MDEC’s Innovative Tax Incentives Empowers Digital Companies

The Malaysia Digital Economy Corporation (MDEC) has introduced a groundbreaking tax incentive scheme, opening the doors for Malaysia Digital (MD) companies to thrive in the digital landscape.

Backed by the digital and finance ministries, this initiative aims to attract global talent and investment, positioning Malaysia as a digital hub in the ASEAN region.

Rewarding Innovation and Growth

Eligible digital companies leveraging cutting-edge technologies such as artificial intelligence (AI), cybersecurity, blockchain, advanced connectivity networks, and telecommunications will benefit from competitive corporate income tax rate reductions on intellectual property (IP) and non-IP income.

Additionally, an Investment Tax Allowance (ITA) for capital-intensive service activities sweetens the deal, fostering growth in high-value activities and rewarding performance.

Tailored Incentives for New and Expanding Companies

The flexible scheme caters to companies in two categories – New Investment Incentive and Expansion Incentive.

Under the New Investment category, companies will enjoy a reduced tax rate (RTR) of 0% on IP income and 5% or 10% on non-IP income for 10 years.

Expansion category companies, on the other hand, can benefit from an RTR of 15% for five years.

Alternatively, companies in both categories can opt for an ITA ranging from 30% to 100% for qualifying capital expenditure, allowing them to deduct up to 100% from statutory income for five years.

Aligning with Economic Goals

MDEC’s CEO, Mahadzir Aziz, said that this initiative aligns with the government’s commitment under Budget 2024 to introduce revenue-based tax incentives.

By driving investment in high-growth and high-value sectors, fostering new economic clusters, and balancing growth with environmental, social, and governance sustainability, the scheme aims to strengthen the Malaysian economy.

Catalyst for a Thriving Digital Ecosystem

“By attracting global talent and investment in high-growth sectors, we aim to create a thriving digital ecosystem, generate high-value jobs, boost research and development activities, and integrate advanced technologies within the country,” said Mahadzir Aziz.

With this innovative tax incentive scheme, MDEC is paving the way for Malaysia to cement its position as a digital powerhouse, fuelling innovation, economic growth, and technological advancement.

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