Malaysia Manufacturing License

Malaysia manufacturing license

• The Malaysia manufacturing license is required for businesses already operating in the booming manufacturing sector of the country. As of May 2025, sales value in the manufacturing industry reached RM158.7 billion, exemplifying steady growth from sub-sectors such as food, electronics, and metals. The manufacturing industry is thriving in Malaysia, employing over 2.4 million people and attracting high foreign and domestic investment in the sector that led to total approvals of RM68.4 billion in registered projects for the first half of 2025.  
• Any entrepreneur wanting to register company in Malaysia for manufacturing must navigate various regulatory requirements to apply for this license. Obtaining a manufacturing license in Malaysia is crucial for business legitimacy and regulatory compliance. Tetra Consultants provides expert advice at every step from company registration to securing the manufacturing license, so that clients can enter the manufacturing market in Malaysia profitably and competitively through tailored solutions and regulatory experience with the licensing process. 

Advantages of obtaining Malaysia manufacturing license

Adherence to legal obligations

• Acquiring a manufacturing license in Malaysia ensures that a business is operating lawfully in accordance with the Industrial Coordination Act 1975. Legal compliance is essential to avoid penalties, like fines or imprisonment while demonstrating a business commitment to comply with government policies. 

Eligibility for tax incentives and allowances 

• Licensed manufacturers will qualify for significant tax benefits, including Pioneer Status, which grants an exemption on partial income tax for five years, and Investment Tax Allowance, which provides an allowance of 60% on qualifying capital expenditures. Together, this provides a substantial reduction in tax obligations and promotes profitability. 

Deductions on import duties 

• Manufacturers with a valid license are exempted from import duties for raw materials, machinery, components, and equipment which is utilized in direct manufacturing, which lowers the overall cost of doing business and helps maintain or enhance competitiveness. 

Heightened credibility with the market 

• A manufacturing license indicates to customers, suppliers, and partners that they can expect assurance of quality along with trust, which is also great for overall business reputation and selling in both domestic and international marketplaces. 

Assess to different government grants and support programs 

• Provides licensed manufacturers with access to a variety of government grant programs, such as reinvestment allowances, R&D grants, or human resources training grants, in order to facilitate overall business expansion and encourage innovation. 

Advancement in international trade 

• The license allows Malaysian manufacturers to be part of the global supply chain and/or export market by demonstrating compliance with Malaysia’s quality and safety standards. 

Advancement in sustainable development 

• The licensing process requires businesses to illustrate their commitment to sustainable manufacturing practices, while enabling Malaysia to meet its economic and environmental priorities. 

Timeline for obtaining Malaysia manufacturing license

• In Malaysia, obtaining a manufacturing license typically takes between 3 to 5 months, depending on the completeness of the application and the nature of the business. The application process can only be initiated after the company’s incorporation. For companies that qualify for an exemption from the manufacturing license, it generally takes around 2 to 3 months to receive approval. It is advisable to finish setting up the company and opening the bank account before initiating the application process, as the regulator will confirm the precise requirements upon application. 

Types of Malaysia manufacturing license

Manufacturing license application 

• This is required for businesses that have shareholder equity of RM2.5 million or more, or that have 75 or more full-time employees. For this license, businesses are required to comply with the provisions of the Industrial Coordination Act 1975, which includes requirements to maintain the capital investments per employee at a minimum of RM140,000, and that at least 80% employees are citizens of Malaysia.  

• The license is mandatory for a business to operate legally, issued by the Ministry of Investment, Trade, and Industry (MITI) through the Malaysian Investment Development Authority (MIDA). It is subject to compliance with regulations and other benefits such as tax incentives, exemptions on duties, and grants. 

Exemption from manufacturing license 

• This is relevant for smaller manufacturers who cannot achieve the thresholds of shareholder funds or full-time employees. A company with less than RM2,500,000 shareholder funds and fewer than 75 employees can apply for an exemption through MIDA by completing an ICA10 form via the MIDA website.  

• The exemption permits smaller manufacturers to operate without the need for a new manufacturing license but is still subject to regulation. Smaller manufacturers may still voluntarily register with MIDA and avail themselves of some tax incentives and benefits of government schemes to invest in companies. The exemption aims to address issues with compliance while allowing industry development during the course of small-scale operations. 

Activities allowed under Malaysia manufacturing license

Making and modifying articles 

• Performing the making, modifying, merging, embellishing, completing, or in any other way working on or changing any article intended to be used, sold, shipped, or otherwise delivered or disposed of. 

Assembly of parts 

• The making or assembly of parts in the manufacturing process. 

Ship repairing 

• Ship repairing, while included as a component of a manufacturing process. 

Threshold-based manufacturing 

• Manufacturers or businesses with shareholder funds of RM2.5 million and above or a full-time paid employee count of 75 or more involved in profit-making manufacturing activities. 

Non-covering activity for retail and wholesale trade 

• All activities related to wholesale or retail trade are not included under manufacturing license activities. 

Labor and capital investment 

• Maintaining capital investment per employee (CIPE) of at least RM140,000 and employing at least 80% Malaysian labor. 

Consistent with national objectives 

• Ensuring that manufacturing activities support orderly industrial growth and are consistent with Malaysia’s national economic and social objectives. 

Excluded activities under the Malaysia manufacturing license

Milling of paddy into rice 

• The milling process that changes paddy into rice does not need a manufacturing license because it falls under agricultural processing.  

Milling of oil palm fresh fruits into crude palm oil 

• The milling of oil palm fresh fruits into crude palm oil activities are likewise exempt from the manufacturing license requirement because they are classified under primary processing.  

Businesses with lesser scale activities  

• A company with shareholders’ funds of less than RM2.5 million and fewer than 75 full-time paid employees can apply for an exemption and will not be required to obtain a manufacturing license.  

Retail and wholesale trade activities  

• Retail and wholesale trade activities are usually considered trading activities and, therefore other than manufacturing, do not require a manufacturing license.  

Voluntary for incentives 

• Even if a company is exempt from licensing, they can choose to voluntarily register with MIDA to secure a range of tax incentives, duty exemptions, and incentives to invest by the government. 

Regulatory authority for Malaysia manufacturing license

• The manufacturing license in Malaysia is regulated by clear and well-specified regulatory framework that involves relevant authorities and laws. The Malaysian Investment Development Authority (MIDA) is the main regulator for issuing and regulating manufacturing licenses. MIDA is under Ministry of Investment, Trade and Industry (MITI) and is the authority responsible for promoting the growth of domestic and foreign investments in Malaysia’s manufacturing sector. MIDA manages the application, approval, and renewal for manufacturing licenses while ensuring companies comply with regulations and standards. 

• The principal legislation for regulating and administering the manufacturing license is the Industrial Coordination Act 1975 (ICA 1975). The Act provides that no person or business entity can engage in any manufacturing in Malaysia without this manufacturing license issued by the Minister of Investment, Trade and Industry (MITI) and through the administrative and regulatory functions of MIDA, recently announced as the incentive for Malaysia to become the regional manufacturing hub. The ICA 1975 defines manufacturing activities as the making of an article or substance, altering, blending, finishing and assembling for use or sale, but not involving the retail and wholesale. 

• MIDA also enforces additional compliance requirements related to capital investment per employee (CIPE), workforce composition (minimum 80% of the full-time workforce made up of Malaysian employees), and national economic and societal aspirations. If a firm has violated the ICA 1975 in the context of failure to obtain a manufacturing license, it may be subject to financial penalties or imprisonment. 

Steps for obtaining Malaysia manufacturing license