How to Obtain a Construction License in Malaysia
Updated on Tuesday 08th January 2019
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Opening a construction company in Malaysia involves the same steps as for any kind of enterprise in the country, with the difference that you need to obtain the special construction license; the document is issued by the CIDB (Construction Industry Development Board), the main institution which regulates this sector. Our specialists in company formation in Malaysia are ready to provide you with the necessary guidance when applying for a construction license. We remind that you can also obtain suitable help for the company registration procedure in Malaysia.
What you need to know about the construction license in Malaysia
A local or foreign entrepreneur who wants to start his/her construction business in Malaysia needs to apply for a license; considering that if he/she will not proceed in accordance, a fine will be imposed. Knowing the main fields of activity, the following categories need to be considered when applying for a CIDB license in Malaysia: building construction, civil engineering construction and electrical and mechanical construction.
The CIDB license is available for a period of one to three years, but the owners of the document can renew the license upon its expiry. Considering the grades of CIDB schemes according to the established capacity (square meters and volume), a certain tax will need to be paid when applying for the construction license.
The CIDB in Malaysia must be informed of the value of the construction project, which must not exceed RM 500,000,000 for foreign contractors established in the country. In this situation, the fee will be settled at 0,125% from the registered construction project and investors may receive more information on this subject from our team of consultants in company formation in Malaysia.
If you want to set up a company here, it is best to solicit help, guidance and information in this matter from our experts in company incorporation in Malaysia. Moreover, it is good to know that the company registration in Malaysia can be an easy process if all the needed documents are prepared with our team and approved by the authorities in charge.
What types of construction projects need a license in Malaysia?
Businessmen who want to open a company in Malaysia that deals with construction projects should know that the construction license is necessary for a wide category of projects. This is required for any construction projects, design projects, extensions, reparations, maintenance, renovations or demolition projects. The detailed list of the construction activities that need to be licensed here is presented below:
- any building structure, edifice, walls, fences or chimneys (this applies to any new construction project or to partially constructions);
- roads, railways, cables, canals, aerodromes, drainage systems or irrigation systems;
- any constructions related to electrical works, mechanical and waterworks or to projects related to telecommunications;
- the construction of viaducts, bridges and dams, sewers, shafts or tunnels;
- the license is also necessary for the excavation of land, the clearing of the site where the construction will be developed, works related to the foundation of a building, the soil investigation or to any landscaping project.
What types of contractors can enter a construction project in Malaysia?
A contractor in Malaysia is the legal entity which is allowed to develop a construction project or parts of a construction project. As stated by the applicable legislation in Malaysia, this type of activity can be carried out by a local contractor, which is defined as a legal entity that was incorporated in this country and which has minimum 70% of its capital registered from local sources.
Foreign investors who are interested in opening a company in Malaysia in this sector should know that foreign contractors are also allowed to enter construction projects here; a foreign contractor can be a company that was registered in Malaysia and whose shareholding is owned by foreigners, but it can also be represented by a foreign company, incorporated in another country.
Construction projects in Malaysia can also be developed by international contractors, which are required to register with CIBD prior to entering any business partnership in this country. An international contractor can develop a construction project here as long as it is currently developing another construction project elsewhere or it has already completed various construction projects in other jurisdictions.
Another way to enter a local construction project is by starting a joint venture with the purpose of completing a specific type of construction in this country. The contractor operating as a joint venture can be incorporated in this country or in another jurisdiction; in the case in which the investors are interested in operating through a local joint venture, our team of consultants in company registration in Malaysia can assist on the incorporation procedure following the local legislation.
Consider the contractor rules in Malaysia
Investors who are interested in starting a construction business in Malaysia are advised to verify the legislation in this domain and to understand the minimum legal requirements for the issuance of the license. For example, the CIDB in Malaysia has to be informed on the total value the project and, in the situation in which the construction project has a total worth of more than RM 500,000,000, the license can be withdrawn provided that the institution was not notified; more importantly, the investors can be imposed with penalties of approximately RM 5,000,000 in this situation.
Who is entitled to apply for a construction license in Malaysia?
The application for a construction license in Malaysia can only be completed by the owner of the company or by the company’s director; this is compulsory, regardless of the type of construction project in which the company will enter. If the application is successful, the company will receive the right of conducting a specific type of construction project on the country’s territory, for a determined period of time.
As a general rule, local contractors will receive the right to perform various construction activities for a period ranging between one to three years. In the case of a local contractor, the license will be issued on a time-based frame, while in the case of a foreign contractor, the license will be provided on a project-based scheme. Although the local contractors will receive a license for a number of years, they will be able to complete only construction projects that are within the scope of the license.
The regulation is also available for foreign contractors, with the difference that they may only complete the specific construction project for which they have received the license and thus, they won’t be able to enter other projects without a prior license for the respective works.
Other imposed construction licenses in Malaysia
Besides obtaining the CIDB license in Malaysia, one should know that other certificates are mandatory for a construction company in the country: the Bumiputera Status Certificate to participate in government projects and the Sijil Perolehan Kerja Kerajaan for allocated construction projects.
We remind that you can receive complete and suitable assistance if you want to obtain a construction license in Malaysia, so do not hesitate to contact our team of company formation representatives in Malaysia. Our specialists can assist with advice on the overall costs of this procedure.