‘15% global minimum tax plan should remain despite Parliament’s dissolution’

KUALA LUMPUR – Professional services firm Deloitte believes that Parliament’s dissolution will not affect the 15% global minimum tax (GMT) plan mentioned in Budget 2023.

Deloitte Malaysia and Southeast Asia international tax leader Tan Hooi Beng and Deloitte Malaysia director Kelvin Yee said unlike the goods and services tax, capital gains tax or inheritance tax, implementing GMT would be key to upholding Malaysia’s tax sovereignty. 

According to Tan and Yee, Malaysia will cede the taxing right to other countries if GMT is not adopted.

“For example, a Malaysian-based listed company has an operating subsidiary in country X that enjoys tax exemption for 10 years.

“If Malaysia does not implement GMT, the top-up taxes (15%-15%) will be collected by other countries that implement GMT,” they said in a statement today.

They cited another example where there is a lowly-taxed Malaysian subsidiary of a foreign-headquartered multinational corporation (MNC).

They said unless Malaysia adopts GMT, in particular Qualified Domestic Minimum Top-Up Tax (QDMTT), the top-up tax of 15% will be ceded to a jurisdiction where the parent company is.

“Since the money is on the table, we believe implementing GMT is essential and not an option for Malaysia.

“The QDMTT design can be a complex task where foreign corporation rules of other countries need to be considered,” they said.

Both Tan and Yee expect the GMT rules to apply to affected MNCs from financial years beginning on or after January 1, 2024.

“Whilst the first GMT return will only be due much later, an early understanding of its impact and preparation will be key to an effective and efficient implementation,” they said.

Caretaker prime minister Ismail Sabri Yaakob announced on October 10, 2022 that Parliament has been dissolved, paving the way for the 15th general election to be held within 60 days.

Under Budget 2023 tabled by incumbent finance minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz on October 7, 2022, the government said it would introduce the GMT rate as recommended under Pillar 2 of the Base Erosion and Profit Shifting Action Plan 1 and implement the QDMTT upon completion of a detailed study.

The tax is targeted for the year 2024. – Bernama, October 19, 2022