Duty-Free Manufacturing in Malaysia
LMW
LMW in Malaysia stands for Licensed Manufacturing Warehouse. It is a type of warehouse facility that allows businesses to import raw materials and components duty-free, provided that they are used in the manufacturing process of goods that will be exported.
Key Points about LMW in Malaysia:
Purpose: To facilitate manufacturing and export activities by reducing import duties and taxes on raw materials and components.
Eligibility: Businesses that manufacture goods primarily for export and meet certain criteria set by the Malaysian Customs Department.
Benefits:
Duty-free import of raw materials and components.
Tax exemptions on manufacturing inputs.
Simplified customs procedures.
Enhanced competitiveness in the global market.
Responsibilities: LMW operators must comply with various regulations and requirements, including maintaining accurate records, submitting regular reports, and ensuring security of the facility.
LMW License
The Licensing Process for LMW in Malaysia
LMW License Requirements
Company Registration:
The company must be incorporated under the Companies Act 1965 (or its amendments).
The company's board of directors must undergo a security screening process.
Factory and Premise:
The factory must be permanent, sturdy, and secure.
It should be guarded by security personnel and equipped with a security alarm system.
The factory should be fenced to an appropriate height.
Non-fenced buildings may be considered with additional security measures.
The factory should have designated areas for manufacturing, raw material storage, finished goods storage, and manufacturing waste storage.
Manufacturing Activities:
The company must primarily engage in manufacturing activities.
Subcontracting activities are not eligible for LMW licenses.
Export Orientation:
At least 80% of the manufactured goods must be intended for export.
LMW License Application Process
Submit Application:
Submit the application to the State Director of Customs / Zone Operation Director where the factory is located.
Use JKDM Form No. 1 along with Appendix A and other supporting documents.
Approval in Principle:
The State Director of Customs may grant approval in principle if the company meets the basic requirements.
This allows the company to import machinery, equipment, and raw materials before the license is issued, subject to certain conditions.
License Issuance:
Upon approval, the State Director of Customs will issue the LMW license in JKDM Form No. 3.
The license fee is RM2,400 per annum.
LMW License Renewal
The LMW license must be renewed annually.
The renewal application should be submitted at least one month before the expiry date.
The renewal process involves a review of the company's compliance with LMW regulations and requirements.
Important Considerations:
LMWs are not subject to sales tax.
LMWs must maintain accurate records and submit regular reports to the Customs Department.
LMWs are subject to customs inspections and audits.
Failure to comply with LMW regulations may result in penalties, including revocation of the license.
By following these guidelines and complying with the relevant regulations, businesses in Malaysia can take advantage of the benefits offered by LMW licenses to enhance their manufacturing and export operations.
Additional Resources:
To learn more about LMW in Malaysia, you can refer to the following resources:
Malaysian Customs Department: https://www.customs.gov.my/en/ip/Pages/ip_lesen.aspx
Industry Malaysia: https://industrymalaysia.com/licensed-manufacturing-warehouse-lmw/
Bestar: https://www.bestar-my.com/post/manufacturing-warehouse-license
How Professional can Help
Professional can provide valuable assistance to businesses seeking to obtain an LMW license in Malaysia. They handle the licensing process. Their expertise in various areas can significantly contribute to a smooth and successful application:
1. Company Incorporation and Structure:
Legal Entity Setup: Professional can guide you through the process of setting up a legal entity in Malaysia, ensuring it meets the necessary requirements for LMW eligibility.
Corporate Structure Optimization: They can help you establish a corporate structure that aligns with LMW regulations and optimizes your business operations.
2. Licensing and Permitting:
Navigating Regulations: Professional can assist you in understanding the complex LMW licensing regulations, ensuring compliance with all relevant requirements.
Application Preparation: They can help you prepare a comprehensive application package, including all necessary documentation and supporting materials.
Liaison with Authorities: Professional can liaise with the relevant government authorities on your behalf, facilitating the application process and addressing any queries or concerns.
3. Financial and Tax Planning:
Tax Implications: Professional can help you understand the tax implications of operating an LMW, ensuring you maximize tax benefits and minimize liabilities.
Financial Projections: They can assist in preparing financial projections and forecasts, which may be required as part of the LMW application process.
4. HR and Payroll Services:
Compliance with Labor Laws: Professional can help you ensure compliance with Malaysian labor laws and regulations, particularly regarding foreign workers and employment contracts.
Payroll Management: They can handle payroll processing, tax deductions, and employee benefits, ensuring accurate and timely payments.
5. Business Advisory and Consulting:
Strategic Planning: Professional can provide strategic advice on your business operations, helping you align your plans with LMW requirements and optimize your supply chain.
Risk Management: They can help you identify and mitigate potential risks associated with LMW operations, ensuring business continuity and compliance.
By leveraging Professional's expertise, you can streamline the LMW licensing process, reduce administrative burdens, and increase your chances of obtaining the necessary approvals.
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