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R&D promotion

Incentives & opportunities

Malaysia is an investor's haven where investment opportunities are plentiful and business prospects are bright. There are now immense investment opportunities in R & D and S & T. Malaysia offers:

• a well-developed industrial base that has set the stage for Malaysia to move into the era for high technology.
• political stability.
• well-developed and modern infrastructure and telecommunications facilities.
• educated and skilled labor force
• sound monetary and economic policies
• efficient bureaucratic support and a welcoming attitude towards investors.
• an advanced support services sector, and
• excellent social and recreational facilities

Incentives and Programs for R & D

Various measures have been introduced to promote the development of technology and R & D activities.

Incentive package: A comprehensive fiscal incentives package among the best in the region has been introduced to promote hi-tech and R & D activities. At present, the incentive schemes for normal non hi-tech pioneer projects are as follows:

• Pioneer Status:

  Companies granted Pioneer Status will be given partial exemption from the payment of income tax. The current corporate tax rate is 30% of their statutory income. The period of tax exemption is 5 years.

• Investment Tax Allowance:

  A company given Investment Tax Allowance will be granted an allowance of 60% in respect of qualifying capital expenditure incurred within 5 years from the date of approval of the project. The allowance can be utilized to set-off against 70% for the statutory income in the year of assessment.

• Contract R & D:

  Full income tax exemption (Pioneer Status) for a period of years or Investment Tax Allowance of 100% on qualifying capital expenditure incurred within a period of 10 years is granted to contract Research and Development companies which provide R & D services in Malaysia to companies other than their related companies. The allowance will be granted at statutory income level and abatement for each year of assessment will be limited to 70% of statutory income.

• In-house R & D:

  Investment Tax Allowance of 50% on qualifying capital expenditure related to R & D expenditure related to R & D expenditure is granted for a period of years for companies carrying out in-house research. The allowance will be granted at the statutory income level and abatement for each year of assessment will be limited to 70% of statutory income.

• Financial assistance

  The Government also provides financial assistance (on a matching grant basis) to small and medium enterprises (SMEs) for product development and quality upgrading activities, as also R&D activities.

• Other tax measures

  Double deduction for expenditure, not being capital expenditure incurred on approved research projects undertaken by a company either in-house or contracted to research companies and institutions.

  Double deduction of expenditure, not being capital expenditure incurred by companies for the use of services provided by approved research companies or institute.

  Double deduction for contributions in cash to approved research institute

  Capital allowances for plant and machinery used for purposes of approved research

  Exemption of import duty, excise duty and sales tax on equipment, machinery, raw materials and samples used for approved research projects and research companies or institutions

  Industrial Building Allowance for buildings used for purposes of approved research projects and building used by approved research companies or institutions carrying out research.

• Definition of R&D for the incentives is not clear
• Procedures for application are not clear
• Lack of awareness of availability of the incentives