Income Tax Act 1967 Reforms and OECD BEPS 15% Global Minimum Tax Compliance Mandate

Malaysia publishes PCP on the implementation of the GloBE Rules under Pillar Two of the BEPS 2.0 initiative

The release of the PCP by the Malaysian Ministry of Finance (MoF) demonstrates Malaysia’s seriousness in implementing Pillar Two of the Organisation for Economic Co-operation and Development’s (OECD’s) BEPS 2.0 initiative. The PCP highlights key issues and requests feedback on important questions, such as:

• Whether Malaysia should impose the GloBE Rules on Malaysian-headquartered Groups with global annual turnover below the OECD’s recommended Pillar Two threshold of EUR750 million
• How the top-up tax provisions should be reflected in Malaysia’s domestic tax legislation, including whether the GloBE Rules should be incorporated into the Income Tax Act 1967 (ITA) or in a separate piece of tax legislation
• Timing of implementation
• Impact on tax incentives. On this point, the PCP mentions, for example, the need for Malaysia to assess how other ASEAN countries are addressing tax incentives in light of Pillar Two. The PCP also highlights that Malaysia must establish agile and forward-thinking incentive packages which meet the needs of investors, and that non-tax incentives could complement the reformed tax incentive framework
• Potential introduction of a Qualified Domestic Minimum Top-Up Tax (QDMTT)