Malaysia Digital (MD) Status

Malaysia Digital (MD) Status

On 4 July 2022, the Government launched the MD initiative, which will succeed Multimedia Super Corridor (MSC) Malaysia. This new initiative will drive digital transformations in focus areas that present high-growth potential, opportunities and importance. The Government, through the Malaysia Digital Economy Corporation (MDEC) will award the MD Status to eligible companies which participate in and undertake MD activities.

Under the MD initiative, it is noted that companies can operate and undertake approved activities in any location within Malaysia. Companies which used to be subjected to the minimum office requirement will no longer need to adhere to that requirement.

In line with the above, MDEC has published on its website the Guidelines on MD Status dated 30 June 2022 to provide an overview of the MD Status, including the eligibility criteria, conditions, the available benefits and incentives, as well as post-approval considerations. The 12-page Guidelines comprise the following paragraphs:

1.0        Introduction

2.0        Eligibility criteria

3.0        Conditions of MD Status

4.0        Other general conditions

5.0        Benefits to MD Status companies

6.0        Sustainable development goals

7.0        MD Status application process

8.0        Post-approval application

9.0        Reporting and monitoring

10.0      Revocation of status

11.0      Surrender of status

12.0      Enquiries and support

13.0      Effective date

Some of the salient points are outlined below.

• To qualify for the MD Status, a company must be:

-      Incorporated under the Companies Act 2016 and tax resident in Malaysia,

-      Either proposing to carry out or is currently carrying out one or more MD activities (as outlined in the Appendix to this Alert)

• A company that has been awarded the MD Status must comply with the following conditions within 12 months from the date of award of the MD Status:

-     Commence operations and undertake MD approved activities in Malaysia

-     Employ at least two full-time employees (comprising knowledge workers) with a minimum average monthly base salary of RM5,000 for MD approved activities

-      Incur an annual operating expenditure of at least RM50,000 to carry on MD approved activities

-      Has paid-up capital of at least RM1,000

• MD Status companies will be eligible for and/or may apply for certain incentives, as well as certain rights and privileges from the Government as provided under the MD Bill of Guarantees (BoGs), subject to approvals and conditions. These include:

-      Tax incentives (i.e., income tax exemption or investment tax allowance)

-      Import duty and sales tax exemptions for multimedia or information and communication technologies (ICT) equipment

-      Foreign knowledge workers quota and passes

-      Freedom of ownership by exempting local ownership requirements

-      Flexibility to source capital and funds globally

• Applications for MD Status are to be submitted via MDEC’s website, which also outlines the step-by-step process for the said applications. Applications are subject to a non-refundable processing fee.

Each application will be assessed by MDEC and thereafter presented to an approval committee comprising representatives from the Government (i.e., approval committee) for deliberation, consideration and decision.

• The MD Status is perpetual, subject to continued compliance with the necessary conditions.

• An MD Status company may apply to add-on new MD activities under its MD Status. The process and criteria are similar to a company submitting a new MD Status application.
• An MD Status company is required to notify MDEC of the following:

-      Change in paid-up capital (which must be higher than the minimum condition), equity or shareholding structure of the company

-      Change in the name of the company

-      Change in the name of product or services (including re-branding) stated under the MD approved activities in the approval letter

-      Change in the business operating address, contact person(s) and/or contact details

Any other variation to the conditions specified in the approval letter, apart from the above, will require the approval of the approving committee.

• An MD Status company is required to submit, on an annual basis, all true, correct and complete information and/or documents as requested by MDEC, for the purpose of reporting the progress of the MD approved activities and/or determining compliance with the application conditions.

All information submitted by the MD Status company must be verified by an independent external auditor appointed by the MD Status company at its own cost, or in any other manner specified by MDEC.

• A company’s MD Status may be revoked in the event of non-compliance with the stipulated conditions. In such cases, the incentives and benefits granted will be withdrawn. The effective date of the revocation shall be determined by the approval committee. 
• A company may also surrender its MD Status, subject to MDEC’s assessment that the company has not failed to comply with any conditions imposed in relation to the MD Status. The surrender of the MD Status shall take effect from the date the surrender request is approved by the approval committee.