE DUTY

Excise duties are levied on selected products manuactured in Malaysia, namely cigarettes,

tobacco products, alcoholic beverages, playing cards, mahjong tiles and motor vehicles.

While excise duties are charged at ad valorem rates or motor vehicles, playing cards and

mahjong tiles, or cigarettes, tobacco products and alcoholic beverages they are imposed at acombination o specic and ad valorem rates.

11. CUSTOMS APPEAL TRIBUNAL AND CUSTOMS RULING

Customs Appeal Tribunal (CAT) is an independent body, establish to decide on appeals against

the decision o the Director General o Customs pertaining to matters under the Customs Act,

1967, Sales Tax Act, 1972, Service Tax, Act 1975 and Excise Act, 1976.

In addition, Customs Ruling is introduced under the Customs Act, 1967, Sales Tax Act, 1972,

Service Tax Act, 1975 and Excise Act, 1976 to provide business sectors with the elements o

certainty and predictability in planning their business activities.


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The ruling issued by the Customs and agreed by the applicant shall be legally binding the

applicant or a specic period time. The main eatures o Customs Ruling are:

i. applications or Customs Ruling can be made with respect to classication o goods,

determination o taxable services and the principles o determination o value o goods

and services;

ii. application should be made in writing together with sucient acts and prescribed ee;iii. applications may be made beore the goods are imported or the services are provided

upon which Customs will issue an customs ruling.

12. DOUBLE TAXATION AGREEMENT

Double Taxation Agreement (DTA) is an agreement between two countries seeking to avoid

double taxation by dening the taxing rights o each country with regard to cross-border fows

o income and providing or tax credits or exemptions to eliminate double taxation.

The objectives o Malaysian DTA are as ollows:

i. to create a avourable climate or both inbound and outbound investments;

ii. to make Malaysias special tax incentives ully eective or taxpayers o capital exporting

countries;

iii. to obtain a more eective relie rom double taxation compared to relie gained under

unilateral measures; and

iv. to prevent evasion and avoidance o tax.

Like many other countries in the developed as well as the developing world, Malaysia too

cannot absolve hersel rom the need to acilitate her trade and investments with the outside

world through international tax treaty network with other countries. The increased pace o

industrialisation coupled with increased oreign direct investment in the country necessitated

tax treaty arrangements with other countries to provide investors with certainty and guarantees

in the area o taxation. As at 31 Januari 2012, the eective DTAs are as ollows:

Albania

Argentina*

Australia

Austria

Bahrain

BangladeshBelgium

Canada

China

Chile

Croatia

Czech Republic

Denmark

Egypt

Fiji

Finland

FranceGermany

Hungary

India

Indonesia

Iran

Ireland

ItalyJapan

Jordan

Kazakhstan

Korea, Republic

Kuwait

Kyrgyz, Republic

Laos

Lebanon

Luxembourg

Malta

MauritiusMongolia

Morocco

Myanmar

Namibia

Netherlands

New Zealand

NorwayPakistan

Papua New Guinea

Philippines

Poland

Qatar

Romania

Russia

San Marino

Saudi Arabia

Seychelles

SingaporeSouth Arica


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* Limited Agreement

Qatar: Income Tax/Withholding Taxes - or Year o Assessment beginning on or ater 1 January

2010 and Petroleum Income Tax - or Year o Assessment beginning on or ater 1 January 2011

In the case o Taiwan (represented by Taipei Economic and Cultural Oce in Malaysia) double

taxation relie is given by way o the ollowing Income Tax Exemption Order:

i. P.U.(A) 201 (1998)

ii. P.U.(A) 202 (1998)

The withholding tax or Interest, Royalties and Fees or Technical Services are reduced to 10%,10% and 7.5% respectively.

For more inormation, please visit www.hasil.gov.myor email [email protected]

Spain

Sri Lanka

Sudan

Sweden

Switzerland

Syria

Thailand

Turkey

Turkmenistan

United Arab Emirates

United Kingdom

United States o America*

Uzbekistan

Vietnam

Venezuela


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CHAPTER 3: IMMIGRATION PROCEDURES

1. ENTRY REQUIREMENTS INTO MALAYSIA

1.1 Passport or Travel Document

All persons entering Malaysia must possess valid national passports or other internationallyrecognised Travel Documents valid or travelling to Malaysia. These documents must be valid

or at least six months rom the date o entry into Malaysia.

