A Guide to

Doing Business in Malaysia

July 2008

Contents Government and Legal System Business Organisation Structures Foreign Investment Taxation Immigration Requirements Employment Law Real Property Law 1 3 6 10 11 13

Government and Legal system

General Malaysia is a constitutional monarchy, headed by the Yang di-Pertuan Agong, customarily referred to as the king. The Yang di-Pertuan Agong is elected for 5-year terms from among the nine Sultans of the Peninsular Malaysian states. The Yang di-Pertuan Agong is also the leader of the Islamic faith in Malaysia. Malaysia practices parliamentary democracy and has a three-tier government structure: federal, state and local. Federal executive power is vested in the Cabinet led by the Prime Minister. The Federal Constitution of Malaysia requires the Prime Minister to command the confidence of the majority in the lower house of Parliament. The Cabinet is chosen from among members of Parliament and is collectively responsible to that body. Legislative power is divided between federal and state legislatures. Parliament makes federal laws applicable to Malaysia as a whole. It also examines the governments policies, approves the governments expenditures and new taxes and also serves as the forum for criticism and the focus of public opinion on national affairs. The State governments are headed by State Rulers. The Ruler acts on the advice of the State Executive Council that is chaired by the Chief Minister or Menteri Besar. All states have their own legislatures.

14 Protection of Intellectual 16 Property Rights

his document is a guide that provides only general information and is not intended to be comprehensive advice. It is not a substitute for legal or other advice and it is given without the assumption of a duty of care. We do not assume any legal responsibility for the accuracy of any particular statement in this document. It is advisable for anyone who intends to do business in Malaysia, or in the case of a specific issue or problem, to seek professional advice. If you need any further information, please consult your usual lawyer at Zaid Ibrahim & Co. or one of the following: Chew Seng Kok Lim Kar Han Dato' Dr. Nik Norzrul Lynette Yeow Toh Beng Suan
Last Updated 25 July 2008

Federal and State Governments The distribution of executive and legislative powers between the Federal and State Governments is embodied in the Federal Constitution of Malaysia. The Federal Government has authority over, among others, external affairs, defence, internal security, civil and criminal law and the administration of justice (except for certain civil law cases among Malays or other Muslims which are adjudicated under Islamic law), federal citizenship, finance, 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 of a local character such as markets, fairs, licensing of places of public amusement. Both the Federal and State Governments have concurrent jurisdiction over, among others, social welfare, town and country planning, public health, sanitation, drainage, irrigation, housing and provisions for housing accommodation.

Zaid Ibrahim & Co. All rights reserved.

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The Parliament The Malaysian Parliament consists of the Yang di-Pertuan Agong or king, the Senate (Dewan Negara) and the House of Representatives (Dewan Rakyat). All 70 Senate members sit for 3-year terms, which are normally extended for an additional 3 years; 26 are elected by the 13 state assemblies, and 44 are appointed by the Yang diPertuan Agong. The life of the Senate is not affected by the dissolution of Parliament. Senators are drawn from the ranks of persons who have rendered distinguished public service or have achieved distinction in their professions; commerce, industry, agriculture, cultural activities or social service or are representatives of a racial minority or are capable of representing the interests of aborigines. The 222 representatives of the House or Dewan Rakyat are elected from single-member districts to parliamentary terms lasting up to 5 years.

Source of Law The foundation of the Malaysian legal system is a legacy of British colonial history. The legal system is based on a set of written and unwritten laws. The Federal Constitution together with the constitutions of the States, legislation enacted by Parliament (Acts of Parliament), and delegated legislation made by statutory bodies under powers conferred on them by Acts of Parliament, form the integral part of the written laws. The unwritten laws are comprised of the principles of English common law, previous judicial decisions of the superior courts and local customary law. Islamic law is another important source of law which applies only to the Muslim population and is governed by a separate system of courts.

