Import, Export and Exchange Control Regulations
Price Control Act 1946
Foreign Currency Bank Account
Tax Issues
Consumer Protection Act 1999

Many companies and organizations are becoming more involved with the Internet. The Internet does not have a universal law that governs it, but this does not mean that it is lawless. From a legal standpoint, the law does not distinguish between activities carried out on the Internet and in the physical world. Therefore, it is important to be aware of the laws that may apply.

The regulatory schemes that must be considered are those of the business' home country as well as the primary target market, with particular attention to countries governed by international conventions.

Import, Export and Exchange Control Regulations

Trade conducted on the Internet is not limited by geography. A small-scale manufacturer may be selling his or her goods overseas, and sourcing raw materials overseas at more competitive rates, thereby lowering the overall cost of product. These activities can turn the small-scale manufacturer into an exporter or an importer.

In this regard, the Customs (Prohibition of Imports) Order 1988 (CPIO) and Customs (Prohibition of Exports) Order 1988 (CPEO) apply. The First, Second, Third and Fourth Schedules of the CPIO provide that certain items may only be imported with an import licence, or imported in a manner specified under the CPIO. There are various items which are prohibited from being imported under the CPIO. Similar provisions in the First, Second and Third Schedules of the CPEO apply to exports.

The Exchange Control (Prescription of Territory and Manner of Payment) Order 1998 requires that all exports must be paid in foreign currency, other than restricted currencies (at present the currencies of Israel, Serbia and Montenegro).

Price Control Act 1946

If a trader is selling goods on the Internet, this makes the trader a retailer and consequently he or she will be required to satisfy the requirements under the Price Control Act 1946 (PCA).

In general, the Price Control (Indication of Price by Retailer) Order 1993 imposes an obligation on the retailer to display the cash price per unit, or per unit weight, or measure of the goods. Where it is not possible to do so, the retailer must display a list of the goods, indicating the price per unit in Malaysia ringgit.

There is also a requirement for the retailer to label price tags, marks or lists in Bahasa, except where the retailer does not read Bahasa, in which case there shall also be a translation in the language of the retailer. The price must still be displayed in Bahasa.

The question then becomes how should prices be displayed on the Internet. They could be based on foreign currency, local currency, or both. Export regulations stipulate that all exports must be paid in foreign currency, whereas the PCA provisions state that prices must be labelled and displayed in ringgit. It therefore seems to depend on whether there is an export or not and will vary from case to case.

Foreign Currency Bank Account

The small manufacturer/trader who is now carrying out export activities and receiving foreign currency may need to open a foreign currency account. In this respect it is useful to note the restrictions imposed by the Exchange Control of Malaysia notices.

Under Exchange Control 7, resident exporters are permitted to open one or more foreign currency accounts or multi-currency accounts with those banks authorized by Bank Negara Malaysia to retain export proceeds in foreign currency subject to various limits.

Tax Issues

Aside from income taxes that are routinely imposed on a business or a company, the trader or exporter will be further subject to sales, customs and import duties (for sales outside of Malaysia through the Internet).

Sales tax
Section 6 of the Sales Tax Act 1972 stipulates that a charge and levy is imposed on all taxable goods manufactured in and imported into Malaysia (unless it is exempt under Schedule A of the Sales Tax (Exemption Order) 1980). However, Section 29 of the act allows licensed manufacturers and importers to claim drawback (subject to certain conditions) of the full amount of the sales tax paid in respect of goods, which are subsequently exported.

Customs duties
Customs duties are levied on certain goods (for import or export) by Section 11 of the Customs Act 1967. The duties levied vary depending on the type of goods exported or imported.

The small manufacturer or trader should be aware of the requirements to declare items imported or exported under Sections 78 and 80 of the act. With regard to imports, there is also a requirement for customs duties to be paid within a stipulated time after making a declaration. Export duties are payable immediately before export.

The implications of customs duties in relation to an online pricing strategy are important. This is particularly so for export duties, as dealings with customers are expected to be a single transaction where recourse to the customer is unlikely once the product is delivered. If the duties are not included in the price, then the trader may not have the opportunity to recover them.

A good forwarding agent should be able to assist with respect to duties and handling charges. Transportation charges should also be built into the price quoted to the online customer.

Excise duty
A manufacturer should also be aware of the excise duty that can be imposed under Section 6(1) of the Excise Act 1976 on any goods manufactured in Malaysia. The applicable rate is dependent on the nature of the goods and is set out in the Excise Duty Order 1991.

Consumer Protection Act 1999

The Consumer Protection Act 1999 was recently passed by Parliament and is aimed at providing protection for consumers. The scope of consumer protection covers deceptive conduct, false representation and unfair practice of traders.

The act states that goods are subject to implied guarantees as to acceptable quality, title, fitness for purpose and that the goods comply with descriptions and price.

Although the act specifically excludes electronic transactions, it is nevertheless useful to consider the salient provisions of the act for the purposes of formulating a policy on refunds or returns, in respect of online sales.


The Communications and Multimedia Act 1998 requires various activities to be licensed. There are four types of licences under the act:

  • network facilities provider licence;

  • network service provider licence;

  • application service provider licence; and

  • content application service provider licence.

E-commerce or online trading activities would, at the very least, require the latter two licences.

There may be other licences that must be obtained before anyone can engage in certain types of activities. These normally relate to the activity itself and the regulations make no distinction whether the activity is carried out online or otherwise.

For example, if a person decides to trade in antiquities (especially in their export), then a licence would need to be issued by the Director General of the Museum Department under the Antiquities Act 1976. Similarly, if a person decides to have an online travel agency, there may be a need to be licensed pursuant to the Tourism Industry Act 1992 (depending on the service offered).

For further information on this topic please contact Julian Ding at Zaid Ibrahim & Co by telephone (+603 292 6688) or by fax (+603 298 1632) or by e-mail ([email protected]).

The materials contained on this web site are for general information purposes only and are subject to the disclaimer