Those with passports not recognised by Malaysia must apply or a document in lieu o Passport

as well as visa issued by the Malaysian Representative Oce abroad. Applications or visas can

be made at the nearest Malaysian Representative Oce in the respective countries.

In countries where Malaysian Representative Oce has not been established, applications can

be made to the nearest British High Commission or Embassy.

1.2 Visa Requirement

A visa is an endorsement in a passport or other recognised travel document o a oreigner

indicating that the holder has applied or permission to enter Malaysia and that permission

has been granted.

Foreign nationals who require a visa to enter Malaysia must apply and obtain a visa in advance

at any Malaysian Representative Oce abroad beore entering the country.

Visa requirement by countries are as ollows:

Afghanistan*

Angola

Bhutan

BurkinaFaso

Burundi

CentralAfricanRepublic

China

Colombia

Comoros

CongoDemocratic

Republic

CongoRepublic

CoteDIvoire

Djibouti

EquatorialGuinea

Eritrea

Ethiopia

Guinea-Bissau

HongKong(Certicateof

Identity or Document o

Identity)

India

Liberia

Mali

Myanmar(normal

passport)

Nepal

Niger

Rwanda

RepublicofSerbia&

Republic o Montenegro

Taiwan

UnitedNations

(Laissez Passer)

WesternSahara

Countries that require visa

Bangladesh

Cameroon

Ghana

Mozambique

Nigeria

Pakistan

SriLanka

Commonwealth countries

that require visa


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Albania

Algeria

Argentina

Australia

Austria(Vienna) Bahrain

Belgium

Bosnia-Herzegovina

Brazil

Croatia

Cuba

CzechRepublic

Denmark

Egypt

Finland

France Germany

Hungary

Iceland

Ireland

Italy

Japan

Jordan

Kirgystan

Kuwait

KyrgyzRepublic

Lebanon

Liechtenstein

Luxembourg

Morocco

Netherland Norway

Oman

Peru

Poland

Qatar

Romania

St.Marino

SaudiArabia

Slovakia

SouthKorea

Spain Sweden

Switzerland

Tunisia

Turkey

Turkmenistan

UnitedArabEmirates

UnitedKingdom

Uruguay

Yemen

Countries that require

visa or stay exceeding 3

months


Armenia

Azerbaijan

Barbados

Belarus

Benin

Bolivia

Bulgaria

Cambodia

CapeVerde

Chad Chile

CostaRica

Equador

ElSavador

Estonia

Gabon

Georgia

Greece

Guatemala

GuineaRepublic

Haiti

Honduras

HongKongSAR

Kazakhstan

Latvia

Lithuania

MacaoSAR

Macedonia

Madagascar

Maldova

Mauritania Mexico

Monaco

Mongolia

Nicaragua

NorthKorea

NorthYemen

Panama

Paraguay

Portugal

Russia

SaoTomeandPrincipe


or stay exceeding 1 month


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For nationals o United States o America, no visa is required or social, business or academic

purposes visits (except or employment).

For nationals o Israel, visas are required and prior permission must be obtained rom

Malaysias Ministry o Home Aairs. However or nationals o Republic o Serbia and Republic

o Montenegro, visas without permissions are required.

For nationals o ASEAN countries (except Myanmar), no visa is required or a stay less than

one month. For a stay exceeding one month, a visa will be required (except rom nationals o

Brunei and Singapore).

Nationals rom other countries other than those stated above (except Israel), are allowed to

enter Malaysia without visa or social visits not exceeding one month.

Note:

* Visa with reerence i.e. with the approval o Malaysias Immigration Department is required.

1.3 Passes Requirements

Other than application or entry or the purpose o social or business visits, application or visit

passes must be made beore the arrival in the country.

A pass is an endorsement in the passport constituting permission to stay or an approved

duration. Foreigners who visit Malaysia must obtain the pass at the point o entry besides visa

(where required) which allows him to stay temporarily in Malaysia.

All such applications must have sponsorship in Malaysia whereby the sponsors agree to be

responsible or the maintenance and repatriation o the visitors rom Malaysia i necessary.

