Malaysia has been growing steadily for the past decade to establish herself 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 rebranded 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 it has been implemented in 1996, the quantifiable outcomes have been well spoken of. Here is a quick summary of the impact of the MD Status programme.
The Malaysia MD Status serves as a mark of excellence and recognition in driving the digital economy, which is highly sought for by companies.
There are 3 tiers of MD Status companies in Malaysia and they are categorised based on the location of their offices.
|Tier 1||MD Status companies situated in the designated premises within the MD Cybercity|
|Tier 2||MD Status companies located in other commercial premises within the MD Cybercity|
|Tier 3 & MD Startups||MD Status|
Who is eligible to apply for the MD Status in Malaysia?
Both local and foreign companies can apply for the MD Status in Malaysia provided if they fulfil the following criteria:
NOTE: There is an exception to the issuance of invoice criteria if the company has at least 60% Malaysian equity ownership and the issued invoice was made less than 12 months from the date of application.
The list of promoted activities are:
The non-qualifying promoted activities include:
Benefits of the MD Status in Malaysia
Companies who are awarded the Malaysia MD Status are entitled to many benefits under the MD Bill of Guarantees (BoGs).
The benefits under the BoGs are:
Here is the detailed breakdown and scope for the tax incentives for the 3 tiers of companies:
|MD Malaysia Status Company||Tier 1||Tier 2||Tier 3|
Minimum KPI Numbers
|Percentage of income tax exemption||100%||100%||70%|
|Exemption period||5 years||5 years||5 years|
|Extension of exemption period||5 years||5 years||May apply for extension provided that the company changed to Tier 1 or Tier 2 and fulfills the conditions imposed|
|Standard Conditions:||Tier 1||Tier 2||Tier 3|
|To be complied with within 24 months from the date of award of MD Malaysia Status and thereafter during the exemption period:|
|(1) Location of approved MD Malaysia Promoted Activities||Designated Premises within MD Malaysia Cybercities or Cybercentres||Other Commercial Premises within MD Malaysia Cybercities or Cybercentres||Not subjected to location|
|(2) Commencement of operation and undertaking of the approved MD Malaysia Promoted Activities in Malaysia|
|To be complied with by the end of Year 2 from the commencement date of the exemption period and thereafter during the exemption period:|
|(3) Paid-up capital||RM500,000*||RM250,000|
|(4) Full time employees
(comprising Knowledge Workers) with
monthly base salary
|(i) 50 full time employees with monthly
base salary of RM5,000; OR
(ii) 30 full time employees with monthly base salary of RM10,000
|(i) 30 full time employees with monthly base salary of RM5,000; OR
(ii) 20 full time employees with monthly base salary of RM8,000
|Data Centre: 5 full time employees with
monthly base salary of RM5,000
|(5) Annual operating expenditure and investment in fixed asset||RM3.5mil||RM1mil|
|Data Centre: RM10 million|
|(6) % of Malaysian Knowledge Workers
(for the full time employees in (4) above)
|*Note: The minimum amount paid up capital needs to be increased to RM2.5mil for the extension of exemption period for the second 5 years|
Malaysia MD Status Application Process
There are 4 key steps when you apply for the MD Status in Malaysia.
1. Malaysia Digital Platform Registration
2. Application Acknowledgement & Registration Acceptance
3. Evaluation & Assessment
4. Application Submission to Relevant Bodies for Approval
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 status that companies have to comply with within 12 months of receiving the status are:
Malaysia Company Registration Requirements
To register for a new company in Malaysia, one must fulfil these requirements:
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 be given up to S$100,000 in funding for the business expansion across 3 categories:
You can find out more about how you can adopt a Singapore-Malaysia twinning strategy to propel business growth in our other article here.