KUALA LUMPUR – The 15% qualified domestic minimum top-up tax (QDMTT) proposed in Budget 2023 is set to combat revenue leakages and profit-shifting activities in the country, said KPMG Malaysia head of tax Soh Lian Seng.
“The QDMTT, which will commence in 2024, will also allow Malaysia the first right to charge top-up taxes on revenue from entities located in Malaysia that are paying low taxes,” he said in a statement yesterday.
He said the QDMTT proposal is in line with the international tax developments surrounding the Organisation for Economic Cooperation and Development’s Base Erosion Profit Shifting (BEPS) Pillar 2 initiatives.
Soh was commenting on Budget 2023 tabled by Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz in the Dewan Rakyat yesterday.
Tengku Zafrul said that to enable Malaysia to broaden its tax base while remaining competitive in attracting foreign direct investment, the government will introduce the global minimum tax of 15% as recommended under Pillar 2 of the BEPS Action Plan 1.
The government also aims to implement the QDMTT in 2024 upon completion of a detailed study.
Ernst & Young Tax Consultants Sdn Bhd Malaysia tax leader Farah Rosley opined that QDMTT would ensure that any top-up tax in respect of profits earned in Malaysia is collected in Malaysia, and it will not cede taxing rights to other countries.
However, she noted that, given the relatively complex rules and exclusions, systems must be capable of capturing and generating the necessary information for compliance.
“It is crucial that Malaysia continues to position itself as an investor-friendly jurisdiction, with a conducive and flexible business environment.
“Tax incentives will continue to be relevant, but investors will increasingly seek tailored incentives to suit their specific profiles,” she added.
On the e-invoicing and tax identification number measures announced in the budget, Farah said they would both reduce the shadow economy, increase compliance, and expand the tax net.
“This reinforces other initiatives of the Inland Revenue Board such as the Tax Corporate Governance Framework, which promotes better governance and transparency, and cooperation between the IRB and taxpayers,” she said. – Bernama, October 8, 2022
