0012doing business in malaysia guide

July 2008

A Guide to

Doing Business in Malaysia

Contents

Government andLegal System

Business OrganisationStructures

Foreign Investment

Taxation

ImmigrationRequirements

Employment Law

Real Property Law

Protection o IntellectualProperty Rights

Gvrm ad Lgal sym

General

Malaysia is a constitutional monarchy, headed by the Yang di-Pertuan Agong, customarily

reerred to as the king. The Yang di-Pertuan Agong is elected or 5-year terms rom among

the nine Sultans o the Peninsular Malaysian states. The Yang di-Pertuan Agong is also the

leader o the Islamic aith in Malaysia.

Malaysia practices parliamentary democracy and has a three-tier government structure:

ederal, state and local. Federal executive power is vested in the Cabinet led by the Prime

Minister. The Federal Constitution o Malaysia requires the Prime Minister to command the

condence o the majority in the lower house o Parliament. The Cabinet is chosen rom

among members o Parliament and is collectively responsible to that body.

Legislative power is divided between ederal and state legislatures. Parliament makes ederal

laws applicable to Malaysia as a whole. It also examines the government’s policies, approves

the government’s expenditures and new taxes and also serves as the orum or criticism and

the ocus o public opinion on national aairs.

The State governments are headed by State Rulers. The Ruler acts on the advice o the State

Executive Council that is chaired by the Chie Minister or Menteri Besar. All states have their

own legislatures.

Federal and State Governments

The distribution o executive and legislative powers between the Federal and State

Governments is embodied in the Federal Constitution o Malaysia.

The Federal Government has authority over, among others, external aairs, deence, internal

security, civil and criminal law and the administration o justice (except or certain civil law

cases among Malays or other Muslims which are adjudicated under Islamic law), ederal

citizenship, nance, trade, commerce, industry, shipping, communications, transportation,

power, education, medicine, health, labour and tourism.

The State Governments have, in their respective States, authority over, among others, land,

local government and services o a local character such as markets, airs, licensing o places

o public amusement.

Both the Federal and State Governments have concurrent jurisdiction over, among others,

social welare, town and country planning, public health, sanitation, drainage, irrigation,

housing and provisions or housing accommodation.

ZAID IBRAHIM & CO • JULY 2008 1

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Last Updated 25 July 2008

This document is a guidethat provides only general

inormation and is notintended to be comprehensiveadvice. It is not a substituteor legal or other adviceand it is given without theassumption o a duty ocare. We do not assume anylegal responsibility or theaccuracy o any particularstatement in this document.It is advisable or anyonewho intends to do businessin Malaysia, or in the case oa specic issue or problem, toseek proessional advice.

I you need any urtherinormation, please consultyour usual lawyer at Zaid Ibrahim& Co. or one o the ollowing:

• Chew Seng Kok

• Lim Kar Han

• Dato' Dr. Nik Norzrul

• Lynette Yeow

• Toh Beng Suan

©Zaid Ibrahim & Co. All rights reserved.

A GUIDe to DoInG BUsIness In MALAYsIA

The Parliament

The Malaysian Parliament consists o the Yang di-Pertuan Agong or king, the Senate (Dewan

Negara) and the House o Representatives (Dewan Rakyat).

All 70 Senate members sit or 3-year terms, which are normally extended or an additional

3 years; 26 are elected by the 13 state assemblies, and 44 are appointed by the Yang di-

Pertuan Agong. The lie o the Senate is not aected by the dissolution o Parliament. Senators

are drawn rom the ranks o persons who have rendered distinguished public service or have

achieved distinction in their proessions; commerce, industry, agriculture, cultural activities

or social service or are representatives o a racial minority or are capable o representing the

interests o aborigines.

The 222 representatives o the House or Dewan Rakyat are elected rom single-member

districts to parliamentary terms lasting up to 5 years.

Source o Law

The oundation o the Malaysian legal system is a legacy o British colonial history. The legal

system is based on a set o written and unwritten laws. The Federal Constitution together

with the constitutions o the States, legislation enacted by Parliament (Acts o Parliament),

and delegated legislation made by statutory bodies under powers conerred on them by Acts

o Parliament, orm the integral part o the written laws. The unwritten laws are comprised

o the principles o English common law, previous judicial decisions o the superior courts

and local customary law. Islamic law is another important source o law which applies only

to the Muslim population and is governed by a separate system o courts.


Bui orgaiai srucur

Overview

Malaysia oers various orms o business models that can be used to set up business in the

country. A business organisation may take any o the ollowing orms:

• Sole trader or proprietor

• Company (Private Limited Company, Public Limited Company or Branch o a Foreign

Company)

• Partnership

• Unincorporated Association

• Representative and Regional Oce

• Operational Headquarter (OHQ)

• International Procurement Centre (IPC)

• Regional Distribution Centre (RDC)

The most common orms o business entities are companies, and to some extent, representative

and regional oces, OHQs, IPCs and RDCs. All companies in Malaysia are governed by

the Companies Act 1965. All companies are required to be registered with the Companies

Commission o Malaysia (CCM). Company limited by shares is the most common type o

company structure in Malaysia. Such limited companies may be either private or public.