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Business organisation structures

Overview Malaysia offers various forms of business models that can be used to set up business in the country. A business organisation may take any of the following forms: Sole trader or proprietor Company (Private Limited Company, Public Limited Company or Branch of a Foreign Company) Partnership Unincorporated Association Representative and Regional Office Operational Headquarter (OHQ) International Procurement Centre (IPC) Regional Distribution Centre (RDC) The most common forms of business entities are companies, and to some extent, representative and regional offices, 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 of Malaysia (CCM). Company limited by shares is the most common type of 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 of Associations that: restricts the right to transfer its shares; limits the number of its members to 50, excluding employees and some former employees; prohibits any invitation to the public to subscribe for its shares and debentures; and prohibits any invitation to the public to deposit money with the company. Public Company A public company can be formed 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 offer shares to the public if it has registered a prospectus with the Securities Commission and has lodged a copy of the prospectus with the CCM on or before the date of 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 of securities (for instance, issue by way of rights or bonus, or issue arising from an acquisition) would require the approval of the Securities Commission.

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Branch of a Foreign Company A foreign company desiring to set up a place of business or undertake business activities in Malaysia may do so by locally incorporating a company, or by registering itself as a foreign company in Malaysia. The terminology branch office is normally used for a foreign company registered in Malaysia. The branch office has to be registered with the CCM before it commences business or establishes a place of business in Malaysia.

Representative Office and Regional Office Foreign companies involved in the manufacturing and trading sectors may establish representative and regional offices in Malaysia to perform certain activities for their head office or principal. There is no requirement for such representative and regional offices to be incorporated under the Companies Act. Representative Office of a foreign company is allowed to collect relevant information regarding investment opportunities in the country especially in the manufacturing sector; to develop bilateral trade relations; to promote the export of Malaysian goods and products; and to carry out research and development activities. A Representative Office is however not allowed to have any business transaction or to derive income from its operation. A Regional Office is an office of a foreign corporation that serves as the coordination centre for the corporations affiliates, subsidiaries, and agents in the Southeast Asia and the Asia Pacific. It should have the responsibility over designated activities of the corporation within the region it operates. However, a Regional Office is not allowed to do any business transaction or derive income from its operation. Expatriate posts are allowed in Representative and Regional Offices depending on the functions and activities of the Representative Office or Regional Office. Approval for such posts is on a renewable two-year basis. Expatriates working in Regional Offices are taxed only on the portion of their chargeable income attributable to the number of days they are in Malaysia.

Operational Headquarter (OHQ) An approved OHQ refers to a locally incorporated company, whether Malaysian-owned or foreign-owned, which carries on a business in Malaysia of providing qualifying services to its offices or its related companies outside Malaysia. A company may be granted OHQ status if it fulfills certain qualifying criteria. An OHQ enjoys a number of benefits including tax exemption for a period of 10 years on income from: qualifying services rendered to its offices or related companies outside Malaysia; interest on foreign currency loans extended to its offices or related companies outside Malaysia; and royalties received from research and development work carried out on behalf of its offices or related companies outside Malaysia. In addition to the above, expatriates working in OHQs are taxed only on the portion of their chargeable income attributable to the number of days they are in Malaysia.

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International Procurement Centre (IPC) An IPC is a locally incorporated company, whether Malaysian or foreign-owned, which carries on a business in Malaysia to undertake the procurement and sale of raw materials, components, and finished products for related and unrelated companies in Malaysia and abroad. This includes procurement from and sale to local sources and third countries. An IPC enjoys the following incentives: approval for expatriate posts based on the requirements of the IPC; permission to open foreign currency accounts with any onshore licensed commercial bank to retain export proceeds, without any limit imposed; permission to enter into foreign exchange forward 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 finished products, without paying custom duties, into free industrial zones, licensed manufacturing warehouses, free commercial zones and bonded warehouses for repacking, cargo consolidation and integration before distribution to the final consumers. Subject to the relevant qualifying criteria, an IPC is also eligible for full tax exemption of its statutory income for 10 years and dividends paid from the exempt income will be exempted from tax in the hands of its shareholders.

Regional Distribution Centre (RDC) An approved RDC is a collection and consolidation centre for finished goods, components and spare parts produced by its own group of companies for 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 benefits such as tax incentives and custom duty exemptions that are similar to those accorded to an IPC.

