E-commerce has gained serious traction over the years. Especially with the current global pandemic, more and more people are turning their businesses online as it caters as an option for both offline and online business.
Setting up an e-commerce business has also become more manageable as it gains more popularity. However, one must bear in mind that an e-commerce business is tied to the same, if not more, legalities of a physical offline business.
We are here to lay down the legal requirements for e-commerce businesses in Malaysia.
Setting up your E-commerce Business
First and foremost, you will need to register your business with Suruhanjaya Syarikat Malaysia (SSM) to make it a legal company. There are three types of business modules you can register as. They are:
Sole proprietor – The business is solely yours. The business liability is your personal liability. You may register the business under your name or a trading name.
Partnership – You and one or more partners share the business. All the partners are liable for the business.
Company – When you would like to have a separate entity altogether for your business.
Special note for foreign citizens:
As a foreign citizen who wants to operate a business in Malaysia, you cannot register a sole proprietor or partnership through SSM. Your business has to be established through company incorporation or company registration.
As a foreigner, you may incorporate a company or register an existing company that you own.
Once registration with SSM is completed, you are free to operate your business.
You can operate under a different name than the registered one with SSM. For good measure, check first that website domain names are available before settling on your desired business name.
Applicable Laws When Operating an E-commerce Business
While there are no laws governing e-commerce business specifically, there are existing laws that apply to e-commerce business which are explained below:
Communications and Multimedia Act 1998 (CMA)
This Act regulates multimedia and communications in Malaysia. As an e-commerce business operator who would be running content online, this Act applies to you. In this article, we discuss content compliance at length.
Consumer Protection Act 1999 (CPA)
The CPA is an Act which protects consumers as a whole. This Act will bind you in how you interact with your consumers. The Act also ties with the establishment of the National Consumer Advisory Council and the Tribunal for Consumer Claims and matters that are connected to them.
Consumer Protection (Electronic Trade Transactions) Regulations 2012
This Regulation applies to anyone who operates their business online, whether on their own website or an online marketplace. The Regulation also applies to providers of operators of online market places.
Contracts Act 1950
This Act governs all contracts in Malaysia. You will be dealing with multiple parties, which will require contracting on your end as you run your business. You can find a further explanation on contracts and agreements in this article.
Digital Signature Act 1997
This Act governs the use of digital signatures and matters that are connected with using digital signatures. Naturally, running your business online will require the usage of digital signatures, and this Act will apply to you.
Electronic Commerce Act 2006 (ECA)
The ECA provides legal recognition for electronic messages. It includes using electronic messages in commercial transactions to fulfil legal requirements and enable and facilitate commercial transactions through any electronic means and devices.
Personal Data Protection Act 2010 (PDPA)
The PDA regulates how each party uses personal data. Commonly, your website would collect customer details which will fall under PDPA protection. We discuss PDPA in further details in this article.
Sale of Goods Act 1957 (SGA)
This Act governs the sale of goods in Malaysia, which applies to e-commerce business as well.
Tax Guidelines for E-commerce Business
In terms of taxation, you will be bound to Income Tax when you operate an e-commerce business.
Briefly, the same tax treatment applies to e-commerce transactions and conventional transactions.
While the above legalities may seem technical and a little daunting, they are necessary to ensure you operate a valid and legal e-commerce business in Malaysia. If you are at all in any doubts, contact our lawyers for a complimentary consultation.
Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and, therefore, will require specific legal advice. Feel free to contact us for complimentary legal consultation.