The Inland Revenue Board of Malaysia (IRBM) has published Public Ruling No. 12/2022 and Public Ruling No. 13/2022, which provide guidance on the tax incentives for the commercialization of public resource-based research and development (R&D) findings in Malaysia. Public Ruling No. 12/2022 provides guidance on the tax incentive available to a company that invests in its related company for the sole purpose of financing the commercialization of public resource-based R&D findings in Malaysia (the investor company), while Public Ruling No. 13/2022 provides guidance on the tax incentive available for the related company invested in (the related eligible company).

For the purpose of the incentives, a related eligible company of an investor company has to undertake the commercialization of public resource-based R&D findings by an approved research institute. Public R&D findings refer to R&D findings developed by approved research institutes, which consist of public institutes of higher learning and public research institutes. Commercialization of public R&D findings in relation to resource-based industries includes the process of transforming ideas, knowledge, or an invention into a product or process that has an industrial application or is marketable. The outcome of the R&D commercialization must be in the form of new resource-based products or activities or new process technology. Resource-based R&D findings cover R&D in the following sectors:

• Agriculture;
• Agriculture and food processing;
• Oil palm products;
• Wood and wood-based products;
• Rubber-based products;
• Non-metallic mineral products;
• Natural products including pharmaceuticals; and
• Natural resources such as water, air, lightning, and solar.

The general eligibility conditions for an investor company include:

• It is incorporated under the Companies Act 2016
• It is resident in Malaysia;
• At least 70% of its equity is Malaysian-owned; and
• The investment made is in a related company that is at least 70% directly owned by the investor company for the purpose of financing a project on the commercialization of public resource-based R&D findings undertaken by the related company.

The tax incentive for a qualifying investor company is in the form of a tax deduction up to the amount of the investment approved. The total tax deduction that would be approved is the actual investment that is made by the investor company in each year of assessment in its related eligible company. For an investor company to qualify for the deduction, the project of commercialization of the public resource-based R&D findings should commence within one year from the date of approval granted to the related company by the Malaysian Investment Development Authority (MIDA).

The general eligibility conditions for a related eligible company include:

• It is incorporated under the Companies Act 2016
• It is resident in Malaysia;
• At least 70% of its equity is directly owned by the investor company; and
• At least 70% of the investor company's equity is Malaysian-owned.

Where the conditions are met, the related eligible company is granted pioneer status. When pioneer status is granted for undertaking a project on the commercialization of public resource-based R&D findings, the related eligible company is considered a pioneer company carrying on a pioneer business during the tax relief period. This includes a 100% tax exemption of statutory income derived from the pioneer business for a period of 5 years, with the option to apply for an extension of the tax relief for an additional 5 years.