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Foreign Investment
The Ministry Of International Trade And Industry The Ministry of International Trade and Industry (MITI) aims to promote and safeguard Malaysian interest in the international trade arena, to spur the development of industrial activities and to further enhance Malaysias economic growth. The Malaysian Industrial Development Authority (MIDA), as an agency under MITI, is the governments principal agency in charge of promotion and co-ordination of industrial development in Malaysia including foreign investments especially in the manufacturing sectors. MIDA is the first point of contact for investors who intend to set up projects in manufacturing and its related support service sectors in Malaysia. Detail information about the incentives granted to investors of various industries in Malaysia may be obtained from MIDA website at www.mida.gov.my Foreign Investment Committee Guidelines The Foreign Investment Committee (FIC) is a committee within the Economic Planning Unit of the Prime Ministers Department, which, amongst others, reviews and regulates the acquisitions by foreign interests of assets and interests in Malaysian companies and businesses. Foreign investment in Malaysia is generally governed by the FIC. Specific 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 of thumb is that a minimum 30% of the effective shareholding in Malaysian companies is to be held by Bumiputeras while the remaining equity can be held either by foreign 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 of interests, mergers and takeovers apply are as follows: Any proposed acquisition of interest in a local company or business in Malaysia which is RM10 million or more in value, by local or foreign interests; Any proposed acquisition of interest in any local company or business in Malaysia regardless of whether the value is less than RM10 million by: any foreign interest of the voting rights to the level of 15% or more or which will result in an increase of the voting rights to the level of 15% or more; or any associated or non-associated group of foreign interests of the cumulative voting rights to the level of 30% or more or which will result in an increase of the cumulative voting rights to the level of 30% or more;

Any proposed acquisition of interest by any associated or non-associated group of foreign interests, in aggregate of 30% or more of the voting rights of any local company/business or such interest which will result in an increase of the voting rights to 30% or more in any local company/business; Any proposed merger or take-over of any local company or business in Malaysia by local or foreign interests; Any proposed joint venture involving two or more parties in a local company; Any control of a local company or business in Malaysia through any form of management agreement, technical assistance agreement or other arrangements; Any charging of shares in a local company to any foreign interest where the value of loan or the market value of the shares is RM10 million or more.

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There are some exemptions to the FIC Guidelines, including any acquisition of interest in manufacturing companies licensed by MITI and acquisition of 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 specified period. Although the FIC Guidelines are not issued pursuant to any legislation or statute, noncompliance with the FIC Guidelines may have adverse practical consequences especially where the foreign investor needs to apply for 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 of Malaysia Notices (ECMs) and clarifications issued by the Malaysian central bank, Bank Negara Malaysia (BNM). As the regulator, BNMs approval is required for certain dealings and transactions. Generally, there are no restrictions on repatriation of capital, profit, dividends, interest and rental income by foreign investors, subject to the payments being made in foreign currency (other than the currency of Israel). The ECMs set out various approvals which BNM has granted and clarifies transactions and applications where prior approvals are required.

The Iskandar Development Region (IDR) The Iskandar Development Region (IDR) spans an area of 2216.34 sq km in South Johor and is one of the key engines of growth identified under the 9th Malaysia Plan. The IDR aims to be a first-class global hub for business, living and leisure. More than RM4 billion has been allocated under the 9th Malaysia Plan towards infrastructure development in IDR. The IDR was officially 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 for establishing policies, directions and strategies, and co-coordinating as well as facilitating the development of 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 of these zones will be announced by the IRDA in the third quarter of 2007.The incentives will be enjoyed by qualifying companies in 6 targeted sectors within the approved zones. The 6 targeted sectors are: creative industries educational services financial advisory and consulting services healthcare services logistics services tourism related services