Private Company

A private company limited by shares has provisions in its Memorandum and Articles o

Associations that:

• restricts the right to transer its shares;

• limits the number o its members to 50, excluding employees and some ormer

employees;

• prohibits any invitation to the public to subscribe or its shares and debentures; and

• prohibits any invitation to the public to deposit money with the company.

Public Company

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

a public company subject to certain requirements in the Companies Act. A public company

limited by shares can oer shares to the public i it has registered a prospectus with the

Securities Commission and 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 Bursa Malaysia (the Malaysian

stock exchange) subject to compliance with the requirements laid down by Bursa Malaysia

and the Securities Commission. Any subsequent issue o securities (or instance, issue by way

o rights or bonus, or issue arising rom an acquisition) would require the approval o the

Securities Commission.



Branch o a Foreign Company

A oreign company desiring to set up a place o business or undertake business activities

in Malaysia may do so by locally incorporating a company, or by registering itsel as a

oreign company in Malaysia. The terminology ‘branch oce’ is normally used or a oreign

company registered in Malaysia. The branch oce has to be registered with the CCM beore

it commences business or establishes a place o business in Malaysia.

Representative Oce and Regional Oce

Foreign companies involved in the manuacturing and trading sectors may establish

representative and regional oces in Malaysia to perorm certain activities or their head

oce or principal. There is no requirement or such representative and regional oces to

be incorporated under the Companies Act. Representative Oce o a oreign company is

allowed to collect relevant inormation regarding investment opportunities in the country

especially in the manuacturing sector; to develop bilateral trade relations; to promote

the export o Malaysian goods and products; and to carry out research and development

activities. A Representative Oce is however not allowed to have any business transaction

or to derive income rom its operation.

A Regional Oce is an oce o a oreign corporation that serves as the coordination

centre or the corporation’s aliates, subsidiaries, and agents in the Southeast Asia and the

Asia Pacic. It should have the responsibility over designated activities o the corporation

within the region it operates. However, a Regional Oce is not allowed to do any business

transaction or derive income rom its operation.

Expatriate posts are allowed in Representative and Regional Oces depending on the

unctions and activities o the Representative Oce or Regional Oce. Approval or such

posts is on a renewable two-year basis. Expatriates working in Regional Oces are taxed

only on the portion o their chargeable income attributable to the number o days they are

in Malaysia.

Operational Headquarter (OHQ)

An approved OHQ reers to a locally incorporated company, whether Malaysian-owned or

oreign-owned, which carries on a business in Malaysia o providing qualiying services to its

oces or its related companies outside Malaysia. A company may be granted OHQ status

i it ullls certain qualiying criteria. An OHQ enjoys a number o benets including tax

exemption or a period o 10 years on income rom:

• qualiying services rendered to its oces or related companies outside Malaysia;

• interest on oreign currency loans extended to its oces or related companies outside

Malaysia; and

• royalties received rom research and development work carried out on behal o its

oces or related companies outside Malaysia.

In addition to the above, expatriates working in OHQs are taxed only on the portion o their

chargeable income attributable to the number o days they are in Malaysia.



International Procurement Centre (IPC)

An IPC is a locally incorporated company, whether Malaysian or oreign-owned, which

carries on a business in Malaysia to undertake the procurement and sale o raw materials,

components, and nished products or related and unrelated companies in Malaysia and

abroad. This includes procurement rom and sale to local sources and third countries. An IPC

enjoys the ollowing incentives:

• approval or expatriate posts based on the requirements o the IPC;

• permission to open oreign currency accounts with any onshore licensed commercial

bank to retain export proceeds, without any limit imposed;

• permission to enter into oreign exchange orward contracts with any onshore licensed

commercial bank to hedge exchange risk based on its projected sales;

• 100% equity holding by the promoter; and

• permission to bring in raw materials, components, or nished products, without

paying custom duties, into ree industrial zones, licensed manuacturing warehouses,

ree commercial zones and bonded warehouses or repacking, cargo consolidation and

integration beore distribution to the nal consumers.

Subject to the relevant qualiying criteria, an IPC is also eligible or ull tax exemption o its

statutory income or 10 years and dividends paid rom the exempt income will be exempted

rom tax in the hands o its shareholders.

Regional Distribution Centre (RDC)

An approved RDC is a collection and consolidation centre or nished goods, components

and spare parts produced by its own group o companies or its own brand to be distributed

to dealers, importers or its subsidiaries or other unrelated companies within or outside the

country. The activities involved are bulk breaking, repackaging and labelling. RDCs enjoy

benets such as tax incentives and custom duty exemptions that are similar to those accorded

to an IPC.



