# Doing Business in Sabah: A Different Statute Book

> Sabah licenses trade under its own Trades Licensing Ordinance Cap. 144, adds a separate premises by-law under the Local Government Ordinance 1961, runs its investment authority on a State enactment rather than an Act of Parliament, levies its own sales tax, and controls its own immigration — none of which follows peninsular law.

- Category: business
- Language: en
- Status: published
- Updated: 2026-08-14
- Canonical: https://negaraku.md/en/business/doing-business-sabah

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Almost every national guide to doing business in Malaysia is wrong about Sabah, and wrong
in the same way each time: it assumes SSM registers your enterprise, that the Local
Government Act 1976 licenses your premises, and that the corridor authority is a federal
statutory body. None of the three is true east of the South China Sea.

Sabah runs on its own statute book, and that determines which counter you queue at, what
your licence costs, when it expires, whether you are legally entitled to be in the state
at all, and whether the product you ship out is taxed twice.

## Sabah is outside the federal business registration Act

**Section 1(2) of the Registration of Businesses Act 1956 says the Act applies to
Peninsular Malaysia only.** It was extended to Labuan in 1996 and nowhere else. There is
no Registrar of Businesses jurisdiction over Sabah, so a sole proprietorship or
partnership there has no SSM registration to obtain and EzBiz is not the route.

What makes it lawful is the **trading licence under s.3(1) of the Trades Licensing
Ordinance (Sabah Cap. 144)**, originally Ordinance No. 16 of 1948, in force since
1 January 1949. Companies and LLPs are different — the Companies Act 2016 and the LLP Act
2012 carry no territorial limitation and apply throughout Malaysia. **The trading licence
sits on top of federal incorporation, not instead of it**, which is why DBKK's application
form asks a Sdn Bhd applicant for its Companies Act documents.

This is the same structural gap that produces Sarawak's three-licence stack — but Sabah
does not copy Sarawak either. Sarawak splits registration, trade licence and operating
licence across three instruments; Sabah puts the substance in one ordinance and adds a
premises layer on top.

## What Cap. 144 actually requires

| Section | Rule |
| --- | --- |
| **s.3(1)** | No person shall carry on business in Sabah without a valid trading licence, or in any place other than the one specified in it |
| **s.3(2)** | A **separate licence for each place of business** — though any number of licensed businesses may run at one licensed place |
| **s.3(4)** | Penalty: **four times the licence fee**, plus a further daily fine for each day the contravention continues after conviction |
| **s.4(1)–(2)** | Issued by the district administrative officer; the Minister may appoint another licensing authority for an area |
| **s.5(4)** | Any change in the particulars given must be filed **within 14 days** |
| **s.6** | The licence **continues in force until 31 December next following** the date of commencement |
| **s.7(2)** | Issued after 30 June, **two-thirds** of the fee; after 30 September, **one-third** |
| **s.10** | Surrender refund: one-third if six months or more remain, one-sixth if three to six months |
| **s.8(1), 8(3)** | Under-18s ineligible; appeal against refusal lies **to a Judge** |
| **s.12(1)** | The licence must be **exhibited in a conspicuous place** on the premises |

Read s.6 literally: *31 December next following the date of commencement* is the **coming**
31 December — the one in the year the licence is issued, not the year after — which is why a
licence taken out in November is worth only weeks. That is the same reading the FAQ gives.

**The correction worth carrying:** s.7(2) is routinely described in the market as a
pro-rated fee. It is not. It is a two-step taper with exactly two breakpoints. A licence
taken out on 1 July and one taken out on 29 September cost the same.

In Kota Kinabalu, **DBKK charges RM25 a year plus a RM10 processing charge**. Renewals open
in November. Documents run to a tenancy agreement or landlord consent letter, identity
card, the latest *cukai pintu* assessment receipt, and for a company its Form 9 and Form 49.

Do not quote the ordinance's own schedules. The reference text published by the State
Attorney-General's Chambers still renders fees in pre-decimal dollars and flattens the
Second Schedule entirely. The council rate is the real rate.

