Types of Business Licenses in Malaysia

To lawfully conduct business in Malaysia, it is important to get the licenses and permits that are required for the establishment of a company. These licenses guarantee that the business is in accordance with the regulations set forth by the government and safeguard the interests of customers, employees, and the general public. In the country of Malaysia, there are three primary types of business licenses: general licenses, licenses that are unique to a certain industry or sector, and licenses that are designed for specific activities. So, let’s go over each category in further depth:

1. General Licenses

Any company doing business in Malaysia, no matter what field they’re in, needs a general license. These licenses, which address different parts of the business, are acquired when the firm is first registered. Here are a few instances when generic licenses are commonly used:

• Company Registration: Businesses must register with the Companies Commission of Malaysia (SSM) to establish a legal entity.
• Company and Employee Income Tax Registration: Companies and their employees must register for income tax purposes with the Inland Revenue Board (LHDN).
• Employees Provident Fund (EPF) Registration: Employers are required to register their employees with the EPF, Malaysia’s national retirement savings scheme.
• Social Security Organisation (SOCSO) Registration: Companies must register their employees with SOCSO to provide social security benefits and insurance coverage.
• Human Resources Development Fund (HRDF) Registration: Depending on the industry, businesses may need to register with the HRDF to support employee training and development.
• Business Premise License: The municipal authority (Pihak Berkuasa Tempatan) issues this licence so that businesses can operate out of a certain address. State and local council regulations determine the specific needs.
• Signboard License: Businesses are required to obtain a distinct signboard license in order to display signboards outside of their premises. This license governs the dimensions, style, and positioning of the signboards.

2. Industry/Sector-Specific Licenses

It is necessary to obtain the proper licenses and permits in order to operate in certain industries and sectors inside Malaysia. For the purpose of developing and regulating specific economic sectors, the government issues these licenses based on the nature of the businesses’ operations. Licenses that are specialised to a certain industry often include:

• Manufacturing Sector License: Companies engaged in manufacturing activities must obtain licenses from the Ministry of International Trade and Industry (MITI).
• Distributive Trade Licenses: Businesses involved in wholesale, retail, franchise, direct selling, or international trading must obtain licenses from the Ministry of Domestic Trade and Consumer Affairs (KPDNHEP).
• Telecommunication and Broadcasting Sector Licenses: Companies operating in the telecommunication and broadcasting sectors require licenses from the Malaysian Communications and Multimedia Commission (MCMC).
• Oil Exploration Sector Licenses: Businesses involved in oil exploration and related activities must obtain licenses from the Ministry of Energy and Natural Resources (KeTSA).
• Banking and Insurance Sector Licenses: Companies operating in the banking and insurance sectors require licenses from Bank Negara Malaysia (BNM), the central bank of Malaysia.
• F&B License: Any business in Malaysia that deals with food or drink in any way must have this licence, which the MOH provides. Strict cleanliness and safety standards are enforced by the firm to protect the public health, as stated in the F&B Licence.
• Health and Beauty License: The Ministry of Health issues this licence to verify that the company satisfies all health and safety requirements. The licence also ensures the safety of specific products and equipment for public use.
• Education License: The institution’s curriculum, personnel, and physical plant must all meet national criteria in order to receive this licence. Any school, public or private, that wants to offer degrees or other credentials must have the Education Licence.

3. Activity-Specific Licenses

Certain commercial operations that could endanger the health and safety of employees, the public, or the environment are governed by licenses that are specific to that activity. Investors must adhere to particular requirements in order to obtain these licenses, which are relevant to one or more industries or sectors. Activity-specific licensing include, for example:

• Certificate of Fitness for Certified Machinery: Businesses using certain types of machinery, such as boilers, pressure vessels, and hoisting machines, must obtain certificates of fitness from the Department of Occupational Safety and Health (DOSH).
• Approval for Expatriate Employment: Companies hiring foreign workers must obtain approval from the Immigration Department of Malaysia and the Ministry of Home Affairs (KDN).
• Approval to Install, Re-site, or Alter Air Pollution Control Equipment: Businesses that emit air pollutants must obtain approval from the Department of Environment (DOE) before installing, re-siting, or altering air pollution control equipment.
• Building Plan Approval: Companies constructing new buildings or making major renovations must obtain building plan approval from the local authority (Pihak Berkuasa Tempatan) and the Fire and Rescue Department (BOMBA).
• Sales Tax License: Businesses that sell taxable goods must register for a sales tax license with the Royal Malaysian Customs Department (RMCD).

