Business Services

A vibrant business services sector generates significant multiplier effects which will inevitably raise job opportunities and the overall productivity across the economy.

Malaysia's commitment to liberalise this sector are in terms of market access and movement of natural persons ( MNP ). In tandem with this, providing capacity building for Malaysian service providers is also undertaken to equip them to participate in the liberalisation exercise .

The principles of trade in services of all sectors are contained, in the General Agreement on Trade in Service (GATS).

The WTO classification for this sector are :

  • Professional Services;
  • Computer & Related services;
  • Research & Development services;
  • Real Estate services;
  • Rental/Leasing Services without Operators; and
  • Other business services, such as advertising & management consulting among others.

Professional Services

The services under this sub sector that will be dealt with are

  • Legal
  • Accounting, auditing & Bookkeeping
  • Taxation
  • Architectural
  • Engineering
  • Integrated engineering
  • Urban planning & landscape architectural

What a service provider needs to know

 As a service provider of this sector, you may be interested in the following :

  • The relevant Acts that govern these services;
  • The Regulatory agency/agencies;
  • The liberalisation initiatives and specific service sector commitments that Malaysia has entered into.

Legal Services

 Services in this sub sector comprise:

  • advice and representation in civil, criminal and other cases.
  • activities in connection with patents and copyrights, with the preparation of deeds, wills, trusts, etc., and
  • activities of notary public, arbitrators, examiners and referees.

The Acts

The Legal Professional Act 1976 (Act 166) and the Legal Profession (Practice and Etiquette) Rules, 1978 are essentially  the two that  set out the rules that govern this service.

 

The Regulatory Agency

It is the Bar Council of Malaysia that regulates this professional service. This being the case, the provision of legal services in the State of Sabah is regulated by the Advocates Ordinance of Sabah while in Sarawak it is regulated by the Advocates Ordinance of Sarawak.

To set up a practice in the legal service, it is a pre-requisite that one is required to possess the Annual Certificate (AC) from the Bar Council of Malaysia and a Practising Certificate (PC) from the High Court of Malaya.

Both these certificates are required to be renewed every year before 31 December of the year which is when the certificates expire.

 

Liberalisation Initiatives

In 2011, the PM announced that legal services is an area that would be autonomously liberalised to allow foreign practitioners to practise in Malaysia. With the recently amended Legal Professional Act, foreign lawyers will be able to practise in some areas in the legal fraternity after the guideline to practise is finalised. Currently, the Attorney General Chambers together with the Bar Council are formulating the guideline.

 

Specific service commitments

All specific commitments by Malaysia under GATS and the ASEAN Framework Agreement on Services (AFAS) as well as bilateral trade agreements are under Mode 3 (Commercial Presence) where foreign legal services suppliers are only allowed to practise in offshore corporations established in the Federal Territory of Labuan, Malaysia.

In Malaysia, expatriates are not allowed to practise as one of the requirements for admission as an advocate and solicitor in Malaysia is that one must be either a citizen or a permanent resident of Malaysia.

This is also reflected in bilateral FTAs commitments with Japan ( MJEPA ); New Zealand (MNZFTA); Pakistan (MPCEPA) and India (MICECA) as well as in the ASEAN Australia New Zealand (AANZFTA) and ASEAN-Korea (AKFTA).

 

Accounting, Auditing,  Bookkeeping & Taxation Services

Accountancy firms are fast becoming versatile in their services as, apart from their core activities of accounting and auditing, they also provide a range of services such as merger audits, insolvency services, tax advice, investment services and management consulting.

The demand for accountancy services are predominantly from enterprises that require mandatory compliance in terms of financial reporting.

Accounting, book-keeping, auditing and tax consultancy services include activities involving:

  • recording of commercial transactions for business or others,
  • preparation of financial accounts;
  • examination of these accounts and the certification of their accuracy
  • preparation of personal and business income tax returns; and
  • related advisory activities and representation (other than legal representation) before tax authorities.

All providers of this service must fulfil certain registration requirements:

  • Registration with Companies Commission of Malaysia ( CCM)

- A local incorporated accountancy consultancy practice must have registered with the Companies Commission of Malaysia (CCM).

  • Foreign service providers can practice only if they have incorporated with a local company or have registered the company in Malaysia with CCM, following the same procedure as that of a locally incorporated company.
  • Registration with the Malaysian Institute of Accountants (MIA)
  • MIA is the regulatory body that governs practice of accounting and auditing in Malaysia and any accounting practice must hold a valid practising certificate issued by MIA.
  • Foreign professionals in this service need to be registered with the MIA as well, with the additional requirement of passing a qualifying examination conducted by MIA  to determine competency and ability.

