Research and Development

There are two types of research and development companies which qualify for incentives: ‘companies’ and ‘contract companies’.

A research and development business is a systematic or critical study conducted in the sector of science or technology. The objective of the study must be the manufacture or improvement of materials, components, utilities, goods, produce or process:

  • Quality control of product or routine testing of materials, devices products or produce
  • Research in the area of social science or humanities
  • Basic data collection
  • Efficiency surveys or management investigations
  • Market research or sales

A research and development business on a contract qualifies can apply for full income tax immunity at statutory income level for five years or a full (100%) Investment Tax Allowance (ITA) on eligible capital expenditure incurred within a decade. The ITA can be used to counterbalance against 70% of the statutory income.

Otherwise, there are research and development companies, which are defined as offering research and development services in Malaysia or to any of its affiliated companies. It qualifies to apply for 100% ITA capital expenditure incurred within the decade of establishment. The ITA can be utilised to offset against 70% of the statutory income.

Contract research and development companies and research and development companies will qualify for incentives offered, providing they meet the following criteria:

  • All research must be in fulfil with the requirements of the nation and contribute significantly to the economy
  • At least 70% of the income of the business needs to be a derivative of research and development operations
  • For production-based research and development, at least half of the labourers of must be properly qualified personnel conducting research and other related functions
  • For agricultural-based research and development at least 5% of the workers must meet the criteria outlined above for production-based research and development
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