Frig Ivm

The Ministry O International Trade And Industry

The Ministry o International Trade and Industry (MITI) aims to promote and saeguard

Malaysian interest in the international trade arena, to spur the development o industrial

activities and to urther enhance Malaysia’s economic growth. The Malaysian Industrial

Development Authority (MIDA), as an agency under MITI, is the government’s principal

agency in charge o promotion and co-ordination o industrial development in Malaysia

including oreign investments especially in the manuacturing sectors. MIDA is the rst point

o contact or investors who intend to set up projects in manuacturing and its related support

service sectors in Malaysia. Detail inormation about the incentives granted to investors o

various industries in Malaysia may be obtained rom MIDA website at www.mida.gov.my

Foreign Investment Committee Guidelines

The Foreign Investment Committee (FIC) is a committee within the Economic Planning

Unit o the Prime Minister’s Department, which, amongst others, reviews and regulates

the acquisitions by oreign interests o assets and interests in Malaysian companies and

businesses. Foreign investment in Malaysia is generally governed by the FIC. Specic

industries may also be regulated by other government authorities. FIC approval is required

in certain transactions as set out in its guidelines (FIC Guidelines). Under the FIC Guidelines,

the general rule o thumb is that a minimum 30% o the eective shareholding in Malaysian

companies is to be held by Bumiputeras while the remaining equity can be held either by

oreign interests or by Malaysian interests or both. ‘Bumiputera’ are generally Malays and

other persons indigenous to Malaysia.

Some transactions to which the FIC Guidelines on acquisition o interests, mergers and take-

overs apply are as ollows:

• Any proposed acquisition o interest in a local company or business in Malaysia which isRM10 million or more in value, by local or oreign interests;

• Any proposed acquisition o interest in any local company or business in Malaysiaregardless o whether the value is less than RM10 million by:

- any oreign interest o the voting rights to the level o 15% or more or which willresult in an increase o the voting rights to the level o 15% or more; or

- any associated or non-associated group o oreign interests o the cumulative votingrights to the level o 30% or more or which will result in an increase o thecumulative voting rights to the level o 30% or more;

• Any proposed acquisition o interest by any associated or non-associated groupo oreign interests, in aggregate o 30% or more o the voting rights o any localcompany/business or such interest which will result in an increase o the voting rights to30% or more in any local company/business;

• Any proposed merger or take-over o any local company or business in Malaysia bylocal or oreign interests;

• Any proposed joint venture involving two or more parties in a local company;

• Any control o a local company or business in Malaysia through any orm omanagement agreement, technical assistance agreement or other arrangements;

• Any charging o shares in a local company to any oreign interest where the value o

loan or the market value o the shares is RM10 million or more.



There are some exemptions to the FIC Guidelines, including any acquisition o interest in

manuacturing companies licensed by MITI and acquisition o interest in companies that

have been granted Multimedia Super Corridor (MSC) status and certain other status.

Where the FIC Guidelines are applicable, the FIC will generally impose equity conditions, share

capital conditions and employment conditions on companies undertaking the transactions,

to be complied within a specied period.

Although the FIC Guidelines are not issued pursuant to any legislation or statute, non-

compliance with the FIC Guidelines may have adverse practical consequences especially where

the oreign investor needs to apply or other governmental licence, permit or approval.

Exchange Control Regulations

The Malaysian exchange control regime is governed by the Exchange Control Act 1953 and

the Exchange Control o Malaysia Notices (ECMs) and clarications issued by the Malaysian

central bank, Bank Negara Malaysia (BNM). As the regulator, BNM’s approval is required

or certain dealings and transactions. Generally, there are no restrictions on repatriation

o capital, prot, dividends, interest and rental income by oreign investors, subject to the

payments being made in oreign currency (other than the currency o Israel). The ECMs set

out various approvals which BNM has granted and claries transactions and applications

where prior approvals are required.

The Iskandar Development Region (IDR)

The Iskandar Development Region (IDR) spans an area o 2216.34 sq km in South Johor and

is one o the key engines o growth identied under the 9th Malaysia Plan. The IDR aims to

be a rst-class global hub or business, living and leisure. More than RM4 billion has been

allocated under the 9th Malaysia Plan towards inrastructure development in IDR.

The IDR was ocially launched on 4 November 2006. The Iskandar Regional Development

Authority (IRDA) established in February 2007 is the statutory body that acts as the one-stop

centre responsible or establishing policies, directions and strategies, and co-coordinating as

well as acilitating the development o IDR.

An initial Incentive and Support Package that applies to certain designated zones within

the IDR had been announced by government in March 2007. The locations o these zones

will be announced by the IRDA in the third quarter o 2007.The incentives will be enjoyed

by qualiying companies in 6 targeted sectors within the approved zones. The 6 targeted

sectors are:

• creative industries

• educational services

• nancial advisory and consulting services

• healthcare services

• logistics services

• tourism related services



The incentives or the qualiying companies in the approved zones are:

• Exemption rom the Foreign Investment Committee (FIC) Guidelines.

