Official Portal
Inland Revenue Board Of Malaysia



Concept of a CCA

A CCA is a framework (in the form of contractual agreement) agreed among business enterprises to share the costs and risks of developing, producing or obtaining assets, services or rights, and to determine the nature and extent of the interests of each participant in those assets, services or rights. Each participant's proportionate share of the overall contributions to the arrangement will be consistent with the participant's proportionate share of the overall expected benefits to be received under the arrangement. The participant would be entitled to exploit its interest in the CCA separately as an effective owner, not as a licensee. Where a taxpayer enters into a CCA with its associated persons, the arrangement should reflect that of an arm's length arrangement.

Types of CCA
There are two major types of CCA most commonly encountered in practice:
Arrangement for the joint development of intangible property

In this arrangement each participant contributes different assets, resources and expertise, and receives a share of rights in the developed property based on the contribution.

Service Arrangement
CCA could exist for any joint funding or sharing of costs and risks, for developing or acquiring property or for obtaining services such as pooling resources for the development of advertising campaigns common to the participants' market. However, if a service arrangement does not result in any property being produced, developed or acquired, the principles for dealing with intragroup services will apply to that arrangement whether it is described as CCA or not.
Example 1
Three members of a multinational group, marketing a product in the same regional market where consumers have similar preferences, want to enter a CCA to develop a joint advertising campaign. A fourth member of the group helps develop the advertising campaign but does not itself market the product. This fourth member is not a participant in the CCA because it does not have any beneficial interest in the services subject to the CCA activity and would not, in any case, have a reasonable expectation of being able to exploit any interest. The three participants in the CCA would, therefore, compensate the fourth member by way of an arm's length payment for the advertising services provided to the CCA.
7.3 Applying the arm's length principle
7.3.1 To demonstrate whether a CCA accords with an arm's length arrangement in comparable circumstances, the following matters should be addressed:
CCA should be entered into with prudent and practical business judgment with a reasonable expectation of its benefits. An independent party would not enter a CCA where the value of the contribution exceeds the expected benefit. Estimation of the expected benefit to be derived from the arrangement can be computed in the following manner:
Based on the anticipated additional income that will be generated or the expected cost savings; or
The use of an appropriate allocation key, perhaps based on sales, units used, produced or sold, gross or operating profits, numbers of employees, capital invested, or alternative keys.
Terms of the arrangement should be agreed upon up-front and in accordance with economic substance, judged by reference to circumstances known or reasonably foreseeable at the time of entry into the arrangement.
7.3.2 Consideration for the entry, withdrawal and termination of a CCA should be dealt with at arm's length, as follows:
Where a participant's contribution is not consistent with its expected share of benefits from the CCA, a balancing payment may be required between the participants to adjust their respective contributions;
Where a participant transfers its pre-existing rights of a prior CCA to a new participant, the exiting participant must be compensated based upon an arm's length value for the transferred interest (buy-in payment). The amount of the buy-in payment shall be determined based on the price an independent party would have paid for the rights obtained by the new participant, taking into account the proportionate share of the overall expected benefit to be received from the CCA;
Where a participant disposes off part or all of its interest, he should be compensated with an arm's length payment (buy-out payment).

Hit(s) : 2,298
Updated : : 2018-08-28 15:55:07

.Headquarters of Inland Revenue Board Of Malaysia, Menara Hasil, Persiaran Rimba Permai, Cyber 8, 63000 Cyberjaya Selangor. .

3 jata mof msc anm kastam bnm lada spr
Last Update : 8 Jul 2020
Visitor(s) : MALAYSIA Flag 1 Online : 1
Best viewed using Chrome,Internet Explorer(Latest Version) or Mozilla Firefox with 1280x800 screen resolution . Copyright Reserved 2015 © IRBM
DISCLAIMER : Inland Revenue Board of Malaysia shall not be liable for any loss or damage caused by the usage of any information obtained from this website.
Visitors Today: 117
Visitors This Month : ( 07 / 2020 ) 541,874
Visitors This Year : ( 2020 ) 15,135,104
Total Visitors : 240,304,707
Visitors This Month :( 06 / 2020 ) 2,685,757
Visitors This Year : ( 2019 ) 27,411,904