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The incentives for the qualifying companies in the approved zones are: Exemption from the Foreign Investment Committee (FIC) Guidelines. Exemption from corporate income tax for a period of 10 years from the commencement of operation on the condition that operation of the company commences before the end of year 2015. Exemption from withholding tax on royalty and technical fee payments to non-residents for a period of 10 years from the commencement of operations. Freedom to source capital globally. Unrestricted employment of foreign 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 information 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 of the MSC, the government has, in a Bill of Guarantees, committed to: Provide a world-class physical and information infrastructure; Allow unrestricted employment of local and foreign knowledge workers; Ensure freedom of ownership by exempting companies with MSC Status from local ownership requirements; Give the freedom to source capital globally for MSC infrastructure, and the right to borrow funds globally; Provide competitive financial incentives, including no income tax for up to 10 years or an investment tax allowance, and no duties on import of multimedia equipment; Become a regional leader in intellectual property protection and cyberlaws; Ensure no Internet censorship; Provide globally competitive telecommunications tariffs; Tender key MSC infrastructure contracts to leading companies willing to use the MSC as their regional hub; and Provide an effective one-stop agency. The Multimedia Development Corporation Sdn Bhd (MDC) is the one-stop agency to accept and process applications by companies for MSC status. Companies with MSC status are entitled to enjoy the government incentives provided pursuant to the Bill of Guarantees.

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A company seeking MSC Status and its benefits is required to: be a provider or a heavy user of multimedia products and services; employ a substantial number of knowledge workers; provide technology transfer and/or contribute towards the development of the MSC or support Malaysias k-economy (knowledge-based economy) initiatives; establish a separate legal entity for the MSC qualifying multimedia business and activities; locate in a MSC designated cybercities; and comply with environmental guidelines.

Labuan International Business and Financial Centre The Federal Territory of Labuan, an island located off the coast of Sabah, East Malaysia, was established as an International Offshore Financial Centre in October 1990 and the Labuan Offshore Financial Services Authority (LOFSA) is the one-stop approving and regulatory agency for offshore businesses operating in Labuan. In January 2008, Labuan IOFC was rebranded into the Labuan International Business and Financial Centre in line with its new focus as an international financial centre. The offshore businesses in Labuan are virtually unaffected by the countrys exchange control measures and the nature of offshore businesses in Labuan is basically foreign currencybased. Offshore companies and offshore trusts undertaking offshore activities are accorded preferential tax treatment. Offshore activities are classified into offshore trading activities (including banking, insurance, trading, management, licensing) and offshore non-trading activities (including holding of investments in securities, stocks, shares, loans, deposits and immovable properties by an offshore company on its own behalf). Offshore companies and persons employed by offshore companies enjoy several tax incentives. For example, an offshore company carrying on an offshore trading activity can opt to pay tax each year at the rate of 3% of its net audited profits, or a fixed sum of RM20,000 a year. Further, an offshore company carrying on an offshore non-trading activity for the basis period for a year of assessment is not subject to tax for that year of assessment. When a company has no basis period for a year of assessment, it is taxed a fixed rate of RM20,000 for that year of assessment. With effect from assessment year 2009, offshore companies will also enjoy the flexibility to elect to be taxed under the domestic corporate tax regime. In Labuan, the following types of income are exempted from tax in the hands of a Malaysian or foreign recipient: dividends received by, or received from an offshore company; distributions received from an offshore trust by the beneficiaries; royalties received by a non-resident or another offshore company; interest received from, or by, an offshore company under certain circumstances and amounts received from an offshore company for providing services.

In addition, documents relating to offshore business activities of an offshore company (including memorandum and articles of association of an offshore company and transfer of shares in an offshore company) are exempted from stamp duty.
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taxation
Corporate Income Tax A company, whether resident or not, is assessable on income accrued in or derived from Malaysia. The current corporate income tax rate (for assessment year 2008) is 26%. The rate will be further reduced to 25% for assessment year 2009. A company carrying on petroleum upstream operations is subject to a Petroleum Income Tax of 38%. Currently, corporate tax is based on the imputation system. With effect from assessment year 2008, the current imputation tax system will be replaced, over a transition period of 6 year, with a single-tier tax system. Under the single-tier system, profits are taxed only at the companys level and dividends received are exempted from tax.

