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Monday, 7 March 2016

The Tax-Free Benefits of Intellectual Property


Recently, I had the good fortune of borrowing two books called "100 Ways to Save Tax in Malaysia for Individuals" and "100 Ways to Save Tax in Malaysia for Partners and Sole Proprietors" by Richard Thornton. The books are part of a series, which address "100 Ways to Save Tax" for different target audiences.

Today, I'm interested in the tips that these books have, with regards to intellectual property.

In reading the first book (i.e. for individuals), I found that, for residents in Malaysia, the following income tax exemptions apply:

  • They will be exempted the first RM10,000.00 of income earned each year from royalties for recording discs or tapes;
  • They will be exempted the first RM20,000.00 of income earned from any musical composition (provided it is done not in the course of official duties); and
  • They will be exempted the first RM20,000.00 of income eared from publication of, or right to use, any literary works (as defined in section 3 of the Copyrights Act 1987) or original paintings.
The "literary works" defined under section 3 of the Copyright Act 1987 includes:
  1. novels,  stories,  books,  pamphlets,  manuscripts,  poetical works and other writings;  
  2. plays,  dramas,  stage  directions,  film  scenarios, broadcasting scripts, choreographic works and pantomimes; 
  3. treatises, histories, biographies, essays and articles; 
  4. encyclopedias, dictionaries and other works of reference; 
  5. letters, reports and memoranda; 
  6. lectures,  addresses,  sermons  and  other  works  of  the  same nature; 
  7. tables or compilations, whether or not expressed in words, figures or  symbols  and  whether  or  not  in  a  visible  form; and 
  8. computer programs, 
but  does  not  include  official  texts  of  the  Government  or  statutory bodies  of  a  legislative  or regulatory  nature,  or  judicial  decisions,  or political  speeches  and  political  debates,  or  speeches delivered  in  the course of legal proceedings, and the official translation thereof.

If you're planning to read (raid?) the first book for more ideas, read chapter 2 -- "Ideas for Everybody".

In reading the second book, I found that, again, for residents in Malaysia, they can claim deduction from business income for cost in investing in a venture company, provided that the shares (of the venture company) are held for 2 years or more. The shares must be issued directly to you by the venture company, not "sub-sale". The "venture company" must be incorporated under the Companies Act 1965 and make use of your funding as seed capital, start-up capital or early stage financing for one of the following:
  1. activities or products promoted under the Promotion of Investments Act 1986 (pioneer status and investment tax allowance);
  2. technology-based activities listed on the MESDAQ market of Bursa Malaysia;
  3. Industrial Research and Development Grant Scheme; or
  4. Multimedia Super Corridor Research and Development Grant Scheme.
If you're planning to read (raid!) the second book, read chapter 11 -- "Tax Incentives".

Please note, I'm not a tax consultant. Mr Richard Thornton seems quite knowledgeable. Perhaps you can contact his publisher, Sweet and Maxwell Asia, if you need more advice.

As a side note, you might ask what a venture company got to do with intellectual property? Many venture companies invest in technology. Naturally, when it comes to technology, intellectual property (IP) is involved. That's why it's included in this post.
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