Iran

Iraq

Libya

Macao(TravelPermit/

Portugal Certicate o

Identity)

Palestine

SierraLeone

Somalia

SouthYemen

Syria


or stay exceeding 14 days

Senegal

Slovenia

Sudan

Surinam

Tajikistan Togo

Ukraine

UpperVolta

Uzbekistan

VaticanCity

Venezuela

Zaire Zimbabwe



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Passes given to oreign visitors upon arrival are as ollows:

i Visit Pass Social Short Term

A Visit Pass is issued to oreigners or the purpose o a social or/and business visit, such as:

Owners and company representatives entering Malaysia to attend a companymeeting, conerence or seminar, inspect the companys accounts or to ensure the

smooth running o the company

Investorsorbusinessmenenteringtoexplorebusinessandinvestmentopportunities

or setting up manuacturing plant

Foreignrepresentativesofcompaniesenteringtointroducegoodsformanufacture

in Malaysia, but not to engage in direct selling or distribution

Propertyownersenteringtonegotiate,sellorleaseproperties

Foreign journalist or reporters from mass media agencies entering to cover any

event in Malaysia

Participantsinsportingevents

Studentssittingforexaminationsinlocaluniversityorongoodwillmission VisitorenteringonotheractivitiesthanaboveasapprovedbytheDirectorGeneral

o Immigration

These passes cannot be used or employment or or supervising the installation o new

machinery or the construction o a actory.

ii Visit Pass Social Long Term

Long term social visit pass may be issued to a oreigner or temporary stay in Malaysia or

a period o not less than six months. Extension may be given based on visitors eligibility

and upon ullling certain conditions.

Foreign spouses to Malaysians, holding a long term social visit pass are allowed to be

engaged on any orm o paid employment or in any business or proessional occupation

without converting their Social Visit Pass status to Employment Pass or Visit Pass

(Temporary Employment)

iii Visit Pass Temporary Employment

This is issued to oreigners who enter the country to take up employment or less than 24

months.

iv Employment Pass

This is issued to oreigners who enter the country to take up employment or a minimum

period o two years. Employment pass is issued ater the applicant has obtained the

approval or expatriate post rom the relevant authorised agencies.

v Visit Pass Proessional

This is issued to oreigners or the purpose o engaging on short-term contract with any

agency.


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The categories o oreigners who are eligible are:

The validity o the pass varies but it does not exceed twelve months at any one time.

Applications should be made by the agency concerned.

vi Dependant Pass

This acility is accorded to amilies o expatriates ocials. Dependant Pass is issued to

spouse and children o the Employment Pass holders. This pass may be applied together

with the application or an employment pass or ater the employment pass is issued.

vii Students Pass

This is issued to oreigners who wish to study in Malaysia in any educational institutions

which courses have been approved by Malaysias Ministry o Higher Education and the

intake o the oreign student has the approval rom Malaysias Ministry o Home Aairs

2. EMPLOYMENT OF EXPATRIATE PERSONNEL

The Malaysian government is desirous that Malaysians are eventually trained and employed

at all levels o employment. Thus, companies are encouraged to train more Malaysians so that

the employment pattern at all levels o the organisation refects the multi-racial compositiono the country.

Notwithstanding this, where there is a shortage o trained Malaysians, companies are allowed

to bring in expatriate personnel i.e. key post or time post. Key posts are posts that are

permanently lled by oreigners whereby time post are position lled on specied time.

researchersrecognisedbytheGovernmentof

Malaysia;

membersofaninternationalorganisations;

invitedlecturers/speakers;

expertsintheinstallationormaintenanceofmachines; thosewhoprovidetechnicaltrainings;etc.

thoseenteringforlmingorperformance;

thoseenteringforpromotionofalbumsornew

products; etc.

thoseenteringforreligiouspurposes

Proessionals/Volunteers

Artistes

Missionaries (Islam or

other religions)


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2.1 Types o Expatriate Posts

Expatriates are oreigners who are qualied to ull the ollowing positions:

a. Key Post

These are high level managerial posts in oreign-owned private companies and rmsoperating in Malaysia. Key posts are posts essential or companies to saeguard their

interest and investments. The expatriates are responsible in determining the companys

policies in achieving its goal and objectives.

b. Time Post

i. Executive Post

These are intermediate level o managerial and proessional posts. The post requires

proessional qualications, practical experience, skills and expertise related to the

respective jobs. The expatriate are responsible in implementing the companyspolicies and supervision o sta.

ii. Non-Executive Post

These are posts or the perormance o technical jobs that require specic technical

or practical skills and experience.