Personal Income Tax Whether an individual is a resident in Malaysia under the Malaysian Income Tax Act 1967 is determined by the duration of his stay in the country. Generally, an individual residing in Malaysia for 182 days or more in a year has resident status. A resident individual is taxed on his chargeable income at a graduated rate from 0% to 28% after deducting relevant tax relief. There are also available tax rebates. A non-resident individual is liable to tax (on income earned in Malaysia) at the rate of 28% without any personal relief.

Withholding Tax Withholding tax is imposed on certain payments made by residents to non-residents such as interest, royalty, technical fees and rentals for moveable properties. The resident has the obligation to withhold tax when making the payments and to pay the amount within a certain time, failing which the resident is liable to pay a penalty equal to 10% of 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 manufacturing levels at a general rate of 10%. Service Tax applies to certain prescribed goods and services, including certain professional and consultancy services in Malaysia, at a general rate of 5%. Import duty is imposed at ad valorem generally. Excise duties are levied on selected products manufactured 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 if the document purports to effect a transfer of subject matter in Malaysia.

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Immigration Requirements
Travel Document and Visa Every person entering Malaysia must possess a valid national passport or internationally recognised travel document valid for travel to Malaysia. Any person not in possession of a passport or travel document which is recognised by the Malaysian Government must obtain a document in lieu of passport. All travel documents must be valid for more than six (6) months from the date of entry into Malaysia. In addition, foreign nationals may require a visa to enter Malaysia depending on their nationality. If so required, the visa must be obtained in advance at Malaysian Representative Office before entering the country. More detailed information on visa requirements is available at the Malaysia Immigration Departments 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 for 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 of entry solely for the purpose of a social and/or business visit such as owners and company representatives entering Malaysia to attend a company meeting or seminar, inspect the companys accounts or to ensure the smooth running of the company, investors or businessmen entering to explore business opportunities and investment potential. Passes issued upon arrival in Malaysia Other than applications for entry for the purpose of social or business visits, all applications for other passes i.e., Employment Pass, Visit Pass (Professional), Visit Pass (Temporary Employment), Dependants Pass and Student Pass must be made upon arrival in Malaysia. Applicants for such passes must have sponsorship in Malaysia where the sponsors agree to be responsible for the maintenance and repatriation of the visitors from Malaysia if necessary. An Employment Pass is required for foreigners who enter the country to take up a contract of employment with a minimum period of 2 years and earn a monthly income of not less than RM2,500. Wives and children of foreigners who have been issued with employment pass can apply for Dependants Passes. Visit Passes (Professional) are issued to foreigners on short-term contract with any agency such as artistes, researchers, lecturers/speakers, members of international organisations. The validity period of 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 for less than 24 months or earns a monthly income of less than RM2,500.

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Employment of Expatriate Personnel Where there is a shortage of trained Malaysians, foreign companies are allowed to bring in expatriate personnel. In addition to this, foreign companies are also allowed key posts, that is, posts that are permanently filled by foreigners. There are 2 stages in the employment of expatriates, namely an application for expatriate post and an endorsement of employment pass by the Immigration Department.

Stage 1: Application for Expatriate Post This is the stage where a company submits its application for expatriate posts. The Government has appointed the following agencies to evaluate and approve expatriate posts: Ministry of Industrial Development Authority for manufacturing and its related service sectors. Multimedia Development Corporation for the information technology sector, specifically companies that have been awarded Multimedia Super Corridor Status. Central Bank of Malaysia for the financial, insurance and banking sectors. Securities Commission (SC) for the securities and futures market. Malaysian Biotechnology Corporation for the biotechnology industry. Expatriate Committee for expatriate posts in sectors other than the above mentioned sectors.

