The Inland Revenue Board of Malaysia on December 29 published an updated public ruling explaining the rules relating to qualifying research and development (R&D) expenditures for tax incentive deductions.
Businesses resident in Malaysia that undertake R&D activity may be able to claim tax incentives on their qualifying R&D expenditures in the form of a single deduction or double deduction. To qualify for a double deduction, the expenditure must be incurred for an “approved” qualifying R&D activity.
The updated ruling includes some clarifications from previous editions of the guidance. For instance, it specifies that any cash contribution or payment for the use of services that are capital in nature will not qualify for the double deduction (noting, as examples, the purchase of plant equipment, buildings, or vehicles for research purposes).
Among other updates, the new public ruling also states that, effective January 1, 2021, no double deduction will be permitted if payments for R&D expenditures undertaken outside Malaysia constitute more than 30% of the total allowable R&D expenditure.
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