Sabah is outside the Registration of Businesses Act 1956, so there is no SSM enterprise registration. What makes a business lawful is a trading licence under s.3(1) of the Trades Licensing Ordinance (Sabah Cap. 144), which expires on 31 December whatever month it was issued. A second premises licence may apply under the Local Government Ordinance 1961. SEDIA, the corridor authority, was created by a State enactment rather than an Act of Parliament, and Sabah controls entry of non-Sabahans under Part VII of the Immigration Act.
- ROBA 1956 s.1(2) applies to Peninsular Malaysia only — a Sabah sole proprietor does not register with SSM and cannot use EzBiz
- Cap. 144 s.3(1) requires a trading licence, s.3(2) requires a separate one for each place of business, and s.6 expires every licence on 31 December
- The fee taper in s.7(2) is not a pro-rate — two-thirds after 30 June, one-third after 30 September, and nothing finer
- DBKK charges RM25 a year plus RM10 processing, and requires a work pass from any applicant who is not a Sabah local or permanent resident
- A second, separate premises licence exists under the Uniform By-laws 2022, in force 5 October 2023, with fees tiered by council class and a penalty ceiling of RM100,000
- SEDIA was established by the Sabah Economic Development and Investment Authority Enactment 2009, a State enactment — IRDA, NCIA and ECERDC are federal Acts
- Sabah levies its own State sales tax, including 7.5 per cent on crude palm oil and 5 per cent on crude petroleum, LNG and natural gas
Who this applies to: Anyone starting or expanding a business in Sabah, and Peninsular-based advisers whose checklists assume SSM registration and the Local Government Act 1976.
On this page
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 for the mechanics, the Sarawak guide for how differently the other East Malaysian state solves the same problem, and the corridors compared to see where SEDIA sits against the federal authorities.
Do I register my Sabah business with SSM?
Only if it is a company or an LLP. The Companies Act 2016 and the Limited Liability Partnerships Act 2012 apply throughout Malaysia, so Sdn Bhd and LLP incorporation stays federal. But the Registration of Businesses Act 1956 says at s.1(2) that it applies to Peninsular Malaysia only, so there is no sole proprietorship or partnership registration for Sabah and EzBiz is not the route. The trading licence under Cap. 144 is what makes the business lawful, and it doubles as the public record of who is trading.
When does a Sabah trading licence expire?
On 31 December, under s.6 of Cap. 144, regardless of when it was issued. The fee relief in s.7(2) is coarser than most guides suggest — it is not a monthly pro-rate. A licence issued after 30 June is charged two-thirds of the fee and one issued after 30 September is charged one-third. Nothing in between. Section 10 mirrors this on surrender, refunding one-third where six months or more remain and one-sixth where three to six months remain.
Who issues the trading licence?
Section 4(1) puts it with the administrative officer, or his assistant, in charge of the district where the premises are situated. Section 4(2) lets the Minister appoint another person as licensing authority for an area, and that is the hook under which city and municipal councils issue — DBKK in Kota Kinabalu, Majlis Perbandaran Sandakan, Majlis Perbandaran Tawau, and district offices elsewhere.
Can a Peninsular Malaysian just open a business in Sabah?
Not without dealing with Sabah immigration first. DBKK's own licensing guidance requires the applicant to be a local or permanent resident of Sabah, or to hold a work pass if from Sarawak or Peninsular Malaysia, and repeats the requirement for company directors named as licence managers. The statutory basis is Part VII of the Immigration Act 1959/63 — s.66(1) says a citizen is not entitled to enter an East Malaysian State without a Permit or Pass unless he belongs to the State or falls in a listed office, and s.66(3) says a citizen not so entitled is treated as if he were not a citizen.
Is SEDIA the same kind of body as IRDA or NCIA?
No, and the difference is constitutional rather than cosmetic. The Sabah Economic Development and Investment Authority Enactment 2009, No. 1 of 2009, is enacted by the Legislature of the State of Sabah. IRDA sits on the Iskandar Regional Development Authority Act 2007, NCIA on Act 687 and ECERDC on Act 688 — all Acts of Parliament. SEDIA's Chairman is the Chief Minister, and s.7(f) makes its function to recommend incentives to the State or Federal Government, not to grant them. The headline Sabah Development Corridor tax incentives still run on the Income Tax Act 1967 and the Customs Act 1967.
Does Sabah have taxes the Peninsula does not?
Yes. The State Sales Tax Enactment 1998 lets the State Minister of Finance impose sales tax by Order on listed goods. Crude palm oil is taxed at 7.5 per cent of volume against the monthly MPOB Sabah average price, applying only where that average exceeds RM1,000. A 2025 Order applies 5 per cent to crude petroleum oil, condensate, LNG, natural gas, ammonia, urea and methanol. Other Orders cover fish and crustaceans, scrap iron, silica, oil palm biomass, and gold and silver mined in Sabah. This sits alongside, not instead of, federal SST.
The following are deliberately unstated or described only qualitatively until confirmed by a subject-matter expert:
- Whether DBKK has adopted the Uniform (Licensing the Use of Premises) By-laws 2022 — DBKK's pages still cite only Cap. 144 and its own 1966 to 1984 by-laws, and adoption requires a resolution of each Authority under s.50A of the Local Government Ordinance 1961
- The current statutory fee schedules under Cap. 144 — the reference version published by the State Attorney-General's Chambers renders all First Schedule fees in pre-decimal dollars and flattens the Second Schedule, so no statutory rate is quotable
- Trading licence fees, processing fees, renewal windows and document lists for Majlis Perbandaran Sandakan and Majlis Perbandaran Tawau — neither publishes them
- Current tenant counts and committed investment at POIC Lahad Datu and SOGIP Sipitang — the operator sites carry figures dated 2020 to 2022 and aspirational totals
Sources
- Trades Licensing Ordinance (Sabah Cap. 144) — Sabah State Attorney-General's Chambers
- Uniform (Licensing the Use of Premises for Trade, Business, Industry and Profession) By-laws 2022 — Sabah State Attorney-General's Chambers
- Lesen Berniaga di Bawah Ordinan Lesen Perniagaan 1948 — Dewan Bandaraya Kota Kinabalu
- Sabah Economic Development and Investment Authority Enactment 2009 — Sabah State Attorney-General's Chambers
- Immigration Act 1959/63 (Act 155) — Attorney General's Chambers
- State Sales Tax Enactment 1998 — Sabah State Attorney-General's Chambers
- Gross Domestic Product (GDP) by State, 2025 — Department of Statistics Malaysia
- Sabah's economy up 5.1% in 2025 — Free Malaysia Today (reporting DOSM figures)
- Labour Force Survey 2025 — Department of Statistics Malaysia
- Employee Wages Statistics (Formal Sector), Fourth Quarter 2025 — Department of Statistics Malaysia
- Malaysia's 1H 2025 Approved Investments Up 18.7% Y-o-Y to RM190.3 Billion — Malaysian Investment Development Authority (MIDA)
- Federal Constitution — Tenth Schedule — Sabah State Attorney-General's Chambers
- Federal Constitution of Malaysia (consolidated text, incl. Art. 161E) — WIPO Lex / Attorney General's Chambers
- About SEDIA and the Sabah Development Corridor — SEDIA
Change history
| Version | Date | Change | By |
|---|---|---|---|
| 01.00 | 14 Aug 2026 | Approved and published. | — |