Harmful Tax Practices – 2024 Peer Review Reports on the Exchange of Information on Tax Rulings

Malaysia

Malaysia has met all aspects of the terms of reference (OECD, 2021[1]) (ToR) for the calendar year 2024 (year in review), except for providing information on rulings to the Competent Authority without undue delay (ToR II.B.5). Malaysia receives one recommendation on this point for the year in review.

In the prior year report, as well as in the 2017-2022 peer reviews, Malaysia had received the same recommendation. As it has not been addressed, the recommendation remains in place.

Malaysia can legally issue five types of rulings within the scope of the transparency framework.

In practice, Malaysia issued rulings within the scope of the transparency framework as follows:

Type of ruling	Number of rulings
Past rulings	249
Future rulings in the period 1 September 2017 – 31 December 2017	23
Future rulings in the calendar year 2018	51
Future rulings in the calendar year 2019	69
Future rulings in the calendar year 2020	40
Future rulings in the calendar year 2021	3
Future rulings in the calendar year 2022	0
Future rulings in the calendar year 2023	31
Future rulings in the year in review	11

Peer input was received from four jurisdictions in respect of the exchanges of information on rulings received from Malaysia. The input was generally positive, noting that overall information was complete and in a correct format. However, two peers indicated that exchanges on rulings were not timely.

Information gathering process (ToR I.A)

1. Malaysia can legally issue the following five