Msc Malaysia Status 4.0
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.
ISSUED BY MALAYSIA DIGITAL ECONOMY CORPORATION SDN BHD (MDEC)
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.