• Exemption rom corporate income tax or a period o 10 years rom the commencement

o operation on the condition that operation o the company commences beore the

end o year 2015.

• Exemption rom withholding tax on royalty and technical ee payments to non-residents

or a period o 10 years rom the commencement o operations.

• Freedom to source capital globally.

• Unrestricted employment o oreign employees within the approved zones.

More information about IDR may be obtained from www.sjer.com.my

The Multimedia Super Corridor (MSC)

The Multimedia Super Corridor (MSC) is a government initiative to spur the inormation

and communication technology (ICT) industry in Malaysia. The MSC was conceptualised in

1996 and has since grown into a thriving ICT hub. To ensure the success o the MSC, the

government has, in a Bill o Guarantees, committed to:

• Provide a world-class physical and inormation inrastructure;

• Allow unrestricted employment o local and oreign knowledge workers;

• Ensure reedom o ownership by exempting companies with MSC Status rom local

ownership requirements;

• Give the reedom to source capital globally or MSC inrastructure, and the right to

borrow unds globally;

• Provide competitive nancial incentives, including no income tax or up to 10 years or

an investment tax allowance, and no duties on import o multimedia equipment;

• Become a regional leader in intellectual property protection and cyberlaws;

• Ensure no Internet censorship;

• Provide globally competitive telecommunications taris;

• Tender key MSC inrastructure contracts to leading companies willing to use the MSC

as their regional hub; and

• Provide an eective one-stop agency.

The Multimedia Development Corporation Sdn Bhd (MDC) is the one-stop agency to accept

and process applications by companies or MSC status. Companies with MSC status are

entitled to enjoy the government incentives provided pursuant to the Bill o Guarantees.



A company seeking MSC Status and its benets is required to:

• be a provider or a heavy user o multimedia products and services;

• employ a substantial number o knowledge workers;

• provide technology transer and/or contribute towards the development o the MSC or

support Malaysia’s k-economy (knowledge-based economy) initiatives;

• establish a separate legal entity or the MSC qualiying multimedia business and

activities;

• locate in a MSC designated cybercities; and

• comply with environmental guidelines.

Labuan International Business and Financial Centre

The Federal Territory o Labuan, an island located o the coast o Sabah, East Malaysia, was

established as an International Oshore Financial Centre in October 1990 and the Labuan

Oshore Financial Services Authority (LOFSA) is the one-stop approving and regulatory

agency or oshore businesses operating in Labuan. In January 2008, Labuan IOFC was

rebranded into the Labuan International Business and Financial Centre in line with its new

ocus as an international nancial centre.

The oshore businesses in Labuan are virtually unaected by the country’s exchange control

measures and the nature o oshore businesses in Labuan is basically oreign currency-

based. Oshore companies and oshore trusts undertaking oshore activities are accorded

preerential tax treatment. Oshore activities are classied into oshore trading activities

(including banking, insurance, trading, management, licensing) and oshore non-trading

activities (including holding o investments in securities, stocks, shares, loans, deposits and

immovable properties by an oshore company on its own behal).

Oshore companies and persons employed by oshore companies enjoy several tax incentives.

For example, an oshore company carrying on an oshore trading activity can opt to pay

tax each year at the rate o 3% o its net audited prots, or a xed sum o RM20,000 a

year. Further, an oshore company carrying on an oshore non-trading activity or the basis

period or a year o assessment is not subject to tax or that year o assessment. When a

company has no basis period or a year o assessment, it is taxed a xed rate o RM20,000

or that year o assessment. With eect rom assessment year 2009, oshore companies will

also enjoy the fexibility to elect to be taxed under the domestic corporate tax regime.

In Labuan, the ollowing types o income are exempted rom tax in the hands o a Malaysian

or oreign recipient:

• dividends received by, or received rom an oshore company;

• distributions received rom an oshore trust by the beneciaries;

• royalties received by a non-resident or another oshore company;

• interest received rom, or by, an oshore company under certain circumstances and

amounts received rom an oshore company or providing services.

In addition, documents relating to oshore business activities o an oshore company

(including memorandum and articles o association o an oshore company and transer o

shares in an oshore company) are exempted rom stamp duty.



taxai

Corporate Income Tax

A company, whether resident or not, is assessable on income accrued in or derived rom

Malaysia. The current corporate income tax rate (or assessment year 2008) is 26%. The rate

will be urther reduced to 25% or assessment year 2009. A company carrying on petroleum

upstream operations is subject to a Petroleum Income Tax o 38%. Currently, corporate tax

is based on the imputation system. With eect rom assessment year 2008, the current

imputation tax system will be replaced, over a transition period o 6 year, with a single-tier

tax system. Under the single-tier system, prots are taxed only at the company’s level and

dividends received are exempted rom tax.

