1. On 9 December 2021, the Minister, in the exercise of the powers conferred by paragraph 127(3)(b) of the Income Tax Act 1967 [Act 53], gazetted the Income Tax (Exemption) (No. 13) 2013 (Amendment) Order 2021 [P.U. (A) 448].
2. This Order has effect from the year of assessment 2021.
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.
Contractual R&D：
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.
Full-Fledged R&D:
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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