Stage 2 : Endorsement of Employment Pass Upon approval of the expatriate posts by the approving agency, the company must submit an application to the Immigration Department for endorsement of the Employment Pass. Once the Employment Pass has been endorsed, the expatriate can be hired. There are additional criteria in the application of expatriate post depending on sector of business, which is based on minimum paid up capital of the company, recommendation/ registration by monitoring agencies (if applicable), appropriateness of scope of job, salary, age, expertise and working experience of an expatriate. As an example, the following additional criteria apply to the manufacturing sector: Automatic approval for up to 10 expatriate posts (including 5 key posts) for manufacturing companies with foreign paid-up capital of US$2 million and above; Automatic approval for up to 5 expatriate posts (including at least 1 key post) for manufacturing companies with foreign paid-up capital of more than US$200,000 but less than US2 million; Where the manufacturing companies with foreign paid-up capital of less than US$200,000, the following applies: Key posts can be considered where the foreign paid-up capital is at least RM500,000; and The number of key posts, executive posts and non-executive posts allowed depends on the merits of each case.

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employment Law
Terms and Conditions of Employment The main legislation regulating terms and conditions of 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 few other specified categories. The Employment Act stipulates the minimum terms and benefits. The employer is not prevented from giving better terms but any term or condition of employment which is less favourable is automatically rendered null and void and substituted by the provision in the Employment Act. The Employment Act and Regulations made under it confer benefits such as rest days, public holidays, annual leave, sick leave, hospitalization leave, maternity leave and termination benefits. The Employment Act also regulates the hours of 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 specified circumstances. The Employment Act also specifies the rates to be paid for overtime work and work on rest days and public holidays. Maximum overtime permissible in a month is 104 hours.

Collective Agreements It is necessary for a trade union to obtain recognition from the employer before it is can begin collective bargaining. The collective agreement, which must be for a minimum period of 3 years, is legally binding and enforceable if it has been taken cognizance of by the Industrial Court. Strike action is prohibited in respect of any matter already covered by the collective agreement.

Retrenchment The employer is entitled to retrench excess employees. Selection is based on the Last-In- FirstOut Rule in the category. Foreign workers are to be retrenched first before any local worker in the same category can be retrenched. No governmental approval is necessary but there is a requirement to notify the Ministry of Human Resources. Employees within the protection of the Employment Act 1955 are entitled to statutory termination benefits.

Statutory Contributions It is compulsory for employees and their employers to make monthly contributions to a statutory retirement fund. Expatriate employees are exempted unless they opt to contribute in which case it becomes compulsory too for their employer. The contributions are made to the account of the individual employee. At present, the employer contributes 12% of the employees 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 of RM3,000 and below. The Fund pays compensation for death and invalidity or disablement benefits arising from 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.
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Real Property 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 of being registered are transfers, leases, charges and easements whereas the dealings which are not capable of being registered are tenancies and liens. As far as the dealings which are capable of being registered are concerned, no title to or interest in land will be transferred or created until the instruments effecting these dealings have been registered. Registration under the NLC is effected when a prescribed memorial of the dealing is made on the register document of title under the hand and seal of the registering authority. Records kept by the local land registries/offices contain all the relevant data and information on land and shows the ownership and other rights that exist on the land. Everyone is allowed to inspect the records upon payment of a fee. State land is generally disposed of by way of alienation. Each state now has the authority to alienate land generally for a maximum lease period of 99 years. Freehold alienations are possible only in exceptional cases. Land may be alienated by the relevant state with the imposition of special conditions, restrictions-in-interest and categories of land use (either one of three categories namely, Agriculture, Building or Industry) on land titles enabling the state to control land development.

Acquisition of Properties by Foreigners Under the NLC, a non-citizen or a foreign company is not allowed to acquire any land (other than industrial land) in West Malaysia unless the prior approval of the relevant State Authority has been obtained. The State Authority may impose certain terms and conditions or a levy in granting its approval for any disposal to or acquisition by a non-Malaysian entity. In addition to the State Authority, any acquisition of property by foreign interests (including permanent residents of Malaysia), requires the approval of the Foreign Investment Committee (FIC) unless they are exempted. The policies with regard to foreigners purchasing real properties are contained in the FIC Guidelines on the acquisition of properties by local and foreign interests (FIC Properties Guidelines). The FIC Properties Guidelines apply to, among others, the following transactions which require the approval of the FIC: Any acquisition of property by foreign interest including Permanent Resident requires the approval of FIC except for purchase of residential properties costing RM250,000 and above with no limit on the number of 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 of property acquire; The State Authority has the discretion to consider the acquisition based on the area or location of the property, types of property and percentage of the total units in a project;

