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Chapter 10

Logistics Services
1. Warehousing Services
1.1 Approvals for Establishment
1.2 Other Approvals
1.3 Special Industrial Building Allowance for
Warehouses
1.4 Equity Requirements

2. Transportation Services
2.1 Licences
2.2 Equity Requirements
2.3 Exemption from Import Duty and Sales Tax on
Prime Movers and Trailers

3. Freight Forwarding / Shipping


3.1 Licences
3.2 Paid-up Capital Requirements
3.3 Equity Requirements

4. Integrated Logistics Services (ILS)


4.1 Incentives
4.2 Expatriate Employment

5. Cold Chain Facilities


5.1 Approvals for Establishment
5.2 Equity Requirements
5.3 Incentives
5.4 Expatriate Employment
Chapter 10

Logistics Services
The term Logistics Services refer to a supply chain management process that plans,
implements and controls the efficient and effective flow and storage of goods,
services and related information between the point of origin and the point of
consumption in order to meet customers’ requirements.

The main services in this area are as follows:-

- Warehousing, storage and inventory management services

- Transportation services

- Freight forwarding/shipping services

- Integrated Logistic Services (ILS)

- Cold Chain Facilities

1. Warehousing Services

There are three (3) types of licences, depending on the warehousing requirements of
the operator. An operator can choose to operate an ordinary warehouse, a Public
Bonded Warehouse or a Private Bonded Warehouse.

Investors intending to provide warehousing services are required to incorporate a


company under the Companies Act, 1965.

1.1 Approvals for Establishment

(i) Ordinary Warehouse Licence

Applications for ordinary Warehouse Licences should be forwarded to the relevant


state Local Authority.

To apply for an Ordinary Warehouse Licence, an operator must first obtain :-

• Approval from DOE

Approval from DOE when the operator stores hazardous goods.

• Certificate of Fitness from the Local Authority

According to the Uniform Buildings By-Laws, a CF issued by the relevant state


Local Authority is required. The CF is an official document to acknowledge that
the building is safe for occupation.

• Approval from the Fire and Rescue Department

Approval from the state Fire and Rescue Department is required to ensure that
the premise is equipped with an adequate number of fire extinguishers and
safety alarm systems.
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(ii) Public/Private Bonded Warehouse Licence

• A Public Bonded Warehouse operates as a central storage for the distribution of


bonded goods (i.e. goods on which Customs duties and taxes have not been
paid) in the country and for international trade, catering for the general public.

• A Private Bonded Warehouse is a central storage and distribution centre for


bonded goods (i.e. goods on which Customs duties and taxes have not been
paid), of the companies and its related companies.

Activities that can be carried out in these warehouses are as follows:-

- Warehousing

- Break bulking

- Repackaging

- Re-labelling of imported goods

- Consolidation

- Entreport

To qualify as a Private Bonded Warehouse Operator, the value of the goods


warehoused should be at least RM10 million per annum. However, for Public
Bonded Warehouses, no minimum value is imposed.

A company that wishes to provide bonded warehousing services must apply for a
licence to the Royal Customs Department.

The following approvals must be obtained before applying to the Royal Customs
Department:-

- Approval from DOE when operators store hazardous goods

- Approval from the Fire and Rescue Department

- CF from the Local Authority

1.2 Other Approvals

(i) Service Tax Licence

A Public or Private Bonded Warehouse operator that is licenced under Section 65 of


the Customs Act, 1967 can be given permission to act as an agent for transacting
businesses relating to the import or export of goods that are stored in the licenced
warehouse. For this purpose, a warehouse operator is required to obtain a Freight
Forwarding Agent/Shipping Agent Licence and a Service Tax Licence.

Applications should be submitted to the Royal Customs Department.

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1.3 Special Industrial Building Allowance for Warehouses

An annual allowance of 10% of the qualifying capital expenditure is given for


buildings used as warehouses for storing goods for export and re-export.

1.4 Equity Requirements

The FIC has further liberalised the policy on foreign equity participation in the
services sector by allowing foreign equity participation of up to 70%. The remaining
30% must be allocated to Bumiputeras, unless specific exemptions apply.

Companies that have been approved for Private Bonded Warehouses Licence are
exempted from the equity condition, while companies that have been approved for Public
Bonded Warehouse Licence would need to comply with the FIC equity guidelines. The
equity condition for warehousing activities is imposed by the Royal Customs Department.

2. Transportation Services

2.1 Licences

Investors intending to provide transportation services are required to incorporate a


company under the Companies Act, 1965.

The following licences are required to be obtained :

(i) Licence for Commercial Vehicle and Haulage

• Transportation Services

Companies intending to provide transportation services to third parties using


commercial vehicles are required to obtain Carrier Licence A and companies that
provide services for its own use are required to obtain Carrier Licence C. Both
licences must be obtained from the Commercial Vehicle Licensing Board (CVLB), in
accordance with the Commercial Vehicles Licensing Board Act, 1987 under the
Ministry of Entrepreneurial and Cooperative Development (MECD).

