msc malaysia status application

Msc Malaysia Status Application

Msc Malaysia Status Qualifying Requirements (updated version) and what it means.

Basic Requirements of obtaining MSC Status under the Msc 2.0 purview are:

* Provide or heavy user of IT & multimedia products & services.

* Employ a substantial number of local and foreign knowledge workers.

* Strong value proposition specifying how operations will contribute to the development of MSC Malaysia in the new era of IR 4.0.

* Establish separate legal entity for MSC-qualifying activities - it means establishing a private company (new) for the purpose of obtaining MSC Status.

* Paid-Up Capital - may start from small amount but have to ramp up to RM250,000.00 on the second year after obtaining msc status for third tier companies.

MDEC has announced changes to BOG 5 (Tax Exemption)

In a previous iteration, the tax exemption for MSC Malaysia Status was granted for the income derived from MSC Malaysia Approved Activities. In future, beginning first January 2019, the tax exemption will be granted for income derived from either services activities (Services Incentive) and/or intellectual property (IP Incentive).

And more specifically the qualifying requirements that will determine as to whether you are granted Msc Status are:

Msc Malaysia Status Activities will be categorised into either IP (intellectual property like copyrights and patents (software)) derived income or Non-IP derived income like ICT services (using other people's IP). Additionally, qualifying business models will need to have "Industry 4.0 elements" such as Artificial Intelligence, Robotics, Automation, IoT and Big Data. Now, for Non-IP derived income business models, in lieu of them not possessing valid intellectual properties, they will need to satisfy additional conditions like Substantial Activities .

Substantial Activities (or substantive), if we were to infer from OECD group of which Malaysia is a recent associate member, means that applying companies will need to firstly increase their number of knowledge workers (will be given a period) and secondly, increase their paid-up capital (also given a period). Companies applying for Msc Malaysia Status will be given two years to raise their paid-up capital to half a million ringgit. As pioneer status is given for five plus five years periods, companies that obtained Msc Malaysia Status will need to raise their paid-up capital to 2.5 million by the fifth year if they were to seek tax relief extension for the second five year irrespective of whether they are tier one, tier two or tier three companies. Tier One companies are required to be based in Cybercities or Cybercentres -100% corporate tax relief. Tier Two companies are required to be based in other commercial premises within MSC Malaysia Cybercities - 100% corporate tax relief. Tier Tree companies can be based outside of the Cybercities or Cybercentres but will only enjoy 70% of coporate tax relief. However, whether Substantive Activities will also be applied to IP derived income business model is still a matter of speculation. We will update you on this.

As for IP derived income business models, MDEC will not accept business models that are IP (your own softcode) based for the time being. It seems that for the moment, if you are dishing out licensing, you are not entitled to tax exemption but if you are ready to buy a license from a third party (say an OECD country), then you can apply for Msc Status - this is the result of joining as a full adherent to the OECD's Council Acts!

industry 4.0 compliance

Industry 4.0 compliant under the purview of Msc 2.0

Updated Qualifying Activities that are approved since 1/1/2019 which would require an element of:-

* Artificial Intelligence - incorporating machine and deep learning. AI enable health application to quicken dianogstication. AI enabled robotics for Radiosurgery. AI enabled robotic explorer for harzardous expeditions. Marketing Analytics with AI. Facial/Image Recoqnition. Security Applications.

* Robotics - industrial automation and autonomous vehicles. Cooperative Robotics. Use of robotics in manufacturing, surgery, engineering, quality controls.

* IoT (also IIoT) - edge computing for autonomous vehicles. Use of IoT's in manufacturing, automation, transport, home automation, agriculture, energy and healthcare.

* Telecommunications - 5G and infrastructures. Mobile applications

* Block chain - framework and smart contracts including secured Covid vaccination certificates. Used in healthcare, real estate, energy, supply chain management, food, banking and finance. DeFi.

* Big Data - analytics and insights. Everything digital.

* Fintech - financial technology and block chains. Cryptocurrency, crowd funding, mobile payments, robo advices, stock trading apps and budgeting apps.

* Edutech - artificial intelligence assistance (proposed) by remote coaching. Improved Education Methods

* Proptech - real time 3D and 4D rendering of properties(proposed) and virtual renderings

* Agritech - precision agriculture, climate controls (proposed) for agriculture productions. Used for increasing yield, efficiency and decrease wastage of fertilizers, insecticides and water.

