Trademark Valuation & Taxation in Malaysia

A trademark is a distinctive mark connected to the products or services of a firm, person, or enterprise. Trademark is a mark or brand that includes a color, a symbol, a product’s packaging, a form, etc. A trademark assists in separating the products or services of one person from those of another and in geographical representation. It is a collection of privileges that grants the owner exclusive usage and enhances the reputation of the products or services it is connected to.

Trademarks are a significant economic and commercial instrument that enhances a company’s brand value. Just like with the sale of real estate, the owner of a trademark may assign his or her rights to that trademark to other parties. As a result, it qualifies as an intangible asset for a company. It may be pledged, sold, transferred, or franchised.

Trademark Valuation:

Finding the precise price at which the seller is prepared to sell an asset, including an intangible asset like a trademark, and the buyer is prepared to purchase it within an acceptable timeframe, is crucial in commercial transactions involving the sale of assets.

However, it can be challenging for sellers to determine a selling price for an item and then locate buyers willing to pay that price. Using various valuation techniques, the valuation of an asset, including a trademark, may assist a buyer in estimating its approximate price.

The worth of their brand is a common concern for business owners or trademark owners. Thus, Trademark Valuation is very relevant today, particularly given the growing number of instances when intangible assets like trademarks are valued more than tangible assets.

Usually, trademarks are valuable for three main reasons that are given below:

  • Taxation purposes
  • Financial accounting purposes
  • Transactional purposes

Taxation Issues Associated with Trademarks

The taxation concerns relating to trademarks can be summarized as follows.

Cross-Border Use of Intellectual Property

Cross-border IP use has recently been one of the concerns with regard to IP taxes. The majority of MNC (Multinational Corporation) companies permit their foreign subsidiaries to utilize and profit from their intellectual property. Subleasing the IP to additional local parties is a possibility for the subsidiaries. In this case, the IP owner may be based in a low-tax area, and they could charge more royalties to their subsidiaries that are in a higher-tax area in order to avoid significant tax reductions.

Placement of an Intangible Asset:

For taxes reasons, determining a property’s situs is essential, but with regard to intangible property, the procedure is challenging. In 2016, the Delhi High Court decided that the situs of the owner of the relevant property would be regarded to be the situs of the intangible asset, regardless of the asset being registered, in accordance with international rules. The court came to this conclusion by applying a strict interpretation of Section 9 of the Act, reasoning that the legislature’s intention to not tax IP owners who are based outside of India even if they generated profits in India through their respective IPs was made clear by the non-inclusion of IP under S.9.

Final Thoughts:

The value of intellectual property, such as trademarks, is becoming increasingly important, and along with it, the challenges associated with its taxes. Accurately valuing intangible assets is becoming more and more difficult due to the immense uncertainty caused by globalization and the fast advancement of technology. Corporations need to be aware of these changes and take the necessary precautions to protect their interests. Furthermore, it is more challenging for organizations with global activities to find a middle ground and secure their compliance with tax legislation because of the many inequalities that exist in different jurisdictions. It is urgently necessary to establish clear and detailed laws relevant to the subject at hand since such differences may potentially result in the imposition of multiple taxes on companies.

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