Personal Income Tax

Whether an individual is a “resident” in Malaysia under the Malaysian Income Tax Act 1967

is determined by the duration o his stay in the country. Generally, an individual residing in

Malaysia or 182 days or more in a year has resident status. A resident individual is taxed

on his chargeable income at a graduated rate rom 0% to 28% ater deducting relevant

tax relie. There are also available tax rebates. A non-resident individual is liable to tax (on

income earned in Malaysia) at the rate o 28% without any personal relie.

Withholding Tax

Withholding tax is imposed on certain payments made by residents to non-residents such

as interest, royalty, technical ees and rentals or moveable properties. The resident has the

obligation to withhold tax when making the payments and to pay the amount within a

certain time, ailing which the resident is liable to pay a penalty equal to 10% o the unpaid

tax and the total sum shall be a debt due to the Government. Due to double tax agreements,

residents in some countries may enjoy exemption or reduced withholding tax rates.

Other Taxes

• Sales Tax is imposed at the import or manuacturing levels at a general rate o 10%.

• Service Tax applies to certain prescribed goods and services, including certain

proessional and consultancy services in Malaysia, at a general rate o 5%.

• Import duty is imposed at ad valorem generally.

• Excise duties are levied on selected products manuactured in Malaysia.

• Stamp duty is imposed on various written legal documents that are executed in

Malaysia. For documents executed outside Malaysia, stamp duty is applicable i the

document purports to eect a transer o subject matter in Malaysia.



Immigrai Rquirm

Travel Document and Visa

Every person entering Malaysia must possess a valid national passport or internationally

recognised travel document valid or travel to Malaysia. Any person not in possession o a

passport or travel document which is recognised by the Malaysian Government must obtain

a document in lieu o passport. All travel documents must be valid or more than six (6)

months rom the date o entry into Malaysia. In addition, oreign nationals may require a visa

to enter Malaysia depending on their nationality. I so required, the visa must be obtained

in advance at Malaysian Representative Oce beore entering the country. More detailed

inormation on visa requirements is available at the Malaysia Immigration Department’s

website www.imi.gov.my

Passes

Foreign nationals have to obtain a pass besides a visa (where required) which allows them

to stay temporarily. A pass is an endorsement in the passport constituting permission to stay

or the approved duration.

Passes issued at point of entry

Foreign visitors entering the country with a valid passport and visa can obtain a Visit Pass

(Social) issued at the point o entry solely or the purpose o a social and/or business visit such

as owners and company representatives entering Malaysia to attend a company meeting or

seminar, inspect the company’s accounts or to ensure the smooth running o the company,

investors or businessmen entering to explore business opportunities and investment

potential.

Passes issued upon arrival in Malaysia

Other than applications or entry or the purpose o social or business visits, all applications

or other passes i.e., Employment Pass, Visit Pass (Proessional), Visit Pass (Temporary

Employment), Dependant’s Pass and Student Pass must be made upon arrival in Malaysia.

Applicants or such passes must have sponsorship in Malaysia where the sponsors agree to be

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

An Employment Pass is required or oreigners who enter the country to take up a contract

o employment with a minimum period o 2 years and earn a monthly income o not less

than RM2,500. Wives and children o oreigners who have been issued with employment

pass can apply or Dependants’ Passes.

Visit Passes (Proessional) are issued to oreigners on short-term contract with any agency

such as artistes, researchers, lecturers/speakers, members o international organisations. The

validity period o the pass varies but it does not exceed 12 months at any one time.

A Visit Pass (Temporary Employment) is issued to a person who enters the country to take

up temporary employment or less than 24 months or earns a monthly income o less than

RM2,500.



Employment o Expatriate Personnel

Where there is a shortage o trained Malaysians, oreign companies are allowed to bring in

expatriate personnel. In addition to this, oreign companies are also allowed ‘key posts’, that

is, posts that are permanently lled by oreigners.

There are 2 stages in the employment o expatriates, namely an application or expatriate

post and an endorsement o employment pass by the Immigration Department.

Stage 1: Application or Expatriate Post

This is the stage where a company submits its application or expatriate posts. The Government

has appointed the ollowing agencies to evaluate and approve expatriate posts:

• Ministry o Industrial Development Authority or manuacturing and its related

service sectors.

• Multimedia Development Corporation or the inormation technology sector, specically

companies that have been awarded Multimedia Super Corridor Status.

• Central Bank o Malaysia or the nancial, insurance and banking sectors.

• Securities Commission (SC) or the securities and utures market.

• Malaysian Biotechnology Corporation or the biotechnology industry.

• Expatriate Committee or expatriate posts in sectors other than the above mentioned sectors.

Stage 2 : Endorsement o Employment Pass

Upon approval o the expatriate posts by the approving agency, the company must submit

an application to the Immigration Department or endorsement o the Employment Pass.

Once the Employment Pass has been endorsed, the expatriate can be hired.

