LMW Licence, Bonded Warehouse and Free Zones in Malaysia: What Factory Buyers Must Check

Key Takeaways

• Three different customs tools, three different property needs. A Licensed Manufacturing Warehouse (LMW) is a licensed factory under section 65A of the Customs Act 1967. A licensed (bonded) warehouse stores dutiable goods under section 65. A free zone is a gazetted area under the Free Zones Act 1990 (Act 438).
• LMW and free industrial zones are for exporters. MIDA says companies are normally approved when all, or not less than 80%, of their output is exported and their raw materials are mainly imported. The exact export and local-sales percentages are written into each LMW licence.
• An LMW can be almost anywhere; a free zone cannot. MIDA describes the LMW as a way to get free-zone-like facilities where a free zone is not practical, so an LMW factory can sit in an ordinary industrial park. A free zone company must be inside a gazetted zone run by a Zone Authority.
• The licence fee is RM2,400 for each 12 months for both an LMW and a private licensed warehouse. Customs also requires a bank guarantee or bond.
• The building is part of the approval. Customs asks for the CCC or Occupation Permit, the local authority business licence, a certified layout plan and the title or tenancy agreement. The LMW conditions require 24-hour security, separate storage for raw materials and finished goods, and only one company in the licensed premises.
• In Selangor, the free industrial zones on the Customs list are Sungai Way, Ulu Klang, Telok Panglima Garang and the Port Klang Free Zone (PKFZ). The free commercial zones include Northport, Westport, Southpoint, PKFZ, MILS Logistics Hub and KLIA.

If you export most of what you make, or you hold goods before duty is paid, the right customs status can save a great deal of import duty and sales tax. But the status comes with rules about the building itself. This guide explains the three options and what they mean when you choose a factory or warehouse.

LMW, licensed warehouse and free zone at a glance

What is an LMW licence?

An LMW, or Gudang Pengilangan Berlesen (GPB), is a company licensed under section 65A of the Customs Act 1967 to carry out export-oriented manufacturing. The activity must meet the definition of "manufacture" in section 2(1) of the Act.

Who qualifies for an LMW

MIDA says LMWs are normally approved for companies whose entire production, or not less than 80% of it, is for export, and whose raw materials and components are mainly imported. The official licence conditions leave the export and local-sales percentages blank, because Customs sets them for each licence. Treat 80% as the usual benchmark, not a fixed legal number. Goods sold into the local market pay the duty and tax that apply at the time.

You will usually also need a Manufacturing Licence from MIDA under the Industrial Co-ordination Act 1975. It is required once shareholders' funds reach RM2.5 million or the company has 75 or more full-time employees, and companies below both thresholds can apply for an exemption. A copy of the Manufacturing Licence is on the Customs LMW application checklist. Our factory approvals guide covers that licence and the other permits.

What an LMW saves

• Import duty is suspended and no sales tax is charged on raw materials, components, packaging, manufacturing aids, cleanroom equipment, and machinery and equipment used in manufacturing.
• Not covered (licence condition 2): forklifts, cranes, construction and building materials, office equipment and furniture, fire-fighting and pollution equipment, vehicles, generators, petroleum products, tyres, air-conditioning equipment and staff uniforms, among others.
• No relief from anti-dumping or countervailing duty, export duty, levies, service tax or other taxes (condition 3).
• Machinery has a 10-year tail. Duty-exempt machinery cannot leave the factory without approval, and duty is payable on machinery used for less than 10 years from the exemption date (condition 32).

LMW fee, guarantee and reporting

• Licence fee: RM2,400 for each 12-month period. Apply to renew at least 60 days before expiry.
• Security: a bank guarantee or general bond, with the amount set for each licence.
• Reporting: monthly statements by the 28th of the following month and an annual statement with audited accounts before 31 January. Changes of directors must be reported within 14 days.

What the LMW rules mean for the building

This is the part most guides skip. The official LMW licence conditions set rules on the premises:

• One company only. Only one entity may operate within the LMW premises, and sharing the area with another company is not allowed (condition 33). A factory shared with a sister company, or a unit sublet in part, can be a problem.
• 24-hour security. The premises must be guarded 24 hours a day with measures such as guards, CCTV and an alarm (condition 9). Customs can ask for extra locks and seals.
• Separate storage. Finished goods must be stored apart from raw materials, components and waste (condition 17). The layout needs room for clear zones.
• Layout changes need approval. Changing the floor plan, structure or fittings needs written approval (condition 7), and moving to another factory needs prior approval from the State Director of Customs (condition 11).
• Exit costs. Duty on remaining stock must be paid before the licence is cancelled (condition 29).

The application checklist asks for documents that come from the property:

• a copy of the CCC or Occupation Permit
• the local authority business licence
• the site plan, and a layout plan certified by a licensed architect, engineer or building draughtsman, plus the elevation plan
• the title (geran) or tenancy agreement

A factory with unapproved extensions, no CCC or a missing Bomba fire certificate will slow down or block the application.

The LMW licence is issued to the company, not to the building. No official source says outright that it cannot pass with the property. But the one-company rule, the approval needed to relocate and the duty settlement on cancellation mean a new owner or tenant should plan to apply in its own name.

Licensed (bonded) warehouses

A licensed warehouse (Gudang Berlesen) under section 65 of the Customs Act stores dutiable or taxable goods. Duty and tax are deferred until the goods are released for local use, and nothing is paid if they are re-exported. There are four types: public (GBA), private (GBP), PEKEMA, and public port or airport warehouses.