2.2 Guidelines on the Employment o Expatriate Personnel

There are two stages in the employment o expatriates:

a. Application or an expatriate post rom relevant authorised bodies determined by the

nature o the business.

b. Upon approval o the expatriate posts by the approving bodies, the company must submit

an application to the Immigration Department or endorsement o the employment pass.

The guidelines or the employment o expatriate personnel are as ollows:

An expatriate personnel who is transerred rom one post to another within the same company

will be required to obtain a new employment pass. His original employment pass will be

amended to refect the change in post. A new expatriate personnel replacing another mustalso obtain a resh employment pass.

All employment passes are valid or the period approved or the post. However, or key

post holders, employment passes will be issued up to ve-year renewable basis except in

circumstances where:

thevalidityoftheexpatriatespassportislessthanveyears,

theexpatriatesemploymentcontractislessthanveyears,or

theemployerrequirestheservicesoftheexpatriateforlessthanveyears.

Holders o employment passes will be issued with multiple entry visas valid or the duration o

the employment pass.


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3. APPLYING FOR EXPATRIATE POSTS

All applications or expatriate posts rom new and existing companies (including those not

involving expansion or diversication) in the manuacturing related services and promoted

services activities should be submitted to MIDA.

4. EMPLOYMENT OF FOREIGN WORKERS

In Malaysia, oreign workers can be employed in the manuacturing, construction, plantation,

agricultural, services and domestic help sector.

Employment o oreign workers is allowed or eleven sub sectors: restaurant, cleaning services,

cargo handling, launderette, caddy in gol club, barber, wholesale/ retail, textile, metal/scraps/

recycle activities, welare homes and hotel/resort island.

Only nationals rom the specied countries below are allowed to work in the selected sectors:

Approved Sectors Nationals o:

Manufacturing Indonesia

Plantation Cambodia

Agriculture Nepal

Construction Myanmar

Servicessector Laos

Vietnam

Philippines (male only)

Pakistan

Sri Lanka

Thailand

Turkmenistan

Uzbekistan

Kazakhstan

Services(cooks,wholesale/retail,barber, India

metal/scraps/recycle, textile)

Construction(xingofhighvoltage

cable only)

Agriculture

Plantation

Approval is based on the merits o each case and subject to conditions that will be determined

rom time to time. Applications to employ oreign workers will only be considered when eorts

to nd qualied local citizens and permanent residents have ailed.


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An annual levy on oreign workers is imposed as ollows:

Approved Sectors Annual Levy

Manuacturing RM1,250

Construction RM1,250

Plantation RM 590

Agricultural RM 410

Domestic Help RM 410

Services

Welfarehomes RM600

Islandresorts RM1,200

Others RM1,850

All applications or oreign workers should be submitted to the One Stop Centre, Ministry o

Home Aairs except or applications or oreign domestic helpers which should be submittedto Malaysias Immigration Department.

For urther inormation on employment o oreign workers, please visit the Ministry o Home

Aairs website at www.moha.gov.my.


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CHAPTER 4: MANPOWER FOR INDUSTRY

1. MALAYSIAS LABOUR FORCE

Malaysia oers the investor a diligent, disciplined, educated and trainable labour orce.

Malaysian youths who enter the labour market would have undergone at least 11 years o

school education i.e. up to secondary school level, and are thereore easy to be trained in newskills.

To cater to the countrys growing demand or technically trained workers, the Malaysian

government has taken measures to increase the number o engineers, technicians and other

skilled personnel graduating each year rom local as well as oreign universities, colleges, and

technical and industrial training institutions.

In addition, Malaysia enjoys a ree and competitive labour market where employer-employee

relationship is cordial and harmonious. Labour costs in Malaysia are relatively low while

productivity levels remain high in comparison with industrialised countries.

2. MANPOWER DEVELOPMENT

The Department o Skills Development (DSD), under the Ministry o Human Resources, was

established in May 1989 which previously known as the National Vocational Training Council

(NVTC). Eective 1 September 2006, (NVTC) has changed its name to become the Department

o Skills Development (DSD) upon the gazetting o the National Skills Development Act

(NASDA). For the purpose o ormulating, promoting, and coordinating Malaysias vocational

and industrial training strategy and programme in keeping with the countrys technological

and economic development needs.

The DSD coordinates the setting up o all public and private training institutions, evaluates

the demand or existing and uture skills, identies uture vocational and industrial training

needs and will continue to develop standards under the National Occupational Skills Standard

(NOSS). To-date, there are more than 700 certied standards which cover certicate, diploma

and advanced diploma qualications. Under NOSS, 20 major industry sectors have been

identied or uture standards development.

