KUALA LUMPUR (Oct 18): The government will implement the global minimum tax (GMT) on multinational enterprises (MNEs) in as early as January 2025 as part of efforts to strengthen the country's tax base, according to the Ministry of Finance (MOF) in its Fiscal Outlook and Federal Government Revenue Estimates Report.
The GMT was first mentioned by Prime Minister Datuk Seri Anwar Ibrahim during Budget 2024 in October last year.
In the report, the MOF said Malaysia has already incorporated the legislative provisions of the OECD Pillar Two Model Rules into its tax laws. It will be effective for the financial year beginning on or after Jan 1 next year, the report said.
For context, Pillar Two sets the GMT at an effective rate of 15% for MNEs with global revenues exceeding €705 million (RM3.3 billion).
Pillar One, which is yet to be introduced, will reallocate certain amounts of taxable income to market jurisdictions, resulting in a change in effective tax rate while eliminating any instance of double taxation.
According to the report, Malaysia's provisions from the GMT framework include the income inclusion rule and the undertaxed profits rule.
The income inclusion rule determines when a company's foreign income should be included in its parent company's taxable income. Undertaxed profits rule, meanwhile, allows a country to raise taxes on a business, if it is part of a larger company that pays less than 15% tax rate in another jurisdiction.
The amended laws also permit the government to implement a qualified domestic minimum top-up tax, it said. "This ensures that sufficient tax is collected domestically before international rules apply,” it added.
“The introduction of GMT in Malaysia marks a significant phase in the context of international tax cooperation. By embracing the GMT, Malaysia could strengthen its tax base, uphold global tax equity, encourage fair tax competition, and support sustainable development,” it said.
The implementation timeline of GMT in Malaysia will be according to the following (also see chart):
- Effective date (Jan 1, 2025): For MNE Group with a consolidated financial statement period beginning on or after Jan 1, 2025.
- Closing date (Dec 31, 2025): The closing date for the first MNE Group's consolidated financial statement for the year 2025.
- Submission (June 30, 2027): Top up tax return (TIR) and globe information return (GIR).
- Assessment and Audit (January 2028): Proposed risk assessment and audit review process.
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