During the recent Budget announcement for the fiscal year 2010, our Prime Minister Datuk Seri Najib Tun Razak voiced his views on the change of Malaysia from a manufacturing country to one of a high-income economy.

“We need a strong foundation in research, development and commercialization (R&D&C) activities.” Datuk Seri Najib said.

He stated that among the upcoming initiatives from the Government are:

1. the Government will take measures to rationalise all research funds and grants to be more effective to achieve set targets;
2. the Government will also establish a National Innovation Centre supported by  a network of innovation excellence centres under the Ministry of Science while working with the Higher Education Ministry;
3. The Government will provide SMEs with a tax deduction on expenses incurred in  the registration of patents and trademarks in the country.

The proposed tax relief is effective from the year of assessment 2010 until the year of assessment 2014.

The expenses include fees or payment made to patent and trademark agents who are registered under the Patents Act 1983 and the Trade Marks Act 1976 during the prosecution of the SMEs’ intellectual property rights.

The definition of “SME” for the purpose of this tax incentives are as follows:

• companies with a paid-up capital in respect of ordinary shares of RM2.5 million and below at the beginning of the basis period for the relevant year of assessment;
• manufacturing industries, manufacturing related services industries and agro-based industries with full time employees not exceeding 150 persons or with annual sales turnover not exceeding RM 25 million; and
• service industries, primary agriculture industries and information & communication technology (ICT) industries with full time employees not exceeding 50 persons or with annual sales turnover not exceeding RM 5 million.

Although the Government has not explicitly stated whether the tax relief applies to the costs of filing intellectual property rights overseas or whether the costs to acquire industrial design rights and utility innovation rights are also covered, from the tone and direction of the 2010 Budget, it is likely that the tax relief would take these into account.

IP owners are encouraged to take advantage of the tax relief provided by the Government to strengthen their unique selling points (USP) and to stay ahead in their industry. Enquiries on the recent tax relief on acquiring IP rights are welcomed.