As many manufacturers and warehouses might have known, Royal Malaysian Customs Department (RMCD) has a license called Licensed Manufacturing Warehouse (LMW), which is designed to boost trade by taking away taxes for raw material imports. But what are the exemptions under LMW? For a Licensed Manufacturing Warehouse company, the Customs Duties (Exemption) Order 2013 and/or Sales Tax (Exemption) Order 2013 provide an exemption for the following:
- Import duty exemption on machinery and equipment excluding spare parts and consumables imported or purchased under item 115 Customs Duties (Exemption) Order 2013.
- Sales tax exemption on machinery, equipment, spare parts and consumables imported or purchased under item 106 Sales Tax (Exemption) Order 2013.
Note: the actual percentage of export will be determined by the Ministry of International Trade and Industry (MITI) at the time the project approval is given. For manufacturers who are exempted from licensing under the Industrial Coordination Act (ICA) 1975, the percentage of export will be decided by customs.
So…. Exemptions under LMW are as such. What exactly are exempted for my business?
Machinery and Equipments
Manufacturers in LMW are given exemption of Customs Duty and Sales Tax on machineries and equipment required for manufacturing the approved product.
Machinery/equipment required for manufacturing: all items necessary for the processing of the approved product starting from the initial state right up to the finishing state where the final product is packed ready for export.
- All such machinery and equipment must be new and unused which includes testing equipment, tools, quality control gadgets, labelling machines, work bench, weighing scales, spare parts, replacement machinery/equipment, grinding stones, pollution control equipment for industrial waste only, welding shields, central unit air conditional and spare parts and computers for factory use only.
- Machinery/equipment not included in the above definition are forklifts, construction/building materials, office equipment/furniture, fire-fighting, equipment, vehicles and generator.
For electronic industry sector, such equipment used for cleaning room are also exempted, as such as:
|a||floor panel/conductive floor tiles|
|c||cap made of non-woven fabric|
*Machinery, equipment and spare parts required for direct manufacturing process of approved final products are entitled to exemptions from Customs Duty and Sales Tax under item 88, Customs Duties (Exemption) Order 1988 and item 83, Schedule B, Sales Tax (Exemption) Order 1980 respectively.
*All machinery imported must be new. Written approval from MIDA must be obtained for used machinery imported. No machinery can be sold, transferred, exported or removed from approved premise without written approval from Customs Department.
Raw Materials and Components
Customs Duty exemption is given to all raw materials/ components used directly in the manufacturing process of approved products from the initial stage of manufacturing until the finished products is finally packaged and ready for export. This includes packaging materials and casings (casings for calculators and cameras).
The list of raw material/components that can be imported and taken into the Licensed Manufacturing Warehouses without payment of customs duty is issued together with the Licensed Manufacturing Warehouse Licence. The list of such goods must first be approved by the State Director of Customs where the factory is located. Addition or deletion to the list can be made from time to time.
Exemption for raw materials/components is also applicable for goods obtained from Free Zone, other LMW, and Bonded Warehouse.
|Raw Materials/Components Not Elegible For Duty Exemption :|
|b||materials for machinery and factory cleaning purposes|
|c||wearing apparel for workers|
|f||foodstuffs and drinks|