Malaysia has introduced a new tax incentive scheme for digital companies, offering reduced corporate tax rates and investment tax allowances to attract high-growth, high-value sector investments. This initiative aims to solidify Malaysia’s position as a digital hub and stimulate economic growth.
31 May 2024 – The Malaysia Digital Economy Corporation (MDEC), in collaboration with the Ministry of Digital (KD) and the Ministry of Finance (MOF), has unveiled a groundbreaking tax incentive scheme aimed at Malaysia Digital (MD) companies. This initiative aligns with the government’s Budget 2024 promise to implement outcome-based tax incentives designed to stimulate the economy by attracting investments in high-growth, high-value sectors, fostering new economic clusters, and promoting environmental sustainability.
The new MD tax incentive scheme offers a comprehensive array of benefits for digital companies employing advanced technologies such as artificial intelligence (AI), cybersecurity, blockchain, and enhanced network connectivity. Eligible MD companies can avail themselves of reduced corporate income tax rates on both intellectual property (IP) and non-IP incomes, as well as investment tax allowances (ITA) for capital-intensive service activities. The flexible structure of the scheme allows companies to benefit based on their specific commitments, promoting growth in high-value activities and rewarding performance.
The tax incentives are available in two categories: New Investment and Expansion. Companies under the New Investment category can enjoy a 0% tax rate on IP income and a 5% or 10% rate on non-IP income for ten years. Companies under the Expansion category can benefit from a 15% reduced tax rate for five years. Alternatively, companies in both categories can opt for ITA ranging from 30% to 100% on qualifying capital expenditure, which can be offset against up to 100% of statutory income for five years.
“This MD tax incentive is a game-changer that will solidify Malaysia’s position as the digital hub of ASEAN,” said Ts. Mahadhir Aziz, CEO of MDEC. “It aligns with current economic needs and international best practices, underscoring our commitment to leading the digital revolution. By attracting global talent and investment in high-growth sectors, we aim to create a thriving digital ecosystem, generate high-value jobs, boost R&D activities, and integrate cutting-edge technologies locally.”
In response to the Prime Minister’s call for Malaysia to become more investor-friendly and guided by the MADANI Economy framework, MDEC is enhancing processes to facilitate easier business operations, improve efficiency in processing digital investments, and eliminate unnecessary steps that complicate investment execution.
Building on the success of the Multimedia Super Corridor (MSC) initiative, the new MD tax incentive scheme reinforces Malaysia’s dedication to developing local tech champions and attracting high-value digital investments. Since the MSC’s inception in 1996, the initiative has drawn RM485 billion in cumulative investments and created over 223,000 high-value jobs as of December 2022. As of April 30, 2024, more than 5,000 companies have been awarded MD status, highlighting the initiative’s pivotal role in promoting digital innovation across various industries and supporting the transformation plans outlined in both the MADANI Economy framework and the New Industrial Master Plan 2030 (NIMP 2030).
Companies interested in the new MD tax incentive can apply now. Further details are available on the official MDEC website at MDEC Malaysia Digital Tax Incentive.
