Msc Malaysia Status 4.0 msc malaysia status

MDEC who is the custodian of Msc Malaysia Status has approved changes to BOG 5 (Tax Exemption) as well as appended a new set of Approved Activities, with effect 1 January 2019

Mdec has begun accepting MSC Malaysia Status application since 2 April 2019 which was previousely suspended. Applications for Msc Malaysia Status is only accepted based on Non-IP (intellectual property) Industry 4.0 modelling services. Global Business Services will include modellings, analysis or research and analytics.

The reason for these drastic changes is because of "Malaysia's Commitment in International Tax Standard" and her undertaking to go inline with the recomendation of the OECD's BEPS Action 5 peer review and monitoring initiative.

Some Laws regarding tax regimes

1. The Government of Malaysia on 12 June 2018, has announced that Malaysia will commit to International Tax Standards regime structured by OECD, and the subsequent announcement by MDEC on 28 December 2018, titled "Important Update and Changes on MSC Malaysia BOG 5".

2. As stated in the aforesaid announcements, the identified tax incentives of Malaysia will need to be reviewed and amended to be consistent with the international standards, which also include the MSC Malaysia Bill of Guarantee (BOG) 5. Generally, promoted activities has been categorized as either IP (intellectual property) or Non-IP derived income.

3. In accordance with the above exercise, the grant of MSC Malaysia Status and its incentives, including extension of income tax exemption period, or adding new MSC Malaysia Qualifying Activities, has been put on hold since 1 July 2018.

4. Previously, the tax exemption for MSC Malaysia Status was granted for the income derived from MSC Malaysia Approved Activities. Moving forward, the tax exemption will be granted for income derived from either services activities (Services Incentive) and/or intellectual property (IP Incentive).

5. The MSC Malaysia Status Services Incentive has been approved by the Government and will be regulated under the new Income Tax (Exemption) (No. 10) Order 2018 [P.U.(A) 389/2018], which was gazetted on 31 December 2018.

6. As for the MSC Malaysia Status IP Incentive, the policy is still under review process by the Government. MDEC will be releasing further information in due course.

7. Applications (new) for MSC Malaysia Status Services Incentive can be made starting from 2nd April 2019. However, only new applications that are Non-Ip derived income business model will be accepted. Those with IP based applications wil have to wait until Mdec confirmed what constitutes IP derived income business model is all about as it has to follow what the OECD has laid down.

8. Applicants who had applied before but has not being approved yet will need to re-apply again (albeit with a new business model that reflects Industry 4.0 elements). As to those who had benefited from the tax exemption clause will also have to re-apply for new aplications that reflects Industry 4.0 adoption as their previous tax exemption will expire come 30 June 2021.


What is granted under the new Msc Malaysia Status regime?

Msc Malaysia Status grant is a msc status grant plus a pioneer status grant. In order to also obtain pioneer status, the company must own an IP.

What are MDEC's Newly Approved Activities?

Under the new ruling, Msc Malaysia Status will be accorded to either IP (intellectual property) derived income business or Non-IP (services derived from non-ip) derived income business.

IP derived business:

ICT platforms in the field of Robotics, Automation, Artificial Intelligence, Additive Manufacturing and IoT and many others. Owns source code. May also license IP to others for a fee.

Non-IP derived business:

ICT business services in the field of Robotics, Automation, Artificial Intelligence, IoT and Global Business Outsourcing (knowledge process outsourcing). Company does not own any IP (source code) but use other's IP to offer services.

Let us now look at the new sets of approved activities.

1. Big data analytics
2. Artificial intelligence
3. Fintech
4. Internet of things
5. Cybersecurity (technology/software/design and support)
6. Data centre and cloud (technology/software/design and support)
7. Blockchain
8. Creative media technology
9. Sharing economy platform
10. User interface and user experience
11. Integrated circuit design and embedded software
12. Additive Manufacturing ( 3D technology/software/design and support)
13. Robotic (technology/software/design)
14. Autonomous (technology/software/design and support)
15. Systems or network architecture design and support

Global business services or knowledge process outsourcing excluding:

(a) Non-technical

(b) Low value call centre

(c) Data entry

(d) Recruitment process outsourcing

You will have noticed that there is a whole new set of activities that are more aligned to Industry 4.0 than with the old msc status regime. Indeed, MDEC has shelved off what they called Infotech (hybrid-infotech may be allowed) and Global Business Sevices and instead put in place of importance for Industry 4.0 players. Thus it would not be out of place when we term the new Msc Status 4.0. As for those who had enjoyed both Msc Status and Pioneer Status in the past, they will have to give them up by 30 June 2021 (they can however make new application based on Industry 4.0 activities). So going forward, we should now focus on the new era of Industrial Revolution 4.0 (also termed IR 4.0 or Industry 4.0 for manufacturing business). As IR 4.0 is still new, there are not many business in this iteration and if you would like to seek advice as to what business model to go into in order to be eligible for Msc Malaysia Status Application, you may want to email us at for our advisory.

With the changes in the criteria for Msc Malaysia Status Application coming to fruition, it would be a daunting task just to sail through all the important changes, let alone filing your msc status application. But help is at hand and we will extend our advisory to those who are still adament to go ahead with the application. We are at the same time offering our help for you to create your intellectual property (plus filing) as we are an intellectual property practisioner.

In case of confusion or you are not sure about the new criteria, you may want to write to us for clarification at Email Us(for security sake, please do not use a free email account to address us)

You may get a glimpse of our advisory on Msc Malaysia Status Application Msc Malaysia Status Advisory

What are the Non-IP Promoted Activities

What is the meaning of IP derived income