## The second licence most guides miss

Cap. 144 licenses the **trade**. The **premises** are a separate question, and Sabah
answers it under the **Local Government Ordinance 1961**, not the Local Government Act
1976.

Under s.50A of that Ordinance, the **Uniform (Licensing the Use of Premises for Trade,
Business, Industry and Profession) By-laws 2022** were approved on 26 November 2022 and
came into operation on **5 October 2023**. By-law 3 prohibits using premises for trade,
business, industry or profession without a licence from the Local Authority. By-law 4(7)
allows a term of up to **five years** — longer than the three-year ceiling that binds
every peninsular council under s.107(4) of Act 171.

The fees are tiered by council class — City, Municipal, District. An office up to
150 square metres runs RM200, RM150 or RM100 by class. Most retail, industrial, store and
workshop categories are priced per square metre at **RM3.00, RM2.00 or RM1.00**. Processing
is RM20. **By-law 26 sets a penalty ceiling of RM100,000 or one year, plus RM5,000 a day**
— fifty times the RM2,000 ceiling that s.104 of Act 171 imposes on peninsular by-laws.

One caveat that matters commercially: **it is unresolved whether DBKK has adopted these
by-laws.** Adoption requires a resolution of each Authority, and DBKK's pages still cite
only Cap. 144 and its own 1966 to 1984 by-laws. The difference between RM25 and a
per-square-metre premises fee is worth a phone call before you budget.

## SEDIA is a State authority, and it recommends rather than grants

The **Sabah Economic Development and Investment Authority Enactment 2009, No. 1 of 2009**
opens with the words *enacted by the Legislature of the State of Sabah*. That single line
separates it from every other Malaysian corridor authority: **IRDA sits on the Iskandar
Regional Development Authority Act 2007, NCIA on Act 687, ECERDC on Act 688** — Acts of
Parliament.

The consequences are practical. Section 8 makes the **Chief Minister** the Chairman, and
defines *Minister* as the Chief Minister. Section 4 has the Yang di-Pertua Negeri
determine by Gazette which projects collectively form the Sabah Development Corridor. And
**s.7(f) makes SEDIA's function to recommend incentives to the State or Federal
Government** — it does not grant them. The headline SDC package still runs on federal
instruments: income tax exemption under the Income Tax Act 1967, duty exemption under the
Customs Act 1967. Stamp duty relief on tourism-related land development is the one item
with a genuinely state dimension.

**SDC Blueprint 2.0 covers 2021 to 2030**, targeting RM95 billion in private investment,
70,000 jobs and RM20 billion of additional GDP. Note it overlaps rather than follows the
original 2008 blueprint, which ran to 2025.

## Sabah taxes things the Peninsula does not

The **State Sales Tax Enactment 1998** empowers the State Minister of Finance to impose
sales tax by Order on goods listed in the regulations. The Orders currently in force
include:

- **Crude palm oil at 7.5 per cent**, applied to volume against the MPOB Sabah monthly
  average price, and only where that average exceeds RM1,000
- **5 per cent** on crude petroleum oil, condensate, LNG, natural gas, ammonia, urea and
  methanol, effective 1 February 2025
- **7.5 per cent** on each category of oil palm biomass taken out of Sabah, and 5 per cent
  on silica
- **5 per cent** on gold and silver mined in Sabah, effective 1 January 2025
- **5 per cent** on fish, molluscs and seaweed taken out of Sabah, **10 per cent** on
  lobster and crab, and 10 per cent on scrap iron

This is a state levy sitting alongside federal SST, not in place of it. Any commodity
export model built on peninsular assumptions will be wrong.

The other state layer with teeth is land. **Section 17(1) of the Land Ordinance
(Sabah Cap. 68) forbids all dealings in land between non-natives and natives** except with
the written permission of the Minister, and makes unpermitted dealings void. Section 15
defines Native Customary Rights broadly — customary tenure, land planted with 50 or more
fruit trees per hectare, burial grounds, rights of way. Due diligence on a Sabah site is
not a title search.