Source: Customs licensing requirements. The licence fee is RM2,400 for a private licensed warehouse, and renewal is due 90 days before expiry.

Permitted activities include warehousing, break bulk, repacking, relabelling, consolidation, entrepot trade, and regional distribution centre (RDC) and international procurement centre (IPC) operations.

Premises rules for a licensed warehouse

• A building or fenced open land of solid, secure construction, with only one main entrance and exit
• A CFO or CCC, or local authority approval
• Not located near flammable materials, with hazardous goods labelled and kept apart
• CCTV that Customs officers can access, an alarm monitored 24 hours, and fencing of a suitable height
• An electronic inventory control system

A warehouse with several shared gates, a common loading yard or no CCC is hard to license. For Port Klang options, see bonded warehouse vs standard factory in Port Klang.

Free zones: FIZ and FCZ

Under section 3 of the Free Zones Act 1990, the Minister of Finance declares free zones by gazette and appoints an Authority to run each one. Goods brought into a free zone are treated as exported from Malaysia, and goods taken out into the principal customs area are treated as imported (section 7).

• Free Industrial Zone (FIZ): for export-oriented manufacturers, with duty-free import of raw materials, components, machinery and equipment used directly in manufacturing. MIDA uses the same 80% export benchmark as for LMWs.
• Free Commercial Zone (FCZ): for trading (except retail), break bulk, grading, repacking, relabelling, transhipment and transit.

MITI said in August 2026 that Malaysia has 48 gazetted free zones: 27 FCZs and 21 FIZs.

Free zones in Selangor

The Customs list of free zones (August 2023) names these in Selangor:

PKFZ's land at Pulau Indah (Lot 67894) is gazetted as both an FCZ and an FIZ. Our PKFZ guide covers its warehouses and set-up.

LMW or free zone?

• Choose a free zone when you want to sit next to the port or airport and your suppliers and logistics partners are already inside the zone.
• Choose an LMW when the right factory is in an ordinary industrial park (Shah Alam, Klang, Rawang, Nilai), or when free zone space does not fit your size, power or budget. The LMW gives similar duty treatment outside the zone.
• Choose a licensed warehouse when you store and distribute goods rather than make them.

Checklist before you buy or rent a factory for LMW or bonded use

1. CCC or CF for the building and every extension, plus a current Bomba fire certificate where the building needs one.
2. Layout: can raw materials, finished goods and waste be stored apart, with one controlled entrance?
3. Perimeter: a fenced compound and a gate you can control, not a shared yard with other tenants.
4. Exclusive use: no other company operating inside the same premises.
5. Security: room and power for 24-hour guards, CCTV and an alarm, and landlord consent to install them.
6. Lease terms: the landlord must agree to sign the documents Customs needs, allow approved layout changes, and give a lease long enough to cover the licence and the 10-year machinery rule.
7. Location: inside a gazetted free zone if you need FIZ or FCZ status; otherwise any industrial park works for an LMW.

Frequently Asked Questions

What is an LMW licence in Malaysia?

An LMW (Licensed Manufacturing Warehouse) licence lets a company run an export-oriented factory under section 65A of the Customs Act 1967. Import duty on approved raw materials, components and machinery is suspended and sales tax is not charged. The State Director of Customs issues it.

How much does an LMW licence cost?

The licence fee is RM2,400 for each 12-month period, and renewal must be applied for at least 60 days before expiry. Customs also requires a bank guarantee or general bond, with the amount set for each licence.

Does an LMW have to export 80% of its output?

MIDA says LMWs are normally approved when all, or not less than 80%, of production is exported. The exact export and local-sales percentages are written into each company's licence, and goods sold locally pay the duty and tax in force at the time.

What is the difference between an LMW and a free industrial zone?

Both give export manufacturers similar duty treatment. A free industrial zone is a gazetted area run by a Zone Authority, so you must be inside it. An LMW is a licence for one factory, which can be in an ordinary industrial park with Customs approval.

What is a bonded warehouse in Malaysia?

It is a licensed warehouse under section 65 of the Customs Act 1967 that stores dutiable or taxable goods. Duty and tax are paid only when goods are released for local use, and not at all if they are re-exported. There are public, private, PEKEMA and port or airport types.

Can two companies share one LMW factory?

No. LMW licence condition 33 allows only one entity to operate within the licensed premises and does not allow sharing the area with another company.

Which free zones are in Selangor?

The Customs list names PKFZ (both FCZ and FIZ), the Northport, Westport and Southpoint FCZs in Port Klang, MILS Logistics Hub, the KLIA FCZ, and the Sungai Way, Ulu Klang and Telok Panglima Garang FIZs.

Is a Manufacturing Licence the same as an LMW licence?

No. The Manufacturing Licence comes from MIDA under the Industrial Co-ordination Act 1975 and is needed once shareholders' funds reach RM2.5 million or staff reach 75. The LMW licence comes from Customs. A copy of the Manufacturing Licence is one of the LMW application documents.

Buying or renting, talk to us

FactoryHub is the industrial-only platform of Peter Tan (REN 12771) and Jason Low (PEA 1478), registered with BOVAEP under CID Realtors Sdn Bhd E(1) 1855. We handle both rent and sale, and we co-broke across the whole market, so if the right unit is another agent's listing we will still put it in front of you.

Send us the numbers that decide the shortlist: required amps, built-up area, floor loading, preferred area and target date. We reply with what actually exists, including units that are not advertised publicly. For 800A to 4,000A+ requirements, see high-power factories in Selangor.