Downgraded on EU tax haven blacklist, Malaysia vows to switch up exemption laws

KUALA LUMPUR – Malaysia has expressed commitment to either repeal or amend existing tax laws that exempt foreign source incomes.

This follows the publication of the European Union’s revised tax haven blacklist on Tuesday, in which Malaysia ranked among the countries downgraded to an annex grey list the EU keeps of jurisdictions considered to be committed to international tax standards, but are not yet there. 

The other territories that made the grey list were Hong Kong, Costa Rica, North Macedonia, Qatar and Uruguay.

Australia, Eswatini and the Maldives were removed from the grey list this year.

In this regard, Malaysia pledged to amend or abolish foreign source income exemptions (FSIE) by December 31, next year.

Further, in another EU Council document, Malaysia was said to have sent letters to the Chairman of the Code of Conduct Group (COCG) on August 3 and September 20 this year to state the country’s commitment to legislative change.

“Malaysia sent letters to the COCG chair on August 3 and September 20 to commit to repeal or amend their harmful FSIE regime,” the document read.

In a bid to promote global good governance in taxation and inform member states on which countries engage in abusive tax practices, the EU Council lists out non-cooperative jurisdictions.

“The criteria for listing are in line with international tax standards and focus on tax transparency, fair taxation and prevention of tax base erosion and profit-shifting.

“The council engages with countries that do not meet these criteria, monitors their progress and regularly reviews and updates this list,” the EU Council’s website reads.

This measure by the EU was announced in 2016, stating the intention to fight aggressive tax practices by large companies efficiently.

Measures were taken to promote good governance on taxation internationally, and list countries that “refuse to play fair”.

On Tuesday, the EU had removed Anguilla, Dominica and Seychelles from the list of non-cooperative jurisdictions for tax purposes.

The three nations failed to meet EU’s tax transparency criteria of being ranked at least “largely compliant by the Organisation for Economic Cooperation and Development (OECD) regarding exchange of information requests”. – The Vibes, October 7, 2021