2.1 Facilities or Training in Industrial Skill

In Malaysia, vocational and technical schools, polytechnics and industrial training institutionsprepare youths or employment in various industrial trades. While they are mostly run by

government agencies, several private initiatives complement the governments eorts in

producing the skilled workers needed by industry.


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The main government agencies involved in training are:

Ministry o Human Resources, currently runs 21 industrial training institutes (ITIs). TheITIs oer industrial skills training programmes at basic, intermediate and advanced levels

or pre-employment or job entry level. These include apprenticeship programmes in the

mechanical, electrical, building and printing trades as well as programmes to upgrade

skills and train instructors. The Ministry also operates the Centre or Instructors andAdvanced Skills Training (CIAST), the Japan-Malaysia Technical Institute (JMTI) and our

advanced technology training centres (ADTECs).

Ministry o Higher Education, established in March 2004, supervises public and privateuniversities, 27 polytechnics and 72 community colleges to prepare skilled manpower

or industries. At the post-secondary level, the ormal training conducted in polytechnics

and community colleges aims to produce trained manpower at the semi-proessional

level in engineering, commerce and services sectors.

Ministry o Education runs more than 90 technical schools oering technical and

vocational courses. School leavers rom the technical schools can either seek employmentat entry level or pursue their post-secondary education at diploma level in Polytechnics

or certicate level in Community Colleges or other training institutions under the

supervision o other ministries.

Ministry o Youth and Sports, which provides basic, intermediate and advanced levelso industrial skills training through its 16 National Youth Skills Training Centres and

Higher National Youth Skills Training Centre. Short-term courses and skills upgrading

programmes are also being conducted.

Majlis Amanah Rakyat MARA, or the Council o Trust or the Indigenous People underthe purview o the Ministry o Rural and Regional Development. MARA operates more

than 20 skills training institutes in dierent parts o the country which oer programmes

at basic, intermediate, advanced and proessional levels.

2.2 Human Resources Development Fund

The Human Resources Development Fund (HRDF) was established in 1993 and administered

by the Human Resources Development Council (HRDC). In line with corporatisation exercise,

the HRDC is now known as Pembangunan Sumber Manusia Berhad (PSMB).

The HRDF operates on the basis o a levy/grant system. Employers who have paid the levy willqualiy or training grants rom the und to deray or subsidise training costs or their Malaysian

employees.


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The Human Resource Development Levy is imposed by the Government on specied groups

o employers or the purpose o employee training and skills upgrading. Employers with ten

(10) employees and above in 21 selected services industries are required to contribute to the

HRDF. These services industries are:

Note:

* For hypermarkets, supermarkets and departmental stores, only employers with 50 employees and

above are required to register.

Currently, the rate o nancial assistance is 100% o the allowable costs incurred or training

in Malaysia and up to 50% or costs incurred overseas, subject to the availability o levy in the

employers accounts with PSMB. With eect rom 1 July 2012, the rate o nancial assistance

or overseas retraining and skills upgrading in advanced technologies, new technologies,

development o new products, research and development, engineering, marketing and

strategic management has been increased rom 50% to 100%.

To date, PSMB has developed and implemented various schemes such as apprenticeship

scheme, industrial training scheme, joint training scheme, computer-based training scheme,

SME on-the-job training, etc. to provide highly trained workorce to the industries.

To acilitate employers in sourcing or suitable training programmes over the Internet, PSMB

has developed the HRD portal at www.hrdportal.com.my. This portal acts as a one-stop centre

that allows training providers to market their training programmes more eectively and

eciently through the interactive acilities available in the portal.

For more inormation on HRDF please visit www.hrd.com.my

2.3 Management Personnel

As at 2010, 92,979 degree and 57,185 diploma holders graduated rom Malaysias 20 publichigher education institutions (IPTA) and other private higher education institutions (IPTS).

These graduates are rom various disciplines ranging rom business management, inormation

technology, engineering, medicine, biotechnology, science and mathematics to art and design.

Besides universities and colleges, agencies like the Malaysia Productivity Corporation, the

Malaysian Institute o Management and the Malaysian Institute o Personnel Management

also provide training or management personnel. In addition many o Malaysias management-

level personnel have been educated overseas.

