Legal Framework For Investment In Sabah

Published date10 January 2023
Subject MatterCorporate/Commercial Law, Government, Public Sector, Tax, Inward/ Foreign Investment, Corporate and Company Law, Income Tax
Law FirmAzmi & Associates
AuthorChris Lim Chee Kiung and Hazwani Kamaluddin

Sabah, better known as "The Land Below The Wind" is strategically located on the island of Borneo with its top-tier tourist destinations and attractions lying below the typhoon belt of East Asia. Given its serenity and richness of natural resources, the Chief Minister of Sabah has initiated a long-stay multiple-entry visa program called Sabah My Second Home ("SMM2H") in June 2022.1 This proposal targets foreigners who wish to live in Sabah while promoting them to acquire and invest in Sabah's real estate.

Following the discussion above, it is pertinent for any local or foreign investors to be well-equipped with the guidelines before embarking on their investment journey in Sabah. The Sabah Economic Development and Investment Agency ("SEDIA") has set up the SEDIA Investment Promotion Unit to promote the investment sector in Sabah and facilitate the licensing and incentives for interested investors.2 Primarily, four (4) key steps are crafted to assist investors and businesses in investing and establishing operations in Sabah.

Firstly, the registration of a company. Any company intending to establish and operate a business in Malaysia must register with the Companies Commission Malaysia.3 Specifically in Sabah, a Trading License must be procured from the relevant district council after a company has been incorporated. It is defined under Section 2 of the Sabah Trades Licensing Ordinance 1948 ("STLO 1948") as a licence issued under this STLO 1948.4 The council managing the area refers to where the company office is physically situated. In reference to Section 5 of the STLO 1948, a Trading License is a pre-requisite for any business activities conducted in Sabah. All business entities including sole proprietorships, partnerships to companies are required to obtain the Trading License. The pre-conditions for application as spelled out in the STLO 1948 are as follows5:

a) the Trading Licence Form must be complete;

b) Applicant must be 18 years and above;

c) Applicant must be a local resident/permanent resident of Sabah' or holds a valid work pass for residents of Sarawak and Peninsular Malaysia; and

d) For Foreigners, application must be made via establishing of a registered company with a valid work pass.

The licensing rate is to be calculated at RM25.00/per annum together with processing fee of RM10.00.6

Secondly, any foreign investors must be alert to the equity policy imposed in Malaysia as the Foreign Investment Committee Guidelines are administering it...

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