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Acquisition of commercial property valued at less than RM10 million by foreign interest does not have to incorporate a local company subject to the commercial property is only for own use; Foreign interest is only allowed to acquire agricultural land valued more than RM250,000 or at least five (5) acres in area subject to the conditions for acquisition; Acquisition of agricultural land by foreign interest is only allowed for the following 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 for the production of goods for export. However, for this purpose relaxation on equity condition may be considered. Other acquisitions that are exempted from the FIC approvals include amongst others, acquisition of properties by Multimedia Super Corridor (MSC) status companies for operation purposes in the MSC area, transfer of land under a will or court order and acquisition of industrial property by manufacturing companies licensed by the Ministry of International Trade and Industry (MITI) for own manufacturing purposes. Real Property Gains Tax Under the Real Property Gains Tax Act, 1976, gains arising from the disposal of any real property in Malaysia or any share in a real property company are subject to real properties gain tax. However, all disposals of properties after 31 March 2007 are now exempted from the Real Property Gains Tax. Stamp Duty Under the Stamp Act, 1949, any conveyance of property in Malaysia attracts an ad valorem stamp duty based on the consideration or market value of the property. Leases and Tenancies Under the NLC, a lease is granted for a term exceeding 3 years, subject to a maximum term of 99 years if it relates to the whole of any alienated land and a maximum term of 30 years if it relates to a part of land. On the other hand, tenancies are for terms not exceeding 3 years. Every lease must be granted by an instrument which format is provided under the NLC. The NLC also provides for agreements that may be incorporated in any lease. However, the parties may modify the terms as they think fit, except for certain implied agreements relating to payment of rent as specified in the lease (on the lessees part) and payment of all rent due to the state authority (on the lessors part). Foreign interest that wishes to take a lease of property for a term of 10 years and above is required to obtain the FIC approval. A tenancy can be effected either in writing or verbally. A tenancy is not capable of registration under the NLC. However, a tenant can be protected against subsequent dealings on the land by an endorsement of the tenants claim on the register document of title to the land. Tenant has to apply to the Registrar for such an endorsement by submitting the documents required.

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Protection of Intellectual Property Rights

Overview The Malaysian intellectual property regime affords protection via an extensive statutory scheme covering intellectual property rights including copyright, trade marks, designs, patents and layout designs of integrated circuits in compliance with Malaysias obligation as a signatory to the Agreement on Trade Related Aspects of Intellectual Property (TRIPS). Malaysia has acceded to the World Intellectual Property Organisation, the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic works, as well as the Patent Cooperation Treaty. The Intellectual Property Corporation of Malaysia (MyIPO) is a statutory body established to, among others, generally assist in the administration and enforcement of 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 of works protected by copyright in Malaysia are literary, musical and artistic works, films, sound recordings and broadcasts. Derivative works are also protected. The owner of the copyright in a literary, musical or artistic work, a film, a sound recording or a derivative work has the exclusive right to control certain acts in these works, including reproduction, and communication, performance or distribution to the public, either in its original or derivative form. Copyright protection in literary, musical or artistic works is for the duration of the life of the author plus 50 years after death. There is no requirement for registration. Civil remedies are available to a copyright owner whose copyright is infringed. Malaysia also imposes criminal penalties for violations of its copyright laws.

Patents Patent law in Malaysia is governed by the Patents Act 1983 and the Patent Regulations 1986. The owner of 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 from the latter. The accession by Malaysia to the Patent Cooperation Treaty (PCT) means that Malaysia is a designated country in respect of a patent application filed in another contracting state on or after 16 August 2006. Malaysia will also be automatically designated for a request for international preliminary examination as regards an application filed in another contracting state. Malaysian applicants themselves will be able to elect for PCT applications where the same treatment will be according to them as with applicants from contracting states.