## Immigration is a live commercial constraint, not a formality

Section 1(2) of the **Immigration Act 1959/63** applies the Act throughout Malaysia
*subject to Part VII*. Part VII is where Sabah's control sits.

**Section 65(1)** requires the Director to comply with directions from the **State
authority** — including directions not to issue a Permit or Pass to a person or class, or
to cancel one. **Section 65(2)** is the sharp end: on appeal, the Minister *shall not allow
the appeal without the concurrence of the State authority*. **Section 66(1)** provides that
a citizen is not entitled to enter an East Malaysian State without a Permit or Pass unless
he belongs to the State or holds one of a short list of federal and state offices, and
**s.66(3)** provides that a citizen not so entitled is treated as if he were not a citizen.

That machinery reaches the licensing counter directly: DBKK requires a work pass from any
applicant who is not a Sabah local or permanent resident. Plan the pass before the lease.

## The economic case

DOSM's *GDP by State, 2025* puts Sabah's economy at **RM88.8 billion** at current prices,
up from RM84.5 billion in 2024 — **5.1 per cent of national GDP** and the seventh-largest
state economy. In real terms it grew **5.1 per cent**, a sharp recovery from 1.2 per cent in
2024, with **GDP per capita at RM31,125** against a national RM59,167.

The sector mix is genuinely unlike anywhere else in Malaysia. **Services 52.1 per cent,
mining and quarrying 22.0 per cent, agriculture 13.9 per cent, manufacturing 7.2 per cent,
construction 4.4 per cent.** Against national shares of 59.5, 5.7, 6.1 and 23.0, Sabah
carries roughly four times the national mining weight, more than double the agriculture
weight, and under a third the manufacturing weight. Mining rebounded 4.9 per cent on crude
oil and condensate recovery; agriculture returned to growth on oil palm at 4.3 per cent;
services grew 4.5 per cent on tourism, with arrivals up 20.4 per cent.

Read plainly: Sabah is a resource and services economy with a thin manufacturing base. The
industrial estates reflect that — **KKIP** at 8,320 acres near Sepanggar, **POIC Lahad
Datu** with a natural deep harbour beyond 20 metres, and **SOGIP Sipitang** at 5,539 acres.

That resource weight does not translate into the labour market. DOSM's *Labour Force
Survey 2025* records Sabah's unemployment rate at **7.2 per cent** for 2025, the highest of
any state and more than double the national 3.0 per cent, while its median formal-sector
wage was **RM2,045** in December 2025 (*Employee Wages Statistics, Q4 2025*), against a
national median of RM3,167 — among the lowest state medians. Investment interest is
stronger: MIDA recorded **RM11.4 billion** of approved investments in Sabah in the first
half of 2025, fifth among the states.

One frequent confusion worth closing: **Labuan is not Sabah.** It has been a Federal
Territory since 1984, regulated by Labuan FSA under the Labuan Business Activity Tax Act
1990, and nothing on this page applies to it.

## What is not different here

Incorporating a Sdn Bhd or an LLP, corporate income tax, SST at the federal level,
e-Invoice, EPF, SOCSO, EIS, the HRD Corp levy, the company secretary requirement,
statutory audit thresholds and the annual return are all federal and identical in Kota
Kinabalu and Kuala Lumpur. Employment law is the exception to the exception — Sabah runs
the **Labour Ordinance of Sabah (Cap. 67)**, not the Employment Act 1955.

## Common mistakes

- **Telling a Sabah sole proprietor to register on EzBiz.** ROBA 1956 s.1(2) puts them
  outside it entirely.
- **Describing the s.7(2) fee taper as pro-rated.** It has two breakpoints, 30 June and
  30 September, and nothing between them.
- **Getting one licence and stopping.** Cap. 144 licenses the trade; the premises may need
  a separate licence under the Local Government Ordinance 1961 by-laws.
- **Applying s.104 of Act 171 penalty ceilings in Sabah.** The Uniform By-laws 2022 ceiling
  is RM100,000, not RM2,000.
- **Treating SEDIA as a federal corridor authority that grants incentives.** It is a State
  body, and s.7(f) makes it a recommending body.
- **Flying a Peninsular manager in to open the shop.** Part VII of the Immigration Act, and
  DBKK's own eligibility rule, require a pass first.
- **Modelling commodity exports on federal SST alone.** The State Sales Tax Enactment 1998
  Orders apply on top.
- **Treating Labuan as part of Sabah.** It is a Federal Territory with its own regulator
  and its own tax Act.

