Malaysia: Global Minimum Tax (GMT)

The Global Minimum Tax (GMT) in Malaysia will take effect for Multinational Enterprise (MNE) groups with a financial year beginning on or after 1 January 2025. MNE groups with consolidated revenue of at least EUR 750 million in at least two of the four preceding Financial Years will be in scope of the Global Anti-Base Erosion (GloBE) Rules.

For any group of companies in Malaysia to be considered an MNE Group and subject to GMT legislation, it must have at least one Entity, such as a subsidiary, branch, or Permanent Establishment (PE) located outside Malaysia. A purely domestic group is not an MNE Group and is not subject to the GMT legislation.

The GMT legislation applies to the Constituent Entities of an MNE Group with annual revenue of EUR 750 million or more in the Consolidated Financial Statement of the MNE Group in at least two of the four preceding Financial Years. The MNE Group will be required to translate the relevant amount from its presentation currency to the currency in EURO based on the average foreign exchange rate for the month of December of the calendar year prior to the commencement of the relevant Financial Year. The average foreign exchange rate for the month of December of the preceding Financial Year shall be determined by the foreign exchange reference rates as quoted by the European Central Bank.

The GloBE Information Return (GIR) is a comprehensive reporting document that MNEs must file annually to disclose financial and tax information under the GloBE Rules. The GIR includes detailed information on the MNE Group’s income, taxes, and the Effective Tax Rate calculation across all jurisdictions where the MNE Group operates or has a business presence. The GIR is typically submitted to the tax authority in the jurisdiction where the Ultimate Parent Entity (UPE) of the MNE Group is a resident, and it is required to be submitted not later than 15 months from the last day of the Reporting Financial Year. Therefore, all Ultimate Parent Entities of Malaysian MNE Groups residing in Malaysia should file an Information Return in a prescribed form which is the same as the GIR, with the Inland Revenue Board of Malaysia (IRBM).

For the Constituent Entity of a foreign MNE Group, where the UPE or Designated Filing Entity (DFE) of the foreign MNE Group resides in a jurisdiction with a Qualifying Competent Authority Agreement (QCAA) to exchange the GIR with Malaysia, they do not have to file the Information Return with the IRBM. The election to appoint a DFE must be made by a notice in writing in the prescribed form and furnished to the Director General of Inland Revenue (DGIR) no later than 15 months from the last day of the Reporting Financial Year by a Constituent Entity.

When a foreign MNE Group’s UPE or DFE resides in a jurisdiction that does not have a QCAA with Malaysia, the Constituent Entity must file the Information Return with the DGIR. If that foreign MNE Group has more than one Constituent Entity in Malaysia, it can nominate a Designated Local Entity (DLE) to submit the Information Return to the IRBM on behalf of all the other Constituent Entities. The election to appoint a DLE must be made by a notice in writing in the prescribed form and furnished to the DGIR not later than 15 months from the last day of the Reporting Financial Year by a DLE on behalf of that Constituent Entity.

The GloBE Rules provide transitional relief for filing obligations where the GIR and notifications can be filed with the DGIR no later than 18 months after the last day of the Reporting Financial Year for the first filing transition year. Filing transition year for Malaysia is the first Financial Year in which the MNE Group comes within the scope.

The Top-up Tax Return (TTR) is the prescribed form for a Reporting Financial Year, which needs to be submitted by every Constituent Entity of an MNE Group located in Malaysia to disclose the amount of tax payable under Section 159 (Domestic Top-up Tax) and Section 160 (Multinational Top-up Tax) of the Income Tax Act 1967 for that financial year. Transitional relief for filing also applies to TTR. The due date to submit a TTR for the filing transition year is no later than 18 months after the last day of the corresponding Reporting Financial Year. The tax payable for the first filing transition year is due on the last day of the 18^th month after the end of that filing transition year.

The Qualified Domestic Minimum Top-up Tax (QDMTT) Safe Harbour is a specific provision in the GloBE Rules that enables MNE Groups to take advantage of simplified compliance measures under specific circumstances. Where an MNE Group qualifies for a QDMTT Safe Harbour, the Top-up Tax payable in other jurisdictions for the Financial Year will be deemed to be zero.

An MNE Group will be eligible for the QDMTT Safe Harbour in respect of a jurisdiction for a Financial Year where the jurisdiction has a QDMTT for the Financial Year; and the jurisdiction’s Domestic Top-up Tax has fulfilled the QDMTT Safe Harbour status for the Financial Year.

Reference/Citation
Global Minimum Tax (GMT) | The Inland Revenue Board of Malaysia – https://www.hasil.gov.my/en/international/global-minimum-tax-gmt/

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