There are additional criteria in the application o expatriate post depending on sector o

business, which is based on minimum paid up capital o the company, recommendation/

registration by monitoring agencies (i applicable), appropriateness o scope o job, salary,

age, expertise and working experience o an expatriate. As an example, the ollowing

additional criteria apply to the manuacturing sector:

• Automatic approval or up to 10 expatriate posts (including 5 key posts) or

manuacturing companies with oreign paid-up capital o US$2 million and above;

• Automatic approval or up to 5 expatriate posts (including at least 1 key post) or

manuacturing companies with oreign paid-up capital o more than US$200,000 but

less than US2 million;

• Where the manuacturing companies with oreign paid-up capital o less than

US$200,000, the ollowing applies:

• Key posts can be considered where the oreign paid-up capital is at least

RM500,000; and

• The number o key posts, executive posts and non-executive posts allowed depends on

the merits o each case.




emplym Law

Terms and Conditions o Employment

The main legislation regulating terms and conditions o employment is the Employment Act

1955 (“Employment Act”). The protection under the Employment Act is extended only to

employees whose monthly wages do not exceed RM1,500, manual workers and a ew other

specied categories.

The Employment Act stipulates the minimum terms and benets. The employer is not

prevented rom giving better terms but any term or condition o employment which is less

avourable is automatically rendered null and void and substituted by the provision in the

Employment Act.

The Employment Act and Regulations made under it coner benets such as rest days, public

holidays, annual leave, sick leave, hospitalization leave, maternity leave and termination

benets. The Employment Act also regulates the hours o work. The normal working hours

in a week cannot exceed 48 hours and the normal working hours in a day cannot exceed 8

hours. These limits can be exceeded under certain specied circumstances. The Employment

Act also species the rates to be paid or overtime work and work on rest days and public

holidays. Maximum overtime permissible in a month is 104 hours.

Collective Agreements

It is necessary or a trade union to obtain recognition rom the employer beore it is can

begin collective bargaining. The collective agreement, which must be or a minimum period

o 3 years, is legally binding and enorceable i it has been taken cognizance o by the

Industrial Court. Strike action is prohibited in respect o any matter already covered by the

collective agreement.

Retrenchment

The employer is entitled to retrench excess employees. Selection is based on the Last-In- First-

Out Rule in the category. Foreign workers are to be retrenched rst beore any local worker

in the same category can be retrenched. No governmental approval is necessary but there is

a requirement to notiy the Ministry o Human Resources. Employees within the protection

o the Employment Act 1955 are entitled to statutory termination benets.

Statutory Contributions

It is compulsory or employees and their employers to make monthly contributions to a

statutory retirement und. Expatriate employees are exempted unless they opt to contribute

in which case it becomes compulsory too or their employer. The contributions are made to

the account o the individual employee. At present, the employer contributes 12% o the

employee’s monthly salary while the employee contributes 11%.

Monthly contributions will also have to be made to the Social Security Organisation Fund

both by the employer and employees who earn a monthly salary o RM3,000 and below.

The Fund pays compensation or death and invalidity or disablement benets arising rom

employment injuries. Those employees whose monthly salary progress above RM3,000

remain contributors. For those who earn above RM3,000 a month, participation is at their

option but once they decide to contribute, their employers will also have to comply.


Ral Prpry Law

Overview

The National Land Code 1965 (NLC) is the governing legislation in West Malaysia. The States

in East Malaysia (Sabah and Sarawak) are each governed by their own land laws, namely, the

Sabah Land Ordinance and the Sarawak Land Code.

The NLC is based on the Torrens System in Australia. Under the Torrens system, title to or

interest in land vests and divests only upon registration. Under the NLC, dealings which

are capable o being registered are transers, leases, charges and easements whereas the

dealings which are not capable o being registered are tenancies and liens.

As ar as the dealings which are capable o being registered are concerned, no title to or

interest in land will be transerred or created until the instruments eecting these dealings

have been registered. Registration under the NLC is eected when a prescribed memorial

o the dealing is made on the register document o title under the hand and seal o the

registering authority.

Records kept by the local land registries/oces contain all the relevant data and inormation

on land and shows the ownership and other rights that exist on the land. Everyone is allowed

to inspect the records upon payment o a ee.

State land is generally disposed o by way o alienation. Each state now has the authority

to alienate land generally or a maximum lease period o 99 years. Freehold alienations are

possible only in exceptional cases. Land may be alienated by the relevant state with the

imposition o special conditions, restrictions-in-interest and categories o land use (either one

o three categories namely, Agriculture, Building or Industry) on land titles enabling the state

to control land development.

Acquisition o Properties by Foreigners

Under the NLC, a non-citizen or a oreign company is not allowed to acquire any land (other

than industrial land) in West Malaysia unless the prior approval o the relevant State Authority

has been obtained. The State Authority may impose certain terms and conditions or a levy in

granting its approval or any disposal to or acquisition by a non-Malaysian entity.

In addition to the State Authority, any acquisition o property by oreign interests (including

permanent residents o Malaysia), requires the approval o the Foreign Investment Committee

(FIC) unless they are exempted. The policies with regard to oreigners purchasing real

properties are contained in the FIC Guidelines on the acquisition o properties by local and

oreign interests (FIC Properties Guidelines).

