Updated: Nov 8, 2022
The R&D environment in Malaysia is evolving steadily, partly because of the increased need for R&D as domestic production capacity increases and partly due to the Malaysian government's incentives for local R&D and innovation activities.
In the post-BEPS (Base Erosion and Profit Shifting) era, the question of how multinational companies should organise their Research and Development (R&D) activities in Malaysia to suit business needs better, enjoy tax benefits, and comply with the Group's global transfer pricing arrangements is gaining importance for multinational companies in Malaysia.
An offshore related party provides the R&D funds and accepts the R&D risk; the contracted R&D party offers R&D service but does not carry the risk.
Following the R&D agreement between the related parties, the contracted R&D party's R&D services are marked up depending on their cost.
Limited Risk R&D:
The R&D company accepts limited R&D responsibilities and R&D-related risks, and it may have partial economic ownership of intangible assets.
The R&D company accepts full R&D responsibilities and R&D-related risks, as well as economic and legal ownership of any associated intangible assets.
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