Setting up a data centre in Malaysia offers numerous advantages, including access to advanced infrastructure, strategic geographic location, and a business-friendly environment. If you’re a foreign investor looking to enter the Malaysian market, here’s a step-by-step guide to help you navigate the process.
Table of contents
Step 1: Register and Incorporate a Company
Before establishing a data centre in Malaysia, you must first register and incorporate your business entity. This can be done through the Suruhanjaya Syarikat Malaysia (SSM), or the Company Commission of Malaysia (CCM), via their online platform. There are several business structures to choose from, including:
- Sole Proprietorship
- Partnership or Limited Liability Partnership (LLP)
- Private or Public Limited Company (Sdn. Bhd. or Berhad)
- Companies Limited by Guarantee
For data centre projects, incorporating as a Private Limited Company (Sdn. Bhd.) or a Public Limited Company (Berhad) is highly recommended. These structures provide limited liability to shareholders and are recognized as separate legal entities, making them ideal for large-scale operations like data centres.
Step 2: Register with the Inland Revenue Board of Malaysia (LHDN)
Once your company is incorporated, the next essential step is to register with the Inland Revenue Board of Malaysia (LHDN). This registration is crucial for tax compliance, including obtaining a Sales Tax license if applicable.
Registering as an Sdn. Bhd. or Berhad offers tax advantages and shields investors from personal liability, which makes it a preferred structure for large-scale, capital-intensive projects such as data centres.
Step 3: Apply for Licenses and Approvals
Malaysia’s regulatory environment requires businesses to acquire specific licenses and approvals, which can be obtained through the Malaysian government’s licensing portal (Pihak Berkuasa Melesen, PBM). Depending on the location of your data centre, you may need to secure licenses from either the federal government or the respective state authorities. These licenses are legally binding documents that validate the operations of your data centre in that particular region.
There are three main categories of business licenses in Malaysia:
- General Licenses – Required for most types of businesses to operate legally.
- Industry- or Sector-Specific Licenses – Tailored for specific industries like IT, telecommunications, and more.
- Activity-Specific Licenses – Related to specific operations, such as health and safety, environmental protection, etc.
Step 4: Sector-Specific Authorisations and Approvals
Given the nature of data centre operations, you may need to secure additional sector-specific licenses depending on your activities. Some key areas where authorisations may be required include:
- Telecommunications Licensing: If your data centre involves networking services or communication solutions, you may need a telecommunications license.
- Occupational Health and Safety Approvals: Ensure your data centre complies with Malaysian health and safety regulations.
- Machinery and Building Permits: This includes approvals for building designs, fitness certificates for machinery, and compliance with structural safety standards.
- Environmental Certification: Pollution control and energy efficiency certifications may be necessary, depending on the environmental impact of your data centre’s operations.
Step 5: Choose the Right Location
Malaysia offers a number of strategic locations for setting up data centres, including well-established technology hubs like Kuala Lumpur, Penang, Johor and Sarawak. These regions provide robust infrastructure, high-speed internet, and reliable power supply, all of which are critical for operating a data centre. Moreover, Malaysia’s stable political environment and growing economy make it an attractive destination for foreign investors.
Step 6: Leverage Malaysia’s Incentives for Foreign Investors
The Malaysian government is actively encouraging foreign direct investment (FDI) in sectors such as technology and infrastructure, offering incentives like tax breaks, grants, and other financial support for foreign companies setting up data centres. Agencies such as MIDA (Malaysian Investment Development Authority) and MDEC (Malaysia Digital Economy Corporation) provide valuable resources and support services to help foreign investors navigate the regulatory and investment landscape.
Source: MIDA, IndustrialMalaysia, MDEC, PBM
This article was prepared and contributed by Clement Sim PM.
