Manufacturing Licence and the ICA 1975 Exemption

Most Malaysian SME manufacturers do not need a manufacturing licence. Almost every guide stops there, as though being exempt were the same as having nothing to do.

It is not. The exemption has a document, the document is the key to import duty relief and investment incentives, and a factory that never applied for it discovers this at the worst possible moment — usually when the first container of machinery is already at port.

What the Act actually says

The Industrial Co-ordination Act 1975 (Act 156) received assent on 15 May 1975 and came into force on 1 May 1976.

Section 3(1) is one sentence: “No person shall engage in any manufacturing activity unless he is issued a licence in respect of such manufacturing activity.”

Section 3(2) carries the penalty — a fine up to RM2,000 or imprisonment up to six months, plus a further fine up to RM1,000 for every day the default continues.

Section 2 defines the activity broadly: the making, altering, blending, ornamenting, finishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal, including the assembly of parts and ship repairing, but excluding any activity normally associated with retail or wholesale trade.

Blending and assembly are inside that definition. Repackaging bought-in goods for resale generally is not. If you cannot tell which side of that line you sit on, resolve it before you build the line, not after.

Section 11 gives the Minister power to exempt any manufacturing activity from all or any of the provisions of the Act, and s.4(3) sets the approval test: whether a licence is consistent with national economic and social objectives and would promote the orderly development of manufacturing activities in Malaysia. Statutorily the decision-maker is the licensing officer appointed by the Prime Minister under s.3A.

The Act sets no validity period, renewal or expiry for a manufacturing licence. It provides only for the grant, revocation (s.6) and transfer of a licence, and MIDA’s 2024 guideline is likewise silent on validity or renewal. A manufacturing licence therefore subsists until it is revoked — there is no published renewal cycle to diarise.

Who actually needs a licence?

MIDA’s Guideline on Application for Manufacturing Licence, dated 6 June 2024, states that the Act requires a person engaging in manufacturing with shareholders’ funds of RM2.5 million and above, OR employing 75 or more full-time paid employees, to apply for a manufacturing licence.

MIDA’s Guideline on Application for Exemption from Manufacturing Licence, dated 3 November 2022, states that a company with shareholders’ funds not exceeding RM2.5 million AND employing not more than 75 full-time paid employees may apply for an exemption.

Read those two sentences side by side, because the conjunctions differ and almost nobody notices.

Position	Test	Conjunction
Licence required	Funds ≥ RM2.5m; or 75+ employees	OR
Exemption available	Funds ≤ RM2.5m; and ≤ 75 employees	AND

A company with RM1 million of shareholders’ funds and 90 employees is over one limb and under the other. On MIDA’s wording it is licensable and it is not exemptible. Growth in headcount alone brings you into the licensing regime with no capital event at all.

The two tests also overlap at the exact boundary. RM2.5 million of shareholders’ funds satisfies both “and above” and “not exceeding”, so a company sitting precisely on RM2.5 million with 75 or fewer employees reads as licensable under the licensing limb and exemptible under the exemption limb at the same time. Because s.3(1) is the operative statutory bar, treat such a company as licensable and apply for the ICA confirmation rather than assume the exemption.

One honest caveat, and it is a real one. The gazetted exemption instrument could not be located. The AGC subsidiary legislation database returns only a licence revocation notification against Act 156, and MITI’s own ICA page lists no exemption order. The thresholds above rest on MIDA’s published guidelines, which is a solid administrative source, but it is not the gazette. Anyone citing a specific exemption order by number should be asked to produce it.

Definitions that decide the answer

Shareholders’ funds are the aggregate of paid-up capital, reserves, the balance of the share premium account and the balance of the profit and loss appropriation account. Paid-up capital excludes bonus shares issued out of a capital reserve created by revaluing fixed assets; reserves exclude any such revaluation reserve and exclude provisions for depreciation, renewals or replacements and diminution in asset value.

Full-time paid employees are persons normally working in the establishment for at least six hours a day and at least 20 days a month for 12 months during the year, paid directly by the applicant company. It includes travelling sales, engineering, maintenance and repair personnel under the establishment’s control, and directors of incorporated enterprises except those paid solely for attending board meetings.