Applications should be submitted to CVLB.

• Transportation of Container Bulk, Bulk Liquid and General Haulage

Commercial vehicles that are used in the transportation of container bulk, bulk
liquid and general haulage and freight, must be registered with the Road Transport
Department Malaysia (RTD).

To register with RTD, the following documents are required :-

- Registration licence with CVLB

- Inspection and weighing reports from the Computerised Vehicle Inspection


Centre (PUSPAKOM)

- An Ad Valorem Registration Fee (AVRF) certificate and valuation (for trailers and
semi-trailers)

A separate application should be submitted to RTD for each commercial vehicle.


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(ii) Licence for Transporting Scheduled Wastes

In accordance with the Environmental Quality (Scheduled Wastes) Regulations,


1989, a company transporting scheduled wastes is required to obtain a licence from
DOE. The licence is valid for one (1) year and is renewable.

Applications should be submitted to DOE.

(iii) Licence for Transportation of Radioactive and Nuclear Materials

Companies that wish to transport nuclear and radioactive materials are required to
obtain a Class D Licence from AELB.

2.2 Equity Requirements

Companies intending to provide transportation services to third parties or Carrier


Licence A holders are subject to the equity condition imposed by the CVLB. This
condition stipulates that at least 30% of the equity must be held by Bumiputeras.

2.3 Exemption from Import Duty and Sales Tax on Prime Movers and
Trailers

Container haulage companies can apply for import duty and sales tax exemption on
prime movers and trailers that are not produced locally. Exemption from sales tax
may be considered for prime movers and trailers that are produced locally.

Applications should be submitted to MOF.

3. Freight Forwarding/Shipping Services

Investors intending to undertake freight forwarding and shipping services are


required to incorporate a company under the Companies Act, 1965.

3.1 Licences

(a) Companies planning to operate as Freight Forwarding Agents and Shipping


Agents are required to obtain the relevant licences from the Royal Customs
Department in accordance with Section 90 of the Customs Act,1967

(b) Licensed freight forwarding agents and shipping agents including providers of
services for clearing of goods from Customs control, are also required to obtain
a Service Tax Licence.

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Paid-up Capital Requirement

The paid-up capital requirement and the duration of the licences approved for
different categories of freight forwarding agents and shipping agents are as follows:-

Category Activity Paid-Up Capital Duration of Licences


Requirement Approved

Category A Freight forwarding Exceeding 3 years (renewable)


and shipping RM100,000

Category B Freight forwarding or between RM50,000 2 years (renewable)


shipping - RM100,000

Applications should be submitted to the Royal Customs Department.

3.3 Equity Requirements

Companies approved as freight forwarding agents and shipping agents are required
to comply with the equity conditions imposed by the Royal Customs Department as
follows:-

• Freight Forwarding Agent -


At least 51% Bumiputera participation in the equity ownership, Board of
Directors, management and the whole employment structure

• Shipping Agent -
At least 30% Bumiputera participation in the equity ownership, Board of
Directors, management and the whole employment structure

A company that undertakes both activities is also required to meet 51% Bumiputera
participation in the equity ownership, Board of Directors, management and its
whole employment structure.

4. Integrated Logistics Services (ILS)

Integrated logistic services comprise the entire supply chain management, including
procurement of software and hardware, warehousing, distribution (transportation
and freight services), packaging activities and customs clearance.

4.1 Incentives

New and existing companies providing the above services are eligible to apply for
incentives under the Promotion of Investments Act, 1986.

Eligibility criteria:

• Incorporated under the Companies Act 1965

• At least 60% of its equity is held by Malaysians

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• ILS providers should undertake the following three (3) principal activities:-

- Warehousing

- Transportation

- Freight forwarding

In addition to the above activities, the company should undertake at least one (1) of
the following activities:-

- Distribution

- Other related and value-added services (e.g. palletising, product


assembly/installation, bulk breaking, consolidation, packaging/repackaging,
procurement, quality control, labelling/re-labelling, testing, etc.)
- Supply chain management

• Companies should have the following minimum infrastructure

- Commercial Vehicles : 20 units

- Warehousing facilities : 5,000 sq. metres

The tax incentives are as follows:

New Companies

(i) Pioneer Status

- Pioneer Status with a tax exemption of 70% of the statutory income for a
period of five (5) years; or

- Pioneer Status with a tax exemption of 100% of the statutory income for a
period of five (5) years for projects located in the Eastern Corridor of
Peninsular Malaysia, Sabah and Sarawak

(ii) Investment Tax Allowance

- ITA of 60% on the qualifying capital expenditure incurred within a period


of five (5) years. The allowance can be offset against 70% of the statutory
income for each year of assessment; or

- ITA of 100% on the qualifying capital expenditure incurred within a period


of five (5) years for projects located in the Eastern Corridor of Peninsular
Malaysia, Sabah and Sarawak. The allowance can be offset against 100%
of the statutory income for each year of assessment.