The FIC Properties Guidelines apply to, among others, the ollowing transactions which

require the approval o the FIC:

• Any acquisition o property by oreign interest including Permanent Resident requires

the approval o FIC except or purchase o residential properties costing RM250,000

and above with no limit on the number o property acquired;

• Foreign interest is only allowed to acquire property other than residential unit valued at

more than RM150,000 per unit with no limit on the number o property acquire;

• The State Authority has the discretion to consider the acquisition based on the area or

location o the property, types o property and percentage o the total units in a project;



• Acquisition o commercial property valued at less than RM10 million by oreign interest

does not have to incorporate a local company subject to the commercial property is

only or own use;

• Foreign interest is only allowed to acquire agricultural land valued more than

RM250,000 or at least ve (5) acres in area subject to the conditions or acquisition;

• Acquisition o agricultural land by oreign interest is only allowed or the ollowing

purposes

a) to carry out agricultural activities on a commercial scale using modern or high

technology; or

b) to carry out agro-tourism project; or

c) to carry out agricultural or agro-based industrial activities or the production o

goods or export. However, or this purpose relaxation on equity condition may

be considered.

Other acquisitions that are exempted rom the FIC approvals include amongst others,

acquisition o properties by Multimedia Super Corridor (MSC) status companies or operation

purposes in the MSC area, transer o land under a will or court order and acquisition o

industrial property by manuacturing companies licensed by the Ministry o International

Trade and Industry (MITI) or own manuacturing purposes.

Real Property Gains Tax

Under the Real Property Gains Tax Act, 1976, gains arising rom the disposal o any real

property in Malaysia or any share in a real property company are subject to real properties

gain tax. However, all disposals o properties ater 31 March 2007 are now exempted rom

the Real Property Gains Tax.

Stamp Duty

Under the Stamp Act, 1949, any conveyance o property in Malaysia attracts an ad valorem

stamp duty based on the consideration or market value o the property.

Leases and Tenancies

Under the NLC, a lease is granted or a term exceeding 3 years, subject to a maximum term o

99 years i it relates to the whole o any alienated land and a maximum term o 30 years i it

relates to a part o land. On the other hand, tenancies are or terms not exceeding 3 years.

Every lease must be granted by an instrument which ormat is provided under the NLC.

The NLC also provides or agreements that may be incorporated in any lease. However, the

parties may modiy the terms as they think t, except or certain implied agreements relating

to payment o rent as specied in the lease (on the lessee’s part) and payment o all rent due

to the state authority (on the lessor’s part). Foreign interest that wishes to take a lease o

property or a term o 10 years and above is required to obtain the FIC approval.

A tenancy can be eected either in writing or verbally. A tenancy is not capable o registration

under the NLC. However, a tenant can be protected against subsequent dealings on the

land by an endorsement o the tenant’s claim on the register document o title to the land.

Tenant has to apply to the Registrar or such an endorsement by submitting the documents

required.



Prci f Illcual Prpry Righ

Overview

The Malaysian intellectual property regime aords protection via an extensive statutory

scheme covering intellectual property rights including copyright, trade marks, designs,

patents and layout designs o integrated circuits in compliance with Malaysia’s obligation

as a signatory to the Agreement on Trade Related Aspects o Intellectual Property (TRIPS).

Malaysia has acceded to the World Intellectual Property Organisation, the Paris Convention

or the Protection o Industrial Property, the Berne Convention or the Protection o Literary

and Artistic works, as well as the Patent Cooperation Treaty.

The Intellectual Property Corporation o Malaysia (MyIPO) is a statutory body established to,

among others, generally assist in the administration and enorcement o intellectual property

laws and issues or matters relating to intellectual property.

Copyright

The Copyright Act 1987 and its regulations govern the law on copyright in Malaysia. Malaysia

acceded to the Berne Convention on 1 October 1990.

The types o works protected by copyright in Malaysia are literary, musical and artistic works,

lms, sound recordings and broadcasts. Derivative works are also protected. The owner o

the copyright in a literary, musical or artistic work, a lm, a sound recording or a derivative

work has the exclusive right to control certain acts in these works, including reproduction,

and communication, perormance or distribution to the public, either in its original or

derivative orm.

Copyright protection in literary, musical or artistic works is or the duration o the lie o the

author plus 50 years ater death. There is no requirement or registration. Civil remedies are

available to a copyright owner whose copyright is inringed. Malaysia also imposes criminal

penalties or violations o its copyright laws.

Patents

Patent law in Malaysia is governed by the Patents Act 1983 and the Patent Regulations

1986. The owner o a patent has the exclusive rights, in relation to the patent, to exploit the

patented invention, assign or transmit the patent, or to conclude licensee contracts. Anyone

seeking to deal with the patent where the rights are exclusive to the owner will need to get

prior consent rom the latter.