* Data centre and cloud (technology/software/design and support)

* Creative Media Content - virtual reality.

* 3D or Additive Manufacturing (technology/software/design and support)

* Sharing Economy - ehailing and real estate sharing

* User Interface and User Experience (UI/UX)

* Systems/network architecture design and support

* Cyber security (technology/software/design and support) for 5G (and 6G) environments.

* Integrated Circuit (IC) design and Embedded software

* Autonomous (technology/software/design and support) - Automobile AI

* Simulation/Digital Twin/Prediction

* Global Business Services or Knowledge Process Outsourcing excluding non- technical and/or low value call centre; data entry; and recruitment process outsourcing.

You would have noted that MDEC is now requiring applications with a business model that have an element of Industry 4.0 regime. Now what does it mean?

It is quite a subjective matter talking about element of Industry 4.0 but for the short take of it your business model must have a touch on at least one of the approved activities. Like for example if your business model is about web site development, then you must incorporate some features that have an auto response like sophisticated Chabots that are able to handle inquiries. Still you will need to be careful about what you propose in your revenue model as how you derive revenue will determine your success in obtaining Msc Status. Still confused? Get in touch with us.

As part of Mdec2.0 initiative, you will have to show what innovative digitalisation can bring about industrial progress, especially with the use of artificial intelligence and automation. In the Industrial Revolution 4.0 era, we will have to work at maximum efficiency using programs to tweak for the best use of time and energy - and you will be in the midst of it.

What is Industry 4.0 and what does Mdec want from you?

Industry 4.0 is a fast growing sector and it encompases things like automation, connectivity and intelligence which would likely change the way we do our manufacturing - which is why it is important for us to embrace its advance technology to achieve efficiency. Industry 4.0 is also about making the factory smart and efficient. Thus the business model that Mdec wants in terms of services will need to embrace the elements of Industry 4.0 - it is how you get to connect all the different parts into an intelligent module. An example is the use of Internet of Things to digitally interconnect, and facilitating the communication and exchange of data through the internet via the connecting of such devices like smartphones, household appliances, cars and physical structures like buildings and factories via cloud computing. Industry 4.0 will allow us to know the real time conditions and performances of the various parts and systems. Then there are digital twin technology/simulation to help the manufacturer to know what will happen from a new set of conditions - especially useful for the designing of new products. As we move towards a larger framework of productivity, there will be a need to help integrate the horizontal and vertical systems so that the head knows what the body is doing - this is also the thing to do with smaller enterprises who do not have a large employment of workers. As we move towards a automation, there is a need to have a system to safeguard all the various components from hacking - hacking is getting rampant with ransome wares. And on a broader framework, we have smart cities and smart transport to deal with - these often require bespoke systems which the Msc Malaysia Status holder can offer.

Now, as a result of Malaysia's participation in the Forum on Harmful Tax Practices (FHTP), Organisation for Economic Co-operation and Development (OECD), to implement the Base Erosion and Profit Shifting (BEPS) action plans, the income tax exemption under the MSC Malaysia Bill of Guarantee No. 5 has been revised to be consistent with the taxation standards under the OECD BEPS Action 52. Thus with this amendment, it will impact greatly on those who had obtained pioneer status from MOF and also those who intend to apply for pioneer status through MDEC. You might want to take a view at the new amendments here

From the look of it and in order to qualify for Msc Malaysia Status Application, it would seem very daunting. However, there is way to go about it especially on how you structure your business model. It is of course not apparent but let us guide you to a successful application as we are well versed with Industry 4.0 elements and we will help you to design a business model that goes with what you would like to do in the first place.

In spite of all the roadblocks you have to go through, there are fruits to be plucked at the end of your msc status journey. For a start, your pioneer status company will get to enjoy 100% tax exemption on taxable income for up to 10 years (5yrs then subject to review + 5yrs after review) or Investment tax allowance which grants you 100% deduction on capital qualifying expenditure that includes hardware and software. Now, you will most probably be concerned as to the tough criteria like a large number of knowledge workers and the huge amount of paid up capital. Well, there is a place for the small guy as well only that you will have to think small for a start and not deterred by negativity. Although it is stated that you will have to employ a large work force, there is also a place for the start up. You can start off with a small number of knowledge workers and thence work towards a larger work count later on. But in case you falter on your maiden journey, you can still enjoy five years of tax exemption - not bad compared to the guy who can only do trading computer hardware. Get the idea and let us help you or let us guide you!

