Since January 1, 2025, Malaysia has adopted the Global Minimum Tax (GMT) as part of the Inclusive Framework OECD/20 regarding Base Erosion and Profit Shifting (BEPS). This measure intends to align local tax policies with international standards and keep its competitiveness in the ASEAN region.
GMT Key Mechanisms in Malaysia
In order to ensure compliance with the 15% effective minimum tax rate, Malaysia has implemented two principal mechanisms:
- Domestic Top-up Tax (DTT): It applies to Malaysian entities, ensuring the tax threshold required.
- Multinational Top-up Tax (MTT): Intended for multinationals operating in Malaysia, aligning its global income taxation with international standards.
Entities not meeting the established threshold must file a top-up tax return with occasional provisions intended to reduce or exempt from penalties in the first stage of the application.
Scope
The GMT applies to large multinationals with revenue exceeding €750 million, affecting sectors currently benefiting from tax incentives, such as manufacturing, finance, and technology. Incentives such as pioneer status and Multimedia Super Corridor (MSC) could require restructuration to comply with the GMT requirements.
Aplication
Multinationals should consider:
- Adjust the Cash Flow: Restructure financing models to incorporate possible additional tax liabilities.
- Investment Decisions: Evaluate GMT compliance costs regarding actual tax incentives.
- Restructuration Needs: Adapting operating models to optimize tax efficiency under new rules.
In addition, companies must comply with new documentation and reporting obligations, including top-up tax return filing for entities with an effective tax rate below 15%.
Regional Comparison
The GMT implementation in Malaysia follows a broader regional trend but has a distinct approach compared to its neighbors:
- Singapore implemented the Income Inclusion Rule and Domestic Top-up Tax in January 2025, focusing on a soft transition with comprehensive data reporting.
- Indonesia released its central tax system in January 2025, leveraging digital administration to streamline compliance.
- Thailand implemented new tax regulations intended to transfer income and social security adjustments, reflecting a broader regulatory amendment.
- Vietnam confirmed its implementation for 2025 after beginning public consultations regarding the Qualified Domestic Minimum Top-up Tax ending 2024, focusing on protecting the domestic taxable base.
These miscellaneous approaches highlight several domestic priorities and regulatory frameworks in the region.
Call to Action
Due to the complexity and GMT effects, multinationals operating in Malaysia must review and adjust their tax strategies and corporate structures to ensure compliance and optimize their financing position.
For expert guidance and customized solutions in Transfer Pricing and tax compliance in Malaysia, contact TPC Group. Our professional team is at your disposal to assist in this new tax scenario and keep a competitive advantage in the ASEAN region.
Source: Asean Briefing