Digital economy in Malaysia

Thanks to the Malaysian Government initiative called Digital Malaysia, businesses and entrepreneurs looking to establish an R&D facility or high-tech base in South-East Asia ought to consider Malaysia.

The scheme offers significant incentives to businesses that can contribute to the country’s knowledge economy and multimedia industries.

Receiving MSC status from the Multimedia Development Corporation (MDeC) unlocks access to the Bill of Guarantees, which governs the entitlements of qualifying businesses.

Qualifying businesses

The following criteria apply to the grant of MSC status:

  • The business must have a private limited company (Sdn. Bhd.) incorporated in Malaysia to carry out the qualifying activities, which include the following:

      E-Commerce business in Malaysia

    • Software development;

    • Hardware design;

    • Research, design & development;

    • E-commerce and other web-based businesses including hosting services;

    • IT outsourcing; and

    • Business process outsourcing including call centres and payroll processing.

  • The MSC entity will operate in one of the infrastructure-rich Malaysian Cybercities;

  • The Malaysian company creates or uses heavily IT & media products and services; and

  • The company employs a substantial number of knowledge workers.

MSC Incentives

The Bill of Guarantees sets out the benefits of MSC status. Some come by virtue of the infrastructure in the Cybercities, while others provide direct financial and operational benefits to MSC companies. The direct benefits include:

  1. Streamlined employment of foreign knowledge workers: MSC companies may employ foreign staff with a degree and two years of relevant experience, or holders of a multimedia/ICT diploma, without caps on their numbers. As their expertise benefits the incentivized activity, their visas enjoy speedy processing;

  2. No local ownership requirements: Malaysian law requires businesses in certain industries to have ownership stakes held by Malaysian nationals. MSC companies enjoy exemption from these rules where they would otherwise apply, ensuring that you maintain complete control of your business;

  3. Duty-free imports of multimedia equipment: Save 20% on bringing computers, components and other multimedia equipment into Malaysia for internal use;

  4. 100% tax writedowns on the first five years’ capital expenditure: Reduce your company’s tax bill by the amount spent on qualifying investments for a limited period.

Other key considerations for technology businesses in Malaysia

  • Malaysia has joined the World Intellectual Property organization and its Patent Cooperation Treaty. This means that your company can file its Malaysian inventions in one place and receive protection in up to 148 countries at once;

  • Exports to the ASEAN region, with a market size of 570m people and combined GDP of US$1.5 trillion, do not attract import or export taxes;

  • Malaysia operates a territorial tax regime, which means 100% tax exemption on foreign income.

If you would like to find out more about doing business in Malaysia and how it might help your business, these links may prove helpful:

Photo Credit: melenita2012 under Creative Commons Attribution 4.0 International License.