KUALA LUMPUR, February 3 – Further to the Budget 2022 announcement, the Finance Bill 2021 was tabled in Parliament and unanimously passed on 23 December 2021. The Finance Bill 2021 incorporates several announcements made in the Budget 2022 and contains proposed amendments, including to the Promotion of Investments Act 1986 (PIA).
Effective from 1 January 2022, the definitions of “Contract Research and Development Company” and “Research and Development Company” under section 2 of the PIA require companies to be approved as a research and development (R&D) status company by the Minister of International Trade and Industry (MITI).
Companies in the business of providing R&D services namely, Contract R&D Company and R&D Company that wish to apply for R&D tax incentive will be granted R&D status (subject to MITI’s approval) for a period of five (5) years. Companies approved with this status may apply for extension to the Malaysian Investment Development Authority (MIDA). However, the granting of the approval is subject to consideration by MITI and the Ministry of Finance.
The Finance Bill 2021 further provides that existing Contract R&D Companies and R&D Companies which have been given approval as a R&D company prior to 1 January 2022 which intend to fall within the new definition of “Contract Research and Development Company” and “Research and Development Company” are required to notify MIDA within the grace period that is from 1 January 2022 to 30 June 2022 for consideration.
For this purpose, companies are required to provide documents to prove that they are undertaking activities relating to R&D as defined under the PIA and complies with conditions imposed previously in their approval letters. Failure to do so will cause the companies to cease their status as approved companies fulfilling the definition of “contract research and development company” and “research and development company”.
The Finance Bill 2021 may also be referred at the following link:
https://lom.agc.gov.my/act-detail.php?language=BI&act=833