Hotel

Advertising

Directselling

Hypermarkets*

Supermarkets*

Departmentalstores*

Securityservices

Telecommunication

Shipping

Airtransport

Freightforwarding

Portservices

Warehousing

Railwaytransport

Commerciallandtransport

Touroperatingbusiness

(in-bound tour only)

Computerservices

Postal&courierservices

Privatehighereducation

Privatehospitalservices

Research&development

Engineeringsupport&

maintenance services


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3. LABOUR COSTS

Basic wage rates vary according to location and industrial sector. Supplementary benets

such as public holidays, annual leave, sick leave, maternity leave, compassionate leave, ree

uniorms, ree or subsidised transport, perormance incentives, shit allowance and other

benets, vary rom company to company.

Salaries and ringe benets oered to management and executive personnel also vary

according to the industry and employment policy o the company. Most companies provide

ree medical treatment and hospitalisation, personal accident and lie insurance coverage,

mileage reimbursement, annual bonus, retirement benets and enhanced contributions to

the Employees Provident Fund.

For more inormation on salaries and ringe benets in the manuacturing sector, please visit

Malaysia Employers Federation (MEF) at www.me.org.my

4. FACILITIES FOR RECRUITMENT

Besides registered private employment agencies, employers and job seekers can seek

assistance rom government employment oces located throughout the country. Employers

seeking to recruit workers can obtain detailed inormation on job seekers registered with

these employment oces whose unctions include:

Undertakingpublicitycampaignstoaidemployersrecruitmentdrive

Arrangingpreparatoryworkrelatingtoholdinginterviewsandaptitudetests

The polytechnics and the community colleges also provide acilities or prospective employersto conduct interviews or graduating students in their institutions.

5. LABOUR STANDARDS

The Department o Labour is responsible or the administration o labour laws in order to

maintain industrial harmony. The labour laws stipulate the minimum requirements that apply

to all types o employment. Flexibility in the operation o businesses is acilitated by application

or exemption to the Director o Labour, Department o Labour.

5.1 Employment Act, 1955

The main legislation, the Employment Act, 1955 applies to all employees in Peninsular Malaysia

and the Federal Territory o Labuan whose monthly wages do not exceed RM1,500 and all

manual labourers irrespective o their wages. Employers may draw up the contract o service

but it should not contravene the minimum benets stipulated under the law. Employees who

earn between RM1,500 and RM5,000 a month can seek redress at the Labour Court on terms

and conditions in their individual contracts o service.


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Some o the obligations o an employer under the Employment Act, 1955 are as ollows:

i. Every employee must be given a written contract o service containing the terms and

conditions o the employment, including provisions relating to the termination o

contract.

ii. Maintaining o labour register pertaining to personal particulars o employees, payment

o wages and deduction o wages.iii. Special provisions or the protection o emale employees pertaining to night work and

maternity benets.

iv. Normal hours o work and other provisions relating to numbers o working hours.

v. Entitlement o paid annual leave, sick leave and public holidays.

vi. Rate o payment or overtime and extra work.

vii. Procedure and responsibility o the employer in employment o oreign employees.

5.2 The Labour Ordinance, Sabah and the Labour Ordinance, Sarawak

The Labour Ordinance, Sabah and the Labour Ordinance, Sarawak regulates the administration

o Labour Laws in their respective states. The provisions o the Labour Ordinance, Sabah andthe Labour Ordinance, Sarawak are similar to the provisions o the Employment Act, 1955.

However, there are some provisions which are dierent and pertinent to note:

These provisions are:-

Special Provisions Relating to the Employment o Children and Young Persons

The Ordinance prescribe the conditions under which a child and young person may be

employed. A child is a person under the age o 15 years and a young person is a person who

has attained 15 years o age but below 18 years old.

Employment o Non-Resident Employees

It is mandatory or any employer wishing to employ any non-resident employee must rst

obtain a licence to employ non-resident employee rom the Director o Labour Sabah/

Sarawak. A non-resident employee is dened as any person who does not belong Sabah/

Sarawak as provided or under Section 71 o the Immigration Act, 1959/1963.