Msc Status Consultant

About your application

As Malaysia has already moved towards MDec 2.0, your application and business plan will also have to reflect on the Industry 4.0 elements. The main theme of Industry 4.0 is about connectivity and efficiency - connectivity is brought about the Internet of Everything and efficiency comes by the use of automation, also he result of recent research points towards data-driven innovation intelligence that improves strategic decision. Furthermore, with the embracement of industry 4.0 elements, companies are now facing a new paradigm in that they have to offer services that can better inform the users of their products - what is termed a product/service system. It also means that it is very important to know the product's lifecycle - the producer will have to contact the user as to whether it would be time to replace the items just so that there will not be any inconvenient down time. It is now the priority of producers to better engage with their customers - making it a new service to satisfy customer demands and indeed to better retain them as the cost of acquiring new customers raised through the roof. Not withstanding that the producers will have to better engage with their customers, manufacturers must now design smart products that are able to benefit from intelligent networks that are bringing producers to their customers much closer. As a lot of data is generated, it has the potential to better optimized production with both internal and external processes having a real time view of whether they are performing or not. Your business plan will have to prioritise the use of automation which is made possible by the use of robotics and thus the sharing of data along the supply chain. You may want to use a third party program for easier deployment - of course you can use your own designed program too. There is this unwriten clause that says you should be able to create jobs along the way but unfrtunately if you are into automation, then you will help create less job which might not look well as far as your msc status application is concerned - but never mind, just create extra jobs as much as you can. There used to be a time when call centers create the most jobs but that time is over so if call centers is your beef, then try to incorporate AI into your call center and made it more efficient - you will then have Industry 4.0 elements!

Then there are other aspects of your application that you have to take note of. One of the most problematic subject is the employment of knowledge workers - especially foreign knowledge workers. You will need to have not more than fifteen percent of foreign workers - and their salaries too to be taken into consideration. As a policy wise, Malaysia would like to give jobs to her own citizens and this will be a strong reason for you to be able to obtain Msc Status but as we are all awared, it has become more difficult to find suitable local employees - so we have to resort to employ foreign knowledge workers. You will have to justify your employment of foreign workers, not so much for your application but more important when you have to justify it while applying for their working permits later on. As tricky as it seems, the problem of filing for foreign knowledge workers can be easily solved - just if you know how. We will provide that help.

Another teething problem is when you file for the financial projections. A good positive projection is highly appreciated but it would have to be tied to your business model - there are not many business model can bring in huge revenues. As the requirement is more aligned to Industry 4.0, it becomes critical to architect a viable business model to suit the Malaysian environment, knowing that Industrial Revolution 4.0 is still very new as not many people are aware of the urgency to move to Industry 4.0 as a way to beat off foreign competitions. The government has provided financial incentives for companies to embrace Industry 4.0 in the form of Industry4WRD readiness assessment incentives and so your application must be able to take advantage of it - it will do you well if you can also entice others to embrace Industry 4.0 as most employers are not aware of how to go about it.

Since we have to embrace Industry 4.0 and whether we like it or not, we will have to treat it as top priority. Why is it so? Well, just to take an example: China has embraced Industry 4.0 in a big way and all you have a look is take a view of their furniture industry where they have managed to architect their way from start to finish – full automation with only one person to be present to oversee the whole operation. That means that China will be able to offer their furniture at a knockdown price given that they have to fully import their raw materials from other countries. You can now see what full automation can do to your supply chains. Not only with full automation but also with up to date supply chain mechanisms – not those supply chain programs of old but supply chains that incorporate IoT’s and other sensors that can really make a difference to an efficient system that do not require huge manpower - some employers are now better aware of what Industry 4.0 is capable of.

