CCSExtension of Tax Incentive for Intellectual Property Development
Updated: Nov 9, 2022
To Download Budget 2023 Speech and some other related publications - https://t.me/YourAuditor/3276
Current Position
The government proposed in Budget 2020 that qualifying intellectual property (IP)-generated income derived from the development of patents and copyright software be given a 100% income tax exemption for up to 10 years.
In response to the proposal presented above, the Malaysian Investment Development Authority (MIDA) has published, with an effective date of January 1, 2020, the Guidelines on Incentives for Intellectual Property (IP) Development.
For tax exemption computation, the income that qualifies for the exemption will be calculated based on the Modified Nexus Approach (MNA).
Eligible applicants
New/existing companies own the rights of the qualifying IPs and are receiving income from the qualifying IP activities related to the promoted activities/list prescribed under the Promotion of Investments Act 1986 (PIA) and the Income Tax Act 1967 (ITA).
Qualifying IP asset types
Patent or utility innovation
Copyrighted software
Family of qualifying IPs
Qualifying IP income types
Royalty
Licensing Fees
Eligibility criteria
R&D activities must be conducted in Malaysia, where such activities lead to the development, improvement, modification or creation of the Qualifying Asset.
Adequate operating expenditure incurred annually to support the company in conducting its business operation in Malaysia.
The company must have at least 30% of science and technical staff have a degree or diploma with a minimum of five years of experience from related fields.
Qualifying R&D expenditure
Eligible R&D expenditure for MNA calculation will align with the eligible expenditure types under s 34A of the ITA.
Includes expenditure under cost-sharing agreements, provided that the cost of payable R&D is clearly stated in the agreement.
Qualifying expenditure can be backdated up to three years from the date the IP is registered/filed.
The incentive will apply to applications received by MIDA between 1 January 2020 and 31 December 2022. Three sets of the application are to be submitted to the following:
Chief Executive Officer
Malaysian Investment Development Authority (MIDA)
MIDA Sentral
No. 5, Jalan Stesen Sentral 5
Kuala Lumpur Sentral
50470 Kuala Lumpur
(Attention: Advanced Technology and Research & Development Division (ATRD) Division)
Proposal
To further encourage R&D activities and IP registration in Malaysia, the proposed tax incentive will be extended for 3 years.
Effective Date
For applications received by MIDA from 1 January 2023 until 31 December 2025.
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