Three activities exempt regardless of size

MIDA’s 2024 guideline names activities that need no manufacturing licence whatever the company’s size:

• Milling of paddy into rice
• Milling of oil palm fresh fruits into crude palm oil
• Production and processing of raw natural rubber of all types

Why an exempt company still applies

MIDA issues a Confirmation Letter for a company exempted from a manufacturing licence, applied for as ICA 10. Its guideline is explicit about what the letter is for: companies confirmed exempt through the Exemption Letter are eligible to apply for government facilities such as import duty exemptions for machinery, equipment and raw materials under the Customs Duties (Exemption) Order 2017 and the Sales Tax (Persons Exempted From Payment Of Tax) Order 2018, and for investment incentives under the Promotion of Investments Act 1986 and the Income Tax Act 1967, subject to criteria.

The duty exemption guideline closes the loop. Its required-attachment list names either a manufacturing licence issued under the ICA 1975, or the confirmation letter for a company exempted from one. There is no third option. An unlicensed, unconfirmed factory has no document to attach.

The exemption is also expatriate currency. MIDA’s Employment Pass guidelines list the manufacturing licence, an interim approval letter, or the ICA 10 exemption letter as the basis for both Key Post and Term Post eligibility.

Practical points on the duty exemption itself: the minimum exemption value is RM5,000 and above per submission, and the application must be made before importation or purchase. Attachments include the tax incentive approval where applicable, a DOSH registration certificate or acknowledgement letter, the SSM company profile, a manufacturing process flow chart and a machinery layout plan.

How to apply

Everything is online, through the InvestMalaysia portal at investmalaysia.mida.gov.my. MIDA states that manufacturing licence and ICA 10 applications can only be made there, and that all manufacturing licence applications received from 26 March 2021 are evaluated through the portal.

MIDA receives and evaluates; MITI approves. MIDA’s handbook describes the licence as being for approval by the Ministry, with applications submitted to MIDA as its agency. Processing runs at seven days on the fast track and 60 days on the normal track, and manufacturing licence applications now use a self-assessment and self-declaration mechanism.

Additional licensing conditions in the 2024 guideline go beyond the thresholds: capital investment per employee of at least RM140,000; at least 80 per cent Malaysian full-time workforce; and either at least 25 per cent of staff in managerial, technical and supervisory roles holding a degree, diploma or certificate, or value added of at least 40 per cent.

The 2026 change that resets the incentive question

Pioneer Status is closed to new manufacturing applications. MITI’s media release of 29 January 2026 states that the New Incentive Framework takes effect from 1 March 2026, beginning with manufacturing and extending to services in the second quarter of 2026, and that the Government will no longer accept new manufacturing incentive applications under the Promotion of Investments Act 1986 — the final deadline having been 28 February 2026. Existing approvals are unaffected and remain valid on their approved terms.

Under the new framework there are two mutually exclusive incentives per qualifying project — a Special Tax Rate and an Investment Tax Allowance — awarded against a scorecard covering economic value creation, local talent development, domestic supply chains, technology transfer and sustainability.

Any guide still presenting “Pioneer Status or ITA under the PIA 1986” as the live menu for a new manufacturing project is describing a closed window. MIDA’s own 2022 ICA 10 guideline still references PIA 1986 incentives, because it predates the change.

Common mistakes

• Treating exemption as inaction. Exempt is a status you confirm in writing, not one you assume.
• Reading the two thresholds as mirror images. Licensing is OR; exemption is AND.
• Watching capital and ignoring headcount. Seventy-five full-time paid employees brings you in without a single ringgit of new capital.
• Applying for duty exemption after the goods land. The application must precede importation or purchase, and the minimum is RM5,000 per submission.
• Assuming packing is not manufacturing. Blending, finishing and assembly are inside the s.2 definition.
• Planning around Pioneer Status. For new manufacturing projects, that route closed on 28 February 2026.

What’s next

Calculate two numbers today: shareholders’ funds on MIDA’s definition, and full-time paid employees on MIDA’s six-hour, twenty-day test. If both sit under the thresholds, file the ICA 10 and keep the confirmation letter with your incorporation documents — it is the attachment every later duty and incentive application will demand.