5.3 Employees Provident Fund Act, 1991

The Employees Provident Fund Act, 1991 stipulates a compulsory contribution or employees.Under the Act, all employers and employees (except those who are listed under the First

Schedule o the Employees Provident Fund Act, 1991) must contribute to the Employees

Provident Fund (EPF). The rate o contributions shall be as ollows:

Age Group Below 55 Years

Employers share - (a) Monthly Wages RM5,000 and below

Minimum o 13% o the employees monthly wages


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(b) Monthly Wages Exceed RM5,000

Minimum o 12% o the employees monthly wages

Employees share - Minimum o 11% o the employees monthly wages

[Reer To Third Schedule (Part A) o the EPF Act, 1991]

Age Group 55-75 years

Employers share - (a) Monthly Wages RM5,000 and below

Minimum o 6.5 % o the employees monthly wages

(b) Monthly Wages Exceed RM5,000

Minimum o 6 % o the employees monthly wages

Employees share - Minimum o 5.5% o the employees monthly wages

[Reer To Third Schedule (Part C) o the EPF Act, 1991]

All oreign workers and expatriates and their employers are exempted rom compulsory

contributions. They can, however choose to contribute and the applicable rates are as ollows:

Age Group Below 55 Years

Employers share - RM5.00 per employee per month

Employees share - 11% o the employees monthly wages

[Reer To Third Schedule (Part B) o the EPF Act, 1991]

Age Group 55-75 years

Employers share - RM5.00 per employees per month

Employees share - 5.5% o the employees monthly wages

[Reer To Third Schedule (Part D) o the EPF Act, 1991]

All employers must register their employees with EPF immediately upon employment except

or those who are exempted under the Act.

5.4 Employees Social Security Act, 1969

The Social Security Organisation (SOCSO) provides two social security schemes to protect the

welare o employees and their dependents under the Employees Social Security Act, 1969.

The two social security schemes are:

EmploymentInjuryInsuranceScheme

InvalidityPensionScheme


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Employment Injury Insurance Scheme

Employment Injury Insurance Scheme provides protection to employees who suer rom work

related occupational diseases or accidents. The benets provided under the Employment Injury

Insurance Scheme consists o Medical Benet, Temporary Benet, Permanent Disablement

Benet, Constant Attendance Allowance, Dependants Benet, Funeral Benet, Rehabilitation

Benet and Education Benet.

Invalidity Pension Scheme

The Invalidity Pension Scheme provides 24-hour coverage to employees against invalidity or

death due to any cause not connected with his employment. However, the employee must

ulll the condition to be eligible or invalidity pension. Benets provided under the Invalidity

Pension Scheme are Invalidity Pension, Invalidity Grant, Constant Attendance Allowance,

Survivors Pension, Funeral Benet, Rehabilitation Benet and Education Benet.

Employer Eligibility

Any employer who hires one or more employees as dened under the Act is required to

register and make contributions to SOCSO. Contributions to SOCSO are compulsory under the

Act or eligible employers and employees. Present contribution rates or employer are 1.75%

o the insured person (employees) salaries and 0.5% or employees.

Employee Eligibility

Employees receiving a monthly salary o three thousand ringgit (RM3,000) or less are required

to contribute to SOCSO. Employees with a monthly salary o more than RM3,000, who have

not registered and contributed to SOCSO, have the option o registering and contributing as

long as both employer and employee agree to contribute. However, when an employee is

already contributing under the said Act, he will still be eligible to contribute and be covered

regardless o his monthly salary thereater. The principal Once In Always In is applicable.

5.5 Workmens Compensation Act, 1952

The Act provides or the payment o compensation or injuries sustained in accidents during

employment and imposes an obligation on the employers to insure workers. The Foreign

Workers Compensation Scheme (Insurance) Order, 2005 issued under this Act requires

every employer employing oreign workers to insure with the panel o insurance companies

appointed under this order and to eect payment o compensation or injuries sustained romaccidents during and outside working hours.

5.6 Occupational Saety and Health Act, 1994

The Department o Occupational Saety and Health (DOSH), under the Ministry o Human

Resources, is responsible or administrating and enorcing legislation related to occupational

saety and health. DOSH ensures that the saety, health and welare o people at work as well

as others are protected rom hazards resulting rom occupational activities in the various

sectors such as:

manufacturing;

miningandquarrying;


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construction;

agriculture,forestryandshing;

utilities(gas,electricity,waterandsanitaryservices);

transport,storageandcommunication;

wholesaleandretailtrades;

hotelsandrestaurants;

nance,insurance,realestateandbusinessservices;and publicservicesandstatutoryauthorities.

This enorcement activity is governed by three legislations which are:

OccupationalSafetyandHealthAct(OSHA),1994;

FactoriesandMa