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MD Status

Malaysia Digital Status for Subsidiaries of Overseas Companies

Overseas groups hold MD status through a Malaysian company. Here is what that means in practice.


Quick answer: Malaysia Digital (MD) status is awarded to a company incorporated under the Companies Act 2016 and resident in Malaysia, so an overseas group holds it through a Malaysian subsidiary. MD status exempts the company from local ownership requirements, so the parent can own 100%. The subsidiary must carry out the approved MD activities itself in Malaysia, employ at least two full-time knowledge workers at RM5,000 average base salary and spend at least RM50,000 a year on those activities.

Key takeaways

  • MD status is held by a Malaysian company incorporated under the Companies Act 2016.
  • An overseas parent can own the subsidiary without a local shareholder for MD status.
  • The subsidiary must perform the activities itself and cannot outsource core work.
  • Intra-group arrangements still need to leave real activity and staff in Malaysia.
  • Report changes in shareholding to MDEC.

Structure

Element Requirement
Applicant Malaysian company incorporated under the Companies Act 2016 and resident in Malaysia
Parent Can be an overseas company owning the subsidiary
Ownership MD status exempts the company from local ownership requirements
Activity Carried out by the subsidiary in Malaysia

Why a Branch Is Not the Route

The eligibility test requires incorporation under the Companies Act 2016. A foreign company registered to operate in Malaysia is not incorporated under that Act, so the practical route for an overseas group is a Malaysian subsidiary. If you are considering a branch, confirm with MDEC before relying on it.


What the Subsidiary Must Do

Condition What it means for a group
Operate in Malaysia Real activity run from Malaysia
Two knowledge workers Employed by the subsidiary, full-time, on the MD activities, at RM5,000 average base salary
RM50,000 spend Spending by the subsidiary on the MD activities
No outsourcing of core work The core activity cannot be passed to another group company or third party

Reporting Changes

Change Action
Shareholding or equity Notify MDEC through its forms with supporting documents
Paid-up capital above the minimum Notify MDEC
Company or product name Notify MDEC
Address and contacts Update on the MD platform

Not sure where you stand? WhatsApp us. We will check it before you apply.

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Mistakes Groups Make

⚠️

Planning a branch

Incorporation under the Companies Act 2016 is required.

⚠️

Shifting core work offshore

The company must perform the activities itself.

⚠️

Forgetting local hiring

Two full-time knowledge workers are required.

⚠️

Not notifying restructures

Shareholding changes must be reported.


Three Scenarios

Scenario 1. A US software group incorporates a Malaysian subsidiary to build its AI team. It holds 100% and applies for MD status.

Scenario 2. A group tries to run the work from a head office abroad. The subsidiary must carry out the activity itself.

Scenario 3. A group restructures its shareholding after approval. It notifies MDEC.


How We Help

What we handle for you

Before you apply

  • Test your activity, hiring plan and cost base against MDEC's conditions.
  • Advise whether MD status, a tax incentive or both make sense for your business.
  • Prepare your business plan and financial plan based on your company idea or business model.

Application

  • Prepare and submit the application and answer MDEC's questions.

Why companies choose us

End-to-end under one roof

  • We handle company incorporation, accounting and payroll, as well as MD status and expatriate pass applications, so your structure, records and hiring plan stay aligned.
  • The company is set up correctly from day one.

We check before you invest

  • We confirm eligibility, including whether you can hire the expatriates you need, before a foreign investor decides to incorporate in Malaysia.
  • Neutral Consulting PLT is a Kuala Lumpur firm led by a Managing Partner who is a member of the Malaysian Institute of Accountants.

Frequently Asked Questions

Quick answers.

Can a subsidiary of an overseas company get Malaysia Digital status?

Yes. The subsidiary must be incorporated under the Companies Act 2016 and resident in Malaysia.

Can the parent own 100%?

MD status exempts the company from local ownership requirements, so yes for MD status.

Can a foreign branch apply?

The eligibility test requires incorporation under the Companies Act 2016, so plan a subsidiary and confirm with MDEC.

Can group companies do the work?

The company must perform the approved activities itself and cannot outsource the core work in whole or in part.

Do we need staff in Malaysia?

Yes. At least two full-time knowledge workers at RM5,000 average base salary.

Must we notify MDEC of restructures?

Yes, changes in shareholding or equity are notified through MDEC's forms.

Can group staff count as knowledge workers?

The condition is for full-time employees employed for the MD activities.

What spend counts?

Operating expenditure on the MD activities, including salaries, rent, utilities and professional fees.

Does the group get a tax incentive?

Not automatically. It is a separate application.

Can the group bring foreign staff?

MD status gives access to a foreign knowledge worker quota and passes, with each hire approved individually.

How long before the conditions apply?

Within 12 months from the date of award.

Can you set up the subsidiary?

Yes. We handle incorporation, accounting and payroll, as well as MD status.



Sources

Official sources

This page is general information, not legal advice. Agencies change their requirements, so confirm the current rules with MDEC, or with us, before you act. Checked November 2026.


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