The Acts

  • Accountants Act, 1967
  • Income Tax Act 196 (Revised 1971)
  • Institute's (Membership and Council) Rules 2001
  • Institute's (Disciplinary) Rules 2001
  • Institute's Qualifying Examination Rules 2001
  • Institute's By-Laws (On Professional Ethics, Conduct and Practice)

Apart from the above Acts, there are related regulations that services providers need to be aware of :

  • Companies Act 1965
  • Banking and Financial Institutions Act 1989
  • Co-operative Societies Act 1993
  • Capital Markets and Services Act 2007
  • Securities Commission Act 1993
  • Rules and Listing Requirements of Bursa Malaysia Securities Berhad
  • Anti-Money Laundering Act 2001

Liberalisation initiatives

Accounting and taxation services are the areas that PM had announced to be autonomously liberalised. Starting January 2012, foreign practitioners are allowed to establish an entity in Malaysia having 100% ownership.

 

Specific service commitments

Under GATS, any commercial presence is only through a locally registered partnership with Malaysian accountants or Malaysian accounting firms with  foreign equity not exceeding 30 per cent.

There are commitments made under Mode 4 (presence of natural persons) where professionals who possess the necessary academic credentials, professional qualifications, experience and/or expertise which have been duly recognized by the professional bodies in 24. Malaysia and registered with those respective professional bodies can enter and stay for a duration of not more than a total of five years.

The same applies to Malaysia's commitment under AFAS under Mode 3 (Commercial presence), except that foreign equity is allowed up to 51 percent.

Under Mode 4, in AFAS, 8 specialists/experts for each institution, subject to registration with MIA and fulfilment of residency requirements is allowed.  Entry shall be limited to a maximum period of two years, subject to domestic regulations.

Malaysia's commitments under Bilateral FTA for Mode 3 are the same as under GATS and AFAS with the aggregate foreign equity not exceeding the figures that follow and with the respective countries :

  • MJEPA       :  35%
  • MNZFTA     :  40%
  • MPCEPA    :  40%
  • MICECA     :  49%

There are two Regional FTAs, the AANZFTA and the AKFTA in which foreign equity has been set to not exceed 40 percent.

 

Architectural

Architectural consultancy services would mean the provision of architectural consultancy advice and services pertaining to all or any of the following:

  • submission of plans or drawings to any person or local authority in Malaysia;
  • conceptualisation, research and development of any design for the built environment;
  • any survey, preparation of reports including environmental impact assessment reports, or investigation relating to the built environment;
  • project programming, construction and manufacturing programming, and product design;
  • planning and development services including interior design, financial advisory services, project management, contract administration and landscaping;
  • preparation of feasibility studies and cost estimates;
  • preparation of plans and other means of presentation; and
  • any other activities relating to the creation, preservation and enhancement of the built environment

 

The Acts

  • Architects Act 1967;
  • Architects Rules 1996; and
  • Code of Professional Conduct for Professional Architects.

 

Regulatory Agency

  • The Architects Act 1967 regulates and governs architectural services. The registration process for a Professional Architect is subject to the Architects Act 1967, as well as the rules specified in the Architects Rules 1996.
  • The Board of Architects Malaysia

This Board assumes a vital role in regulating this professional services. One of their primary roles is to maintain the Register of Professional Architects, Building Draughtsmen and architectural consultancy practices. In addition, the Board helps develop and promote the profession by managing accreditation of architectural programmes and by being the body that conducts examinations for prospective members of the profession.

Any company or individual intending to practise architectural consultancy in Malaysia needs to be registered with the Board. A sole proprietorship or a partnership must consist of professional architects. To register as a ‘Professional Architect', the individual must fulfil the following conditions. He/She must

  • Be a citizen or permanent resident of Malaysia;
  • Be a registered Graduate Architect; (one whose qualification is recognised by the Board).
  • Have  obtained the practical experience as prescribed by the Board;
  • Have passed the Part III Professional Examination; and
  • Be a Corporate Member of the Malaysian Institute of Architects (PAM).

 

Liberalisation Initiatives

As announced by the PM in 2011, architectural services will be autonomously liberalised once the relevant Act has been amended. With the amendments foreign practitioners will be allowed to have 100% ownership.

Currently, foreign architects who intend to practise must apply for temporary registration with The Board, and must possess :

  • the necessary qualification recognised for the practice of architecture as an architect in the country where he normally practises; and
  • the necessary expertise and his/her physical presence is required in Malaysia for not less than one hundred and eighty days in one calendar year or that he/she is a resident representative of the foreign component of a joint-venture.

The Board may approve a temporary registration for a period not exceeding one calendar year and may renew such temporary registration as it deems fit.

Foreign professionals can only be registered as Temporary Architects, and are only allowed to hold up to 30% foreign equity in an architectural firm. However, they cannot hold the directorship of an architectural firm.