The accession by Malaysia to the Patent Cooperation Treaty (PCT) means that Malaysia is a

designated country in respect o a patent application led in another contracting state on

or ater 16 August 2006. Malaysia will also be automatically designated or a request or

international preliminary examination as regards an application led in another contracting

state. Malaysian applicants themselves will be able to elect or PCT applications where the

same treatment will be according to them as with applicants rom contracting states.



Trade marks

Trade marks are accorded protection under the law both under common law and by

registration pursuant to the Trade Marks Act 1976 and Trade Marks Regulations 1997. Trade

marks which are either pending registration, or or which no application or registration have

been made, are protected under the common law provided the owner o such unregistered

marks can show proo o goodwill and reputation in the use o the said marks in relation to

goods or services.

The registration o a trade mark will be or a period o 10 years but may be renewed rom

time to time in perpetuity. Upon registration o a trade mark, the proprietor has the exclusive

right to use the trade mark in relation to those goods or services subject to any conditions,

amendments, modications or limitations entered in the Register o Trade Marks.

The Register o Trade Marks is kept at the Central Trade Marks Oce. Inspection o the

Register can be made at the Trade Mark Oce during oce hours upon payment o a

prescribed ee.

Industrial Designs

The Industrial Designs Act 1996 and Industrial Designs Regulations 1999 apply to applications

or the registration o industrial designs made ater 1 September 1999.

The owner on a registered industrial design will have the exclusive right to make or import

or sale or hire or or use or the purposes o any trade or business, or to sell, hire or to

oer or expose or sale or hire any article to which the registered industrial design has been

applied. Once registered, the rights associated with an industrial design will be that o a

personal property in that it will be capable o assignment and transmission by operation o

law. Registered designs are protected or an initial period o 5 years which may be extended

to a urther two 5 years terms, resulting in a total period o 15 years.

Layout-designs o Integrated Circuits

The Layout-Designs o Integrated Circuits Act 2000 provides or the protection o layout

designs o integrated circuits based on originality, the creator’s own invention and the act

that the creation is reely created.

No registration is needed. The Layout-Designs o Integrated Circuits Act grants automatically

to the owner o an original circuit layout certain rights to copy the layout, make an integrated

circuit in accordance with the layout and exploit the layout commercially. The rights can

be transerred either partly or wholly by way o assignment, license, wills or through the

enorcement o law.

The duration o protection is 10 years rom the date o commercial exploitation or 15 years

rom the date o creation i not commercially exploited.



FURtHeR InFoRMAtIon

Kuala LumpurLevel 19, Menara MileniumPusat Bandar Damansara, 50490 Kuala LumpurTel : +603 2087 9999Fax : +603 2094 4888 / 4666

Bangkkin association with Bangkok International AssociatesNo.140/37 ITF Tower18th Floor, Suite 11, Silom Road, KwaengSuriyawong, Khet Bangkrak, 10500 BangkokTel : +662 234 3720Fax : +662 231 6204

DubaiLevel 41, Emirates Towers, Sheikh Zayed RoadP.O.Box 31303, Dubai, UAETel : +971 4 319 9000Fax : +971 4 319 9372

Haniin association with AGZI LCT LimitedM01 Atlanta Place, 49 Hang Chuoi StreetHai Ba Trung District, HanoiTel : +84 4 2782768 / 769Fax : +84 4 2782766

H Chi Minh Cityin association with AGZI LCT LimitedSuite 1605 Saigon Trade Centre37 Ton Duc Thang Street, District 1, Ho Chi Minh CityTel : +84 8 8212357Fax : +84 8 8212382

Jakartain association with Roosdiono & PartnersIndonesia Stock Exchange BuildingTower I, 12th FloorJalan Jenderal Sudirman Kav. 52-53Jakarta 12190Tel : +62 21 5289 5125Fax : +62 21 5289 5112

Jhr BahruSuite 31.01, Level 31, Johor Bahru City Square106-108 Jalan Wong Ah Fook, 80000 Johor BahruTel : +607 226 4999Fax : +607 226 3999

Kta BharuPT 808, 1st Floor, Section 27Jalan Sri Cemerlang, 15300 Kota BharuTel : +609 744 7300Fax : +609 748 5122

KuchingLot 100, 1st Floor, Wisma Bukit MataJalan Tunku Abdul Rahman93100 Kuching, SarawakTel : +6082 241 546Fax : +6082 251 546

Labuan IoFCUnit Level 13(E), Main Oce TowerFinancial Park Labuan, Jalan Merdeka87000 WP LabuanTel : +6087 451 688 / 452 688Fax : +6087 453 688

Penang51-22-B&C, Menara BHLJalan Sultan Ahmad Shah, 10050 PenangTel : +604 227 0888Fax : +604 228 6755

singapre16 Rafes Quay, #20-03 Hong Leong BuildingSingapore 048581Tel : +065 6820 3499Fax : +065 6820 3493

www.zaidibrahim.com

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