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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 for which no application for registration have been made, are protected under the common law provided the owner of such unregistered marks can show proof of goodwill and reputation in the use of the said marks in relation to goods or services. The registration of a trade mark will be for a period of 10 years but may be renewed from time to time in perpetuity. Upon registration of 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, modifications or limitations entered in the Register of Trade Marks. The Register of Trade Marks is kept at the Central Trade Marks Office. Inspection of the Register can be made at the Trade Mark Office during office hours upon payment of a prescribed fee.

Industrial Designs The Industrial Designs Act 1996 and Industrial Designs Regulations 1999 apply to applications for the registration of industrial designs made after 1 September 1999. The owner on a registered industrial design will have the exclusive right to make or import for sale or hire or for use for the purposes of any trade or business, or to sell, hire or to offer or expose for 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 of a personal property in that it will be capable of assignment and transmission by operation of law. Registered designs are protected for an initial period of 5 years which may be extended to a further two 5 years terms, resulting in a total period of 15 years.

Layout-designs of Integrated Circuits The Layout-Designs of Integrated Circuits Act 2000 provides for the protection of layout designs of integrated circuits based on originality, the creators own invention and the fact that the creation is freely created. No registration is needed. The Layout-Designs of Integrated Circuits Act grants automatically to the owner of 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 transferred either partly or wholly by way of assignment, license, wills or through the enforcement of law. The duration of protection is 10 years from the date of commercial exploitation or 15 years from the date of creation if not commercially exploited.

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FURtHeR InFoRMAtIon

Kuala Lumpur Level 19, Menara Milenium Pusat Bandar Damansara, 50490 Kuala Lumpur Tel : +603 2087 9999 Fax : +603 2094 4888 / 4666 Bangkok in association with Bangkok International Associates No.140/37 ITF Tower 18th Floor, Suite 11, Silom Road, Kwaeng Suriyawong, Khet Bangkrak, 10500 Bangkok Tel : +662 234 3720 Fax : +662 231 6204 Dubai Level 41, Emirates Towers, Sheikh Zayed Road P.O.Box 31303, Dubai, UAE Tel : +971 4 319 9000 Fax : +971 4 319 9372 Hanoi in association with AGZI LCT Limited M01 Atlanta Place, 49 Hang Chuoi Street Hai Ba Trung District, Hanoi Tel : +84 4 2782768 / 769 Fax : +84 4 2782766 Ho Chi Minh City in association with AGZI LCT Limited Suite 1605 Saigon Trade Centre 37 Ton Duc Thang Street, District 1, Ho Chi Minh City Tel : +84 8 8212357 Fax : +84 8 8212382 Jakarta in association with Roosdiono & Partners Indonesia Stock Exchange Building Tower I, 12th Floor Jalan Jenderal Sudirman Kav. 52-53 Jakarta 12190 Tel : +62 21 5289 5125 Fax : +62 21 5289 5112 Johor Bahru Suite 31.01, Level 31, Johor Bahru City Square 106-108 Jalan Wong Ah Fook, 80000 Johor Bahru Tel : +607 226 4999 Fax : +607 226 3999 Kota Bharu PT 808, 1st Floor, Section 27 Jalan Sri Cemerlang, 15300 Kota Bharu Tel : +609 744 7300 Fax : +609 748 5122 Kuching Lot 100, 1st Floor, Wisma Bukit Mata Jalan Tunku Abdul Rahman 93100 Kuching, Sarawak Tel : +6082 241 546 Fax : +6082 251 546 Labuan IoFC Unit Level 13(E), Main Office Tower Financial Park Labuan, Jalan Merdeka 87000 WP Labuan Tel : +6087 451 688 / 452 688 Fax : +6087 453 688 Penang 51-22-B&C, Menara BHL Jalan Sultan Ahmad Shah, 10050 Penang Tel : +604 227 0888 Fax : +604 228 6755 singapore 16 Raffles Quay, #20-03 Hong Leong Building Singapore 048581 Tel : +065 6820 3499 Fax : +065 6820 3493

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