 

Specific service commitments

Under GATS, the specific commitments and limitations are as follows:

  • In terms of Limitations on National Treatment, for Modes 1 (Cross Border Supply) & 2 (Consumption Abroad), architectural services must be authenticated by a registered professional architect in Malaysia.
  • Under Market Access, Mode 3 (Commercial Presence) architectural services may only be supplied by a citizen or permanent resident of Malaysia.
  • Under Mode 4 (Movement of Natural Persons ), only a foreign architect who is a consultant to a project wholly financed by a foreign government or implemented under a bilateral arrangement between governments subject to temporary registration will be given a period of one year  temporary registration.

Under AFAS, there is a similar stipulation under Market Access, Mode 3

  • that architectural services may be supplied only by a citizen or permanent resident of Malaysia; and
  • that for multi-disciplinary practices (Architecture, Engineering and/or Quantity Surveying), foreign equity is allowed up to a maximum of 30 per cent for joint ventures by professionals who are registered in the country of origin.

Under Mode 4, 2 specialists/experts per country are  allowed and registration is subject to qualification of registration and domestic regulations. Temporary registration is on an annual basis and renewal subject to domestic regulations.

In Bilateral FTAs with Japan ( MJEPA ), Pakistan (MPCEPA), New Zealand (MNZFTA) and India (MICECA), the commitment is via Mode 3 where for multi disciplinary practices (MDP), i.e. architecture, engineering and/or quantity surveying, ), foreign equity is up to a maximum of 30 per cent for joint ventures by professionals who are registered in the country of origin.

The same applies to the ASEAN - China (ACFTA) and the ASEAN –Australia/New Zealand (AANZFTA) except for ASEAN – Korea regional FTA (AKFTA), where the equity is only 10 per cent.

 

Engineering

This sub sector includes any corporate body, incorporated under the Companies Act 1965, that provides professional engineering services.

Professional engineering services would include engineering services and advice in connection with any feasibility study, planning, survey, design, construction, commissioning, operation, maintenance and management of engineering works or projects and includes any other engineering services approved by the Board.

 

The Acts

  • Registration of Engineers Act 1967;
  • Registration of Engineers Regulation;
  • Companies Act 1965;
  • Washington Accord.

 

Regulatory Agency

The Board of Engineers Malaysia's (BEM) primary role is to facilitate the registration of engineers and to regulate the professional conduct and practice of registered engineers in order to safeguard the interest of the public.

A graduate engineer is required to have had three years of experience in order to be entitled to apply for registration as a Professional Engineer.

To register yourself as a professional engineer, you must have had practical experience and must have sat for the Professional Assessment Examination ( PAE ).

 

Liberalisation Initiatives

As announced by the PM in 2011, engineering services will be autonomously liberalised once the relevant Act has been amended. With the amendments foreign practitioners will be allowed to have 100% ownership.

 

Specific service commitments

Under GATS, the specific commitments and limitations are as follows:

  • In terms of Limitations on National Treatment, for Modes 1 (Cross Border Supply ) & 2 ( Consumption Abroad ), engineering services must be authenticated by a registered professional engineer in Malaysia.
  • Under Market Access, Mode 3 ( Commercial Presence) engineering services may be supplied only by a citizen or a permanent resident of Malaysia.
  • Under Mode 4 (Movement of Natural Persons ), a foreign engineer who is a consultant to a project wholly financed by a foreign government or implemented under a bilateral arrangement between governments subject to temporary registration will be given a period of one year per temporary registration.

Under AFAS, there is a similar stipulation under Market Access, Mode 3

  • that architectural services may be supplied only by a citizen or a permanent resident of Malaysia ; and
  • that for multi-disciplinary practices (Architecture, Engineering and/or Quantity Surveying), foreign equity up to a maximum of 30 per cent for joint ventures by professionals who are registered in the country of origin.

Under Mode 4, 2 specialists/experts per country is allowed and registration is subject to qualification of registration and domestic regulations. Temporary registration is on an annual basis and renewal subject to domestic regulations.

In the Bilateral FTA with Japan (MJEPA), the commitment is via Mode 3 where for multi disciplinary practices (MDP), i.e. architecture, engineering and/or quantity surveying, ), foreign equity is up to a maximum of 10 per cent for joint ventures by professionals who are registered in the country of origin.

In the MNZFTA and MICECA, for MDP, the foreign equity is up to a maximum of 30 percent and for MPCEPA, it is 40 percent.

In the ASEAN – China FTA (ACFTA), as well as in the ASEAN – Korea FTA (AKFTA ), Malaysia has allowed for up to 10 percent foreign equity. In the AANZFTA, the foreign equity for MDP is 30 percent.

In all bilateral and regional FTAs, foreign directorship is not allowed.