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How to apply for MDEC’s Malaysia Digital tax incentive for digital companies

The Malaysia Digital Economy Corporation (MDEC) is extending a helping hand to tech companies! Their Malaysia Digital (MD) Tax Incentive offers significant tax breaks and financial benefits specifically for businesses leveraging digital technologies.

If you’re a digital entrepreneur looking to establish or expand your footprint in Southeast Asia and seize this exciting opportunity, here’s a comprehensive guide to applying for the MD Tax Incentive:

Step 1: Eligibility Check

Before diving headfirst, ensure your company meets the eligibility requirements:

  • Company Registration: Your business must be registered and incorporated under the Companies Act 2016 of Malaysia.
  • Resident Status: Your company must be a resident of Malaysia.
  • Digital Focus: Your core business activities must involve utilizing digital technologies like artificial intelligence (AI), cybersecurity, blockchain, or advanced network connectivity.
  • MD Status: You’ll need to be awarded MD Status by MDEC. This recognizes your company’s contribution to the Malaysian digital economy. You can apply for this status separately.

Step 2: Understanding the Incentive Options

The MD Tax Incentive offers two main benefits for qualified companies:

  • Reduced Corporate Income Tax Rates: Enjoy significant tax breaks on both intellectual property (IP) and non-IP income. New investment companies can benefit from a 0% tax rate on IP income and a 5% or 10% rate on non-IP income for 10 years. Existing companies looking to expand can benefit from a 15% reduced tax rate for five years.
  • Investment Tax Allowance (ITA): Offset a portion of your capital expenditures against your taxable income. The program offers options ranging from 30% to 100% for qualifying activities, which can be applied against up to 100% of your statutory income for five years.

Step 3: Gather Necessary Documents

Once you’ve confirmed your eligibility, it’s time to collect the required documents for your application. These may include, but are not limited to:

  • Company Registration Documents: (Certificate of Incorporation, Business Registration)
  • Financial Statements: (Audited accounts or management accounts)
  • Business Plan: Outlining your digital focus, activities, and future plans
  • Supporting Documentation: Evidence of your use of qualifying digital technologies

Step 4: Secure MD Status

Obtaining MD Status is a crucial first step. Visit the official MDEC website (https://mdec.my/) for details on the application process and required documents for MD Status.

Step 5: Submit Your MD Tax Incentive Application

After receiving your MD Status award, you can proceed with applying for the MD Tax Incentive program. MDEC provides a designated online portal or application form for this purpose.

For more information, you may go to MDEC’s website at https://mdec.my/malaysiadigital/tax-incentive