|Axcelasia, Taxand Malaysia|
|Lee Hishammuddin Allen & Gledhill|
|Shearn Delamore & Co|
|Wong & Partners|
|Raja, Darryl & Loh|
In January 2017, Malaysia announced its intention to participate in the BEPS inclusive framework as a BEPS associate.
This move requires changes in Malaysia's domestic legislation and illustrates the government's desire to align with OECD country standards. It also enables the government to directly participate in shaping international tax rules to address tax evasion and avoidance issues. Meanwhile, tax authorities have also been displaying a more enhanced focus on TP audits.
"The authorities are trying to get to grips with BEPS. The [Malaysian] government is trying to align itself with what was signed and committed to in the BEPS action plan," said Adeline Wong, who heads the tax practice group at Wong & Partners.
Malaysia's tax authority, the Inland Revenue Board (IRB), has taken a proactive role in promoting the new BEPS regime. The IRB's CEO Datuk Sabin bin Samitah has ambitious plans. "His focus is to enforce tax compliance and he has a huge collection target," said Theresa Goh, the head of the TP practice at Deloitte.
"Time for the settlement of transfer pricing and tax audits is getting shorter. [The IRB is] in a hurry to settle cases," she said.
Bob Kee, co-lead partner in charge of transfer pricing at KPMG, said that the IRB is intensifying its tax auditing activities. "It is broadening its reach and targeting professionals. It is more challenging for clients because the IRB is getting more sophisticated and aggressive," he said.
Goh Ka Im, the head of the tax and revenue practice group at Shearn Delamore & Co agreed that the IRB has been actively pursuing TP audits and retroactive adjustments.
"The director-general [Sabin bin Samitah] wants to collect more tax than his predecessor," she said. "This carries over into initiatives trying to challenge and overturn tax cases we won years ago. This led to very aggressive audits with some astronomical figures thrown around for back years. Some cases go back as far as 2008."
Kee and Chang Mei Seen, an executive director at KPMG, have written in International Tax Review about the Malaysian government's creation of a special tax investigation team in December 2016. The so-called LHDN Tax Investigation Team 2017 consists of 272 intelligence officers and tax investigators. Part of the team's agenda is to audit MNEs that transfer their profits to countries with lower tax rates than Malaysia.
The Central Bank of Malaysia is also involved in assisting its government in curbing base erosion. Kee said: "The Central Bank [of Malaysia] issued a directive to banks and insurance companies to require them to get external auditors to certify that those charges [payments made by companies to their parent companies] are in compliance with TP guidelines.
Kee added that the extra attention from the IRB, and the difficulty in making payments to parent companies, has pushed some banks to hire external auditors to ease the pressure on, and supplement the knowledge of, their in-house tax departments.
Royal Malaysian Customs Department
Jabatan Kastam Diraja Malaysia,
Kompleks Kementerian Kewangan No 3, Persiaran Perdana, Presint 2, 62596, Putrajaya
Tel: +60 3 8882 2100/2300
Inland Revenue Board
Headquarters Inland Revenue Board of Malaysia
12th Floor Menara Hasil, Persiaran Rimba Permai, Cyber 8, 63000 Cyberjaya Selangor
Tel: +60 3 8313 8888
Fax: +60 3 8313 7848 / +60 3 8313 7849
(As of August 2017)
|Corporate income tax rate||24% (a)|
|Real property gains tax rate||30% (b)|
|Branch tax rate||25% (a)|
|Royalties from patents, know-how, etc.||10% (c)|
|Distributions by real estate Investment trusts and property Trust funds||10/25% (e)|
|Payments to non-resident contractors||13% (f)|
|Payments for specified services and Use of movable property||10% (g)|
|Other income||10% (h)|
|Branch remittance tax||24%|
Net operating losses (years)
Source: EY 2017 Worldwide Corporate Tax Guide and Deloitte