Malaysian companies whether they are in the manufacturing or services sector must be serious in embracing Industry 4.0 architectures in order to better compete with their peers. The Malaysian Government is very concerned about the Industry 4.0 take up rate because there don’t seem to be great interest in moving with the rest of the industrialized world, even when financial incentives are thrown in – one would suspect that it would be difficult to even think about it as it would involve a lot of technical expertise. Malaysian industries on the whole does not have that element of competing on technology wise but more on price because they have a very good path to employ cheap labor – which is why they tend to be apprehensive when it comes to move to a higher level of technicalities. However, as everyone is trying to move towards the era of Industrial Revolution 4.0, there is no telling what will happen to companies who reluctantly try to evade such a path.

The recent business start-up trends of 2021 includes security, advance robotics, digital twins, IoT's, Edge/Fog computing, AI, Augmentation, Big Data and 3D/4D/5D printing - for your application though you will only have to render such services without having to program your soft code. The previouse Msc Status demands you to come up with your soft code - so you are on an easier path.

From a readiness point of view, most of local companies are in a bind as they are still using legacy software to run their enterprise – most are using outdated CRM, ERP, Supply Chains, Automation and Analytics. Where embracing ID 4.0 is concerned, these legacy programs would have to be ditched for newer kinds. And that is where Msc Status companies would have to play their part, albeit with a lot of convincing effort which is an element that they are not trained for. But it is an opportune time now that the government is giving financial incentives to cajole industrial players (the smaller ones) to look at upgrading – that is where software companies can take advantage to market their wares. When we talk about ID 4.0, we are referring to automation, smart factory system and efficiency. So if you are intending to apply for multimedia status, then you must put yourself in the position of local enterprises to figure out the what, why and the how to implement updated software to help enterprises to achieve top efficiencies and to better compete with the giants.

It is now an opportune time to apply for msc status as there are very few of the remaining left since most of them have already expire their status since June 30 2021 – the result of it is that you will have less of competition. But in order to obtain msc status, you must put your thinking forward and visualize what is needed to help enterprises to upgrade their management techniques in order to play their useful part in the supply chain realm. Automation, robotics, artificial intelligence and analytics will have to be in the forefront of your program. You will also have to imagine that everybody is somehow connected to everybody – internet of everything does require a new paradigm shift. For the sake of reducing our output of carbon dioxide, there is also the need to go green, very green in fact to the extent that we treat electrically run vehicles as not in the green realm. Msc Status entities will have to predict as to what things will come our way, years ahead of it happening – yes, you will need a great foresight.

Available Incentives for Msc Malaysia Status Companies include:

Financial Incentives

Pioneer Status privilege, granted for a first five (5) year. There will be a review after 5 years and if your review is positive, you will get another 5 years. The incentive includes 100% exemption from taxable statutory income from qualifying activities - starting from the date when the company starts generating income and from submitting relevant invoices.

There is also a 100% Investment Tax Allowance (ITA) on new investments made within MSC Malaysia Cybercities or Cybercentres. (tier 1 & 2).

Eligible for R&D grants (for majority Malaysian owned MSC Malaysia status companies) once in a while (normally once a year).

Duty-free Incentives

Duty-free importation of multimedia equipment for use by the company in the operation of its business.


Freedom to source capital globally for MSC Malaysia infrastructure and the right to borrow funds globally.

Freedom of ownership by exempting companies with MSC Malaysia status from local ownership requirements.

Free to employ foreign knowledge workers – amount will depend on the nature of business and the number of local knowledge worker under employment

Now when you think you are qualified, you would want to know how to go about applying for the Msc Status

What is Msc Malaysia Status worth?

You might not be aware of it but if you are able to obtain msc status, then your business will be worth at least RM2 million (if it is clean) in the market. One of the reasons is that there are very few with the status now since 30th June 2021 - all previous holders have got their status expired due to policy matters. So you can imagine people queing up to buy your msc status company in case you are considering to retire from your business - people are willing to buy businesses that are involved in future proofed Industry 4.0 settings as compared to those who are involved in dinosaured businesses like CRM, ERP and the old format of Supply Chains. Even if they pay RM 2 million for it, they can even make more when they are accorded tax free for ten years - provided they adhered to what was proposed in the application. Make hay while the sun shines!

How to apply for MSC Malaysia Status?

Here are the steps that you will need to go through:-

1st step

Register online via https://mdec.y/what-we-offer/msc-malaysia.html and scroll down to 'Login to Vega' (V logo). Once you are registered, you will be asked on what do you propose to do - this is a tricky section because if you proposed then tat will probably mean the end of your story! However, you can consult us on that.

