Country-by-Country Reporting in Malaysia
January 2017
Since the release of the Action 13 on Base Erosion and Profit Shifting (BEPS): Transfer Pricing Documentation and Country-by-Country Reporting (“CbCR”) by the Organisation for Economic Co-operation and Development (OECD), many countries have jumped on the bandwagon to introduce CbCR laws or rules in their countries, including Malaysia. The Malaysian Government has recently issued Income Tax (Country-by-Country Report) Rules 2016 (“CbCR Rules”) on 23 December 2016 to prescribe the rules relating to the compliance of CbCR rules in Malaysia with effective from 1 January 2017.
What is CbCR?
CbCR is an entirely new reporting requirement aimed to enhance transparency, through disclosure of high level information regarding entities within the MNC to the relevant tax authorities in the relevant countries the MNC operates, e.g. income, profit, fixed assets, headcount, taxes paid, etc.
Who is required to prepare CbCR in Malaysia?
The CbCR Rules are applicable to all MNC Groups with ultimate holding company incorporated in Malaysia, and having reached the total consolidated group revenue of at least RM 3 billion in a financial year. Please see the entity that is the “reporting entity” in the table below.
Filing Requirements
An Ultimate (or Surrogate) holding company of a MNC group residing in Malaysia should file the CbCR to the Director General of Inland Revenue on or not later than 12 months after the last day of the financial year end. For example, a reporting entity with financial year ending on 31 December 2017 shall submit its first CbCR on or before 31 December 2018.
Penalty
Failure to furnish CbCR return is an offence and if committed, would be liable to a fine of not less than RM20,000 and not more than RM100,000 or to imprisonment for a term not exceeding 6 months or to both, under Section 112A of the Income Tax Act, 1967.