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Existing Companies

(i) Pioneer Status

- Pioneer Status with a tax exemption of 70% on the increased statutory


income arising from the reinvestment for a period of five (5) years; or

- Pioneer Status with a tax exemption of 100% on the increased statutory


income arising from the reinvestment for a period of five (5) years for
projects located in the Eastern Corridor of Peninsular Malaysia, Sabah and
Sarawak.

(ii) ITA

- Investment Tax Allowance of 60% on the additional qualifying capital


expenditure incurred within a period of five (5) years. The allowance can
be offset against 70% of the statutory income for each year of assessment;
or

- Investment Tax Allowance of 100% on the additional qualifying capital


expenditure incurred within a period of five (5) years for projects located in
the Eastern Corridor of Peninsular Malaysia, Sabah and Sarawak. The
allowance can be offset against 100% of the statutory income for each year
of assessment.

4.2 Expatriate Employment

Companies that have been approved for incentives to provide ILS can apply for
expatriate posts, namely Key Posts and Time Posts. Upon approval, companies
should forward their applications for Employment Passes to the Immigration
Department for endorsement.

Applications for incentives, exemption from Import Duty/Sales Tax on Machinery


and Equipment and Expatriate Posts should be submitted to MIDA.

5. Cold Chain Facilities

Companies undertaking cold chain facilities provide a wide range of services


including cold room, refrigerated truck and other related services such as the
collection, storage and distribution of perishable locally produced food products.

5.1 Approvals for Establishment

Investors intending to provide cold room and refrigerated truck facilities and related
services that require warehousing and transportation services are required to:-

• Incorporate a company under the Companies Act, 1965.

• Obtain operating licences for :

- Public/Private Bonded Warehouse

- Licence for Commercial Vehicles and Haulage (Class A Licence)

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5.2 Equity Requirements

The FIC has further liberalised the policy on foreign equity participation in the
services sector by allowing foreign equity participation of up to 70%. The remaining
30% must be allocated to Bumiputeras, unless specific exemptions apply.

Companies granted incentives under the Promotion of Investments Act, 1986 to


provide cold chain facilities are exempted from the equity condition.

5.3 Incentives

(i) Incentives for Companies Providing Cold Chain Facilities

Companies providing cold chain facilities and services for perishable agricultural
produce such as fruits, vegetables flowers, ferns, and meat and aquatic products are
eligible for consideration for Pioneer Status or ITA:-

New Companies

(iii) Pioneer Status

- Pioneer Status with a tax exemption of 70% of the statutory income for a period
of five (5) years; or

- Pioneer Status with a tax exemption of 100% of the statutory income for a
period of five (5) years for projects located in the Eastern Corridor of Peninsular
Malaysia, Sabah and Sarawak

(iv) Investment Tax Allowance

- ITA of 60% on the qualifying capital expenditure incurred within a period of


five (5) years. The allowance can be offset against 70% of the statutory income
for each year of assessment; or

- ITA of 100% on the qualifying capital expenditure incurred within a period of


five (5) years for projects located in the Eastern Corridor of Peninsular Malaysia,
Sabah and Sarawak. The allowance can be offset against 100% of the statutory
income for each year of assessment.

Existing Companies

(iii) Pioneer Status

- Pioneer Status with a tax exemption of 70% on the increased statutory income
arising from the reinvestment for a period of five (5) years; or

- Pioneer Status with a tax exemption of 100% on the increased statutory income
arising from the reinvestment for a period of five (5) years for projects located
in the Eastern Corridor of Peninsular Malaysia, Sabah and Sarawak.

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(iv) Investment Tax Allowance

- ITA of 60% on the additional qualifying capital expenditure incurred within a


period of five (5) years. The allowance can be offset against 70% of the
statutory income for each year of assessment; or

- ITA of 100% on the additional qualifying capital expenditure incurred within a


period of five (5) years for projects located in the Eastern Corridor of Peninsular
Malaysia, Sabah and Sarawak. The allowance can be offset against 100% of the
statutory income for each year of assessment.

The qualifying capital expenditure includes the following:-

- Expenditure for the building of cold rooms, including the ante-room

- Expenditure for obtaining the building for use in post harvest activities

- Expenditure for the acquisition of plant, machinery and equipment for use in
activities that relate to freezing, cleaning, washing and packing

- Expenditure for the acquisition of refrigerated trucks

Eligibility criteria:

- At least 60% of the company’s total revenue must be derived from the provision
of cold room facilities, refrigerated transportation and other related services for
the local agriculture produce

(ii) Exemption from Import Duty and Sales Tax on Machinery and Equipment

Companies providing cold chain facilities intending to import machinery and


equipment that are not available locally can apply for import duty and sales tax
exemption.

5.4 Expatriate Employment

Companies applying for incentives to provide cold chain facilities can also apply for
expatriate posts namely Key Posts and Time Posts. Upon approval, companies
should forward their applications for Employment Passes to the Immigration
Department for endorsement.

Applications for incentives, expatriate posts and exemption from Import Duty/Sales
Tax on Machinery and Equipment should be submitted to MIDA.

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