Malaysia and the international tax standard

MALAYSIA will continue to review its international tax policy to support its sustainable economic development.

It will also provide a competitive environment for the business community, especially in attracting foreign direct investments while assuming an active role in promoting international tax cooperation to prevent cross-border tax evasion.

The Economic Outlook 2019 said significant changes initiated by the Organisation for Economic Co-operation and Development (OECD) and the United Nations presented an opportunity especially for developing countries to review and improve their tax systems.

As of September 2018, Malaysia had 72 currently enforced double taxation avoidance agreements, two limited agreements with the US and Argentina as well as one tax information exchange agreement with Bermuda.

With the latest development in the international taxation standards, Malaysia is committed to implementing the Base Erosion and Profit Shifting (BEPS) Action Plan, transparency and exchange of information (EOI) for tax purposes.

Malaysia also has participated actively in various tax collaboration and policy making initiatives, including being a signatory to four OECD-led multilateral instruments such as the Multilateral Competent Authorities Agreement on Common Reporting Standard, Multilateral Competent Authorities Agreement on Country-by-Country Reporting, Convention on Mutual Administrative Assistance in Tax Matters and Multilateral Instrument Framework to Modify Bilateral Tax Treaties.

The report pointed out that Malaysia as a developing country sees the implementation of the BEPS Action Plan with a higher standard on transparency and the EOI system posed significant challenges to Malaysia’s tax authorities and the multinational enterprises (MNEs).

Any shortfalls in the BEPS Action Plan implementation and compliance may result in exposure to unilateral action including trade sanctions by international organisations and trading partners.

Therefore, Malaysia will continue to take proactive measures to review its domestic laws and policies to ensure consistency in dealing with cross-border transactions.

The measures taken include ongoing consultations as well as engagements with the business communities and international organisations.

It is also crucial for MNEs to enhance their knowledge with the latest tax developments in the respective jurisdictions to ensure their business sustainability while adhering to the internationally-agreed tax standards.