4. Licences for Environmental and Safety

• Environmental Impact Assessment (EIA) Approval: Businesses are required to secure Environmental Impact Assessment (EIA) Approval if their operations could significantly affect the environment. Projects including construction, mining, and large-scale agriculture require this approval, which is provided by the Department of Environment (DOE). In order to complete an EIA, a company must first determine what kind of environmental impact their operations could have and then suggest ways to lessen that impact.

• Certification for Fire Safety: Any company doing business out of a facility with a significant potential for fire, including hotels, factories, and other high-rise structures, must have a valid Fire Safety Certificate. The installation of fire detection and suppression equipment, as well as compliance with other fire safety rules, are guaranteed by this certificate provided by the Fire and Rescue Department of Malaysia (Bomba).

The Business License Application Process

The process of obtaining business licenses in Malaysia varies depending on the type of license and the specific requirements of the issuing authority. However, the general steps are as follows:

Step 1- Determine the necessary licenses

Based on your business’s nature, location, and activities, identify the general, industry/sector-specific, and activity-specific licenses required.

Step 2- Gather the required documents

Prepare the necessary documents, such as company registration certificates, lease agreements, and supporting documents from relevant ministries or agencies.

Step 3- Submit the application

Submit the completed application form and required documents to the appropriate issuing authority, either in person or online, depending on the specific requirements.

Step 4- Pay the application fee

Most licenses require an application fee, which varies depending on the type of license and the issuing authority.

Step 5- Await approval

The issuing authority will review the application and supporting documents. If approved, the license will be issued.

Step 6- Renew the license

Most business licenses in Malaysia are valid for one year and must be renewed annually by paying the prescribed renewal fee.

Read also: Guide for Foreigners to Register a Company in Malaysia

Importance of Obtaining Business Licenses

Obtaining the necessary business licenses in Malaysia is crucial for several reasons:

1. Legal compliance: Operating a business without the required licenses can result in fines, penalties, or even legal action by the authorities.

2. Access to benefits: Licensed businesses can access various benefits, such as tax incentives, government support programs, and access to certain markets or industries.

3. Credibility and trust: Licensed businesses are perceived as more credible and trustworthy by customers, suppliers, and partners, which can lead to better business opportunities and growth.

4. Protecting public interests: Business licenses help protect the interests of consumers, employees, and the general public by ensuring that businesses operate in a safe, ethical, and responsible manner.

Documents Required for Business License Application

Before applying for a business license in Malaysia, it is essential to gather the necessary documents. The specific documents required may vary depending on the type of license and the issuing authority, but generally, you will need:

Paid-up Capital Requirements

In Malaysia, the minimum amount of paid-up capital needed to get a business licence varies by licence type and by industry. The minimum paid-up capital needed to obtain a general licence is usually between RM 50,000 and RM 500,000. Having said that, paid-up capital requirements can be higher for industry-specific licences like manufacturing or banking, with amounts ranging from RM 500,000 to RM 1 million or even more.

It is important to note that the paid-up capital requirements may change over time, so it is essential to check with the relevant authorities or seek professional advice to ensure that you meet the current requirements.

Conclusion

It is essential for entrepreneurs planning to start or develop their enterprises in Malaysia to be familiar with the many kinds of business licences that are available in the country. Businesses in Malaysia may help the economy grow by operating lawfully, gaining access to advantages, establishing credibility, and acquiring the required licences and permissions.

An organization’s location, type of business, and industry all play a role in determining which licences are necessary. So, to make sure you have all the licences you need, it’s important to do your homework and talk to the right people.

Business owners in Malaysia may help the country’s economy grow and succeed by doing things the right way and getting the necessary licences.