## What's next

Start with the licensing authority for your district and ask two questions: what the
Cap. 144 trading licence costs there, and whether that Authority has adopted the Uniform
By-laws 2022. Settle immigration status before the tenancy, because the licence counter
will ask for it. If you are shipping a listed commodity, check the current State Sales Tax
Order before pricing. Then read
[registering and licensing a business in Sabah](/en/business/register-business-sabah)
for the mechanics, the
[Sarawak guide](/en/business/sarawak-business-guide) for how differently the
other East Malaysian state solves the same problem, and
[the corridors compared](/en/business/economic-corridors-compared) to see where
SEDIA sits against the federal authorities.

## Sources

- Trades Licensing Ordinance (Sabah Cap. 144) — https://sagc.sabah.gov.my/sites/default/files/law/TradesLicensingOrdinance(SabahCap144).pdf (Sabah State Attorney-General's Chambers)
- Uniform (Licensing the Use of Premises for Trade, Business, Industry and Profession) By-laws 2022 — https://sagc.sabah.gov.my/?q=en/law-type/subsidiary-legislation-page (Sabah State Attorney-General's Chambers)
- Lesen Berniaga di Bawah Ordinan Lesen Perniagaan 1948 — https://dbkk.sabah.gov.my/lesen-berniaga (Dewan Bandaraya Kota Kinabalu)
- Sabah Economic Development and Investment Authority Enactment 2009 — https://sagc.sabah.gov.my/sites/default/files/law/SabahEconomicDevelopmentandInvestmentAuthorityEnactment2009.pdf (Sabah State Attorney-General's Chambers)
- Immigration Act 1959/63 (Act 155) — https://lom.agc.gov.my/act-detail.php?act=155&lang=BI (Attorney General's Chambers)
- State Sales Tax Enactment 1998 — https://sagc.sabah.gov.my/sites/default/files/law/State%20Sales%20Tax%20Enactment%201998_2.pdf (Sabah State Attorney-General's Chambers)
- Gross Domestic Product (GDP) by State, 2025 — https://www.dosm.gov.my/portal-main/release-content/gross-domestic-product-gdp-by-state-2025 (Department of Statistics Malaysia)
- Sabah's economy up 5.1% in 2025 — https://www.freemalaysiatoday.com/category/nation/2026/07/02/sabahs-economy-up-5-1-in-2025 (Free Malaysia Today (reporting DOSM figures))
- Labour Force Survey 2025 — https://www.dosm.gov.my/portal-main/release-content/labour-force-survey-2025 (Department of Statistics Malaysia)
- Employee Wages Statistics (Formal Sector), Fourth Quarter 2025 — https://www.dosm.gov.my/portal-main/release-content/employee-wages-statistics-formal-sector-q42025 (Department of Statistics Malaysia)
- Malaysia's 1H 2025 Approved Investments Up 18.7% Y-o-Y to RM190.3 Billion — https://www.mida.gov.my/media-release/malaysias-1h-2025-approved-investments-up-by-18-7-year-on-year-to-rm190-3-billion-creating-over-89000-new-jobs/ (Malaysian Investment Development Authority (MIDA))
- Federal Constitution — Tenth Schedule — https://sagc.sabah.gov.my/sites/default/files/law/TenthSchedule.pdf (Sabah State Attorney-General's Chambers)
- Federal Constitution of Malaysia (consolidated text, incl. Art. 161E) — https://www.wipo.int/wipolex/en/legislation/details/13054 (WIPO Lex / Attorney General's Chambers)
- About SEDIA and the Sabah Development Corridor — https://sedia.com.my/about-sdc/ (SEDIA)

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