MD Status in Malaysia Guid

Malaysia has been growing steadily for the past decade to establish itself as one of Southeast Asia’s top economy. With the pandemic driving digitalisation, Malaysia looks to stay in the game by introducing digital-led initiatives and programmes under the MyDIGITAL blueprint to boost its digital economy.

One of the key initiatives is the introduction of MSC Status in Malaysia, which is now rebranding as Malaysia Digital (MD) Status.

What is MD Status / MSC Status

The MD / MSC Status in Malaysia is a label that both local and foreign companies can apply for to get a wide range of incentives to drive business growth. Through this initiative, the Malaysia Digital Economy Corporation (MDEC) aims to attract companies, talents, and investments while empowering local businesses to stay competitive in the global digitalisation phenomenon.

Since implementation in 1996, the quantifiable outcomes have been well spoken of. Here is a quick summary of the impact of the MD Status programme.

1. 4,726 companies awarded the Malaysia MD Status
2. 2,708 active Malaysia MD Status companies
3. RM384B worth of investment recorded as of December 2020
4. RM588B worth of revenue generated as of December 2020
5. RM212B worth of exports generated as of December 2020
6. 184,030 jobs created as of December 2020

The Malaysia MD Status serves as a mark of excellence and recognition in driving the digital economy, which is highly sought after by companies.

There are 3 tiers of MD Status companies in Malaysia and they are categorised based on the location of their offices.

Who is eligible to apply for the MD Status in Malaysia?

Both local and foreign companies can apply for MD Status in Malaysia provided they fulfil the following criteria:

1. The company has to be incorporated under the Companies Act 2016 and resident in Malaysia
2. Carry out (now & in future) one or more Malaysia Digital activities and have not issued any invoice for the proposed activities in Malaysia based on the date of application.
3. No existing tax exemption granted by the government

The list of promoted activities are:

• Big Data Analytics
• Artificial Intelligence
• Financial Technology (FinTech)
• Internet of Things (IoT)
• Cybersecurity
• Data Centre & Cloud
• Blockchain
• Creative Media Technology
• Sharing Economy Platform
• User Interface & User Experience (UI/UX)
• Integrated Circuit (IC) Design & Embedded Software
• 3D Printing
• Robotics
• Autonomous Technology
• Systems & Network Architecture Design & Support
• Global and/or low-value call centre
• Data Entry
• Recruitment Process Outsourcing

The non-qualifying promoted activities include:

• Trading
• Manufacturing
• Provision of Telecommunication Services

Benefits of the MD Status in Malaysia

Companies with Malaysia MD Status enjoy many benefits under the MD Bill of Guarantees (BoGs).

The benefits under the BoGs are:

• Pre-approved quota for foreign knowledge workers
  • 50 full-time employees with a monthly base salary of RM5,000 or
  • 30 full-time employees with a monthly base salary of RM10,000
• Tax incentives
• Pioneer Status (PS) privilege for 5 + 5 years 100% tax exemption and renewable to 10 years
• Multimedia/ ICT equipment import duty & sales tax exemption
• Ready infrastructure available at MD Cybercities/ Cybercentres
• No requirements for local ownership
• Flexibility to source capital & funds globally

Here is the detailed breakdown and scope of the tax incentives for the 3 tiers of companies:

Source: MDEC

Malaysia MD Status Application Process

There are 4 key steps when you apply for the MD Status in Malaysia.

1. Malaysia Digital Platform Registration

• Submit the online application form within 30 days from the registration date
• No extension will be granted.

2. Application Acknowledgement & Registration Acceptance

• The applicant will receive an acknowledgement receipt to their registered email address
• Preliminary check & review on the tax incentive eligibility
• Acknowledgement receipt will send after a successful check
• Unsuccessful checks will be rejected, re-application is possible if eligibility criteria is fulfilled

3. Evaluation & Assessment

• Evaluation of application by MDEC Business Analyst
• Additional documents and presentation of proposed activities may be required
• Processing payment fees will incur
  • MD Status – RM1,060 (including SST)
  • MD Status with tax incentive – RM2,120 (including SST)
• A notification email will send after a successful evaluation

4. Application Submission to Relevant Bodies for Approval

• For MD Status only companies
  • Presented to Malaysia Digital – Coordination Committee (MD-CC)
  • MDEC will issue an approval or rejection letter after MD-CC’s decision
  • MD Digital Certificate will be issued by MDEC upon acceptance of the approval letter
• For Tax Incentive
  • Presented to the National Committee on Investment (NCI)
  • MIDA will issue an approval or rejection letter after NCI’s

Annual Compliance for MD Status Companies

All MD-status companies in Malaysia must submit all documents related to the progress of the approved activities and any other documents required by MDEC on an annual basis. The income derived from these activities should be parked under a separate account for easy tracking.

The conditions of the MD states that companies have to comply with within 12 months of receiving the status are:

• Commencement of operations of approved activities
• Hiring a minimum 2 full-time employees with a minimum average salary of RM5,000 per month
• Paid-up capital of RM1,000
• Minimum annual operating expenditure of RM50,000 incurred for the approved activities

Malaysia Company Registration Requirements

To register for a new company in Malaysia, one must fulfil these requirements:

• At least one director and shareholder that has a legitimate local residential address
• The minimum paid-up capital is MYR 1
• The cost of registration with the Companies Commission of Malaysia (SSM) is MYR 1,060
• Must appoint a licensed Company Secretary within 30 days after incorporation is done

Singapore Tech Company Expansion into Malaysia

If you are a Singapore company looking to expand your tech company into Malaysia, you can also tap on the Market Readiness Assistance (MRA) grant by the Singapore government to stack up your incentives.

Under the MRA Grant, your Singapore company will give you up to S$100,000 in funding for the business expansion across 3 categories:

1. Overseas market promotion – trade fairs, etc.
2. Overseas market development – hiring business development staff, etc.
3. Overseas market set-up – market entry, licensing, etc.

You can find out more about how you can adopt a Singapore-Malaysia twinning strategy to propel business growth in our other article here.