2nd step

Your application will be reviewed for a preliminary check and upon approval, you will receive an acknowledgment via your given email.

Further to that, Mdec will appoint a Business Analyst to look into your application ( you will download the application in the form of Excel sheet and you will be given about 20 days to fill it). This is the stage where you might want to appoint someone to help you draft it as it is a critical step - because what Mdec wants and what you want are not the same!

3rd step

The assigned BA will evaluate your application and to see whether it is relevant to what Mdec termed required. If it is out of the requirements, then you will receive a no. And if the thing that you write is not far off of what Mdec wants, then you will be invited to see the BA to rectify what is amiss.

A notification email will be sent to your registered email upon successful evaluation by the BA team which will include a statement that they(BA) will seek an appointment with the Approval Committee (made up of officers from MIDA, MITI and MOF) where the AC will either approve it, or partially approve it (certain things to be rectified or in a worse case scenerio, a "NOT Approved"! Seeking an appointment (BA) with the Approval Committee will take about a month. It must be noted that the applicant is not required to be present during the Approval Committee meeting.

News - Grants for Msc Malaysia Status holders


• The grant provides up to RM2 million funding for technology companies and technology accelerators to expand their global market presence via innovation and commercialisation of market-driven products, as well as to set up Centres of Excellence.

• The goal is to support the scaling-up of Malaysian technology companies into the global arena by way of empowering innovation, development and commercialisation of products and services

• Open to both local and foreign-owned tech companies that are incorporated in Malaysia and particularly in possession of Msc Malaysia Status (not expired)

Grant objectives are to

• support the scaling-up of Malaysian technology companies into the global arena by way of empowering innovation, development, and commercialisation of disruptive or innovative products and services.

• The grant works by supporting research and development (R&D), scaling up of provision of R&D services, development of new technologies, establishment of Centres of Excellence, and the creation of new market-driven products or services for the global market.

• The grant also serves to support high-impact ecosystem development initiatives, including the development of ecosystem players that ultimately contribute to the growth of the digital economy, such as new job creations, expansion of export and investments, and talent development that all fall under MDEC’s focus areas.

Two types of grants:

Type 1 - aims to help local scale-up tech companies who are ready to enter their first global market or expand their existing global market presence via technology innovation and commercialisation of market-driven products or services. Type 1 Grant covers up to 50 percent of total project costs or up to RM2 million, whichever is lower, for locally owned companies. As for foreign-owned companies, the grant covers up to 30 per cent of total project costs or up to RM2 million.

Type 2 - targets foreign technology companies to set up Centres of Excellence to conduct high-value tech innovations and R&D activities leading to the development and commercialisation of market driven, innovative products and services for the global market. Type 2 covers up to 30 per cent of the project cost or up to RM2 million, whichever is lower.

The Global Technology Grant is open to both Local and Foreign Owned companies. For local companies to be eligible, it must be incorporated in Malaysia under the Companies Act 1965 or the Companies Act 2016 and in operation for at least one year; have a minimum issued and paid-up capital of RM20,000; and a minimum of 51 per cent equity held by Malaysians. For companies which shareholders are from another company, the same rule applies.

For foreign-owned companies to be eligible, they must be incorporated in Malaysia under either Companies Acts, with a minimum issued and paid-up capital of RM500,000. They must also be in operation for at least one year.

The Global Technology Grant is open for submission on 27 August 2021, and the closing date for submissions on 15 September 2021, with evaluation and approvals set to be completed by October. The project execution phase will begin in November and December.

Technology companies in Malaysia need innovations, ideas and globally-relevant products. One way to do so is to create an ecosystem that supports R&D and innovation. The Grants hope to encourage companies to incorporate a vibrant R&D landscape – the purpose is to better compete with others. In this respect, Malaysian companies should take advantage of the embracement of Industry 4.0 elements to create a viable and stable supply chain infrastructure outside of China.

In case you are still confused, you may email us at for a better understanding of what the new Msc Malaysia Status 2.0 is all about.

We are also offering our services to those with Msc Malaysia Status who would be transitioning into the 2nd five year pioneer status application. However for such applications termed transitioning, the cut off date is 31st October 2021.