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FOZL Services

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Manufacturing

Manufacturing is a core pillar of Malaysia’s economy, covering a wide range of sectors including Electrical & Electronics (E&E), machinery and metal products, chemicals, food processing, and more. To ensure that manufacturing activities comply with national industrial policies, environmental standards, and safety regulations, the Malaysian government requires certain manufacturers to obtain a Manufacturing License in order to operate legally.

 

What is a Manufacturing License?

The Manufacturing License is a mandatory permit issued by the Malaysian Investment Development Authority (MIDA) under the Industrial Coordination Act 1975 (ICA 1975). Companies that meet either of the following criteria must apply for the license:

  • Annual sales turnover exceeding RM2.5 million
  • More than 75 full-time employees

 

Why is the Manufacturing License Important?

  1. Legal Compliance: Ensures that operations are conducted lawfully, avoiding fines, shutdowns, or legal repercussions.
  2. Access to Tax Incentives: Licensed companies can apply for Pioneer Status (PS), Investment Tax Allowance (ITA), and other government incentives.

 

Policy-Linked Incentives for Manufacturing License:

The Malaysian government provides various tax policies for manufacturing companies. Companies holding a manufacturing license can apply for:

  1. Pioneer Status (PS): Eligible companies enjoy up to 70% income tax exemption for 5 years.
  2. Investment Tax Allowance (ITA): Qualified capital expenditures receive 60% tax allowance, deductible against up to 70% of statutory income over 5 years.
  3. Import Duty Exemptions: For raw materials, components, and machinery used in production, helping to reduce manufacturing costs.


Industries Requiring a Manufacturing License:

  • Electrical & Electronics (E&E): 
    Semiconductors, consumer electronics, photovoltaics
  • Machinery & Metal Products: 
    Auto parts, precision engineering, industrial machinery
  • Chemicals & Plastics: 
    Specialty chemicals, rubber and plastic goods
  • Food Processing: 
    Food production, beverage manufacturing, packaging
  • Others: 
    Textiles, furniture, medical devices, etc.

 

Malaysia’s Industrial Development Priorities:

  • Promotion of high-value sectors 
    (e.g., semiconductors, smart manufacturing)
  • Sustainable practices 
    (e.g., green manufacturing, circular economy)
  • Integration into global supply chains 
    (e.g., via RCEP)

The Manufacturing License is not only a compliance requirement, but also a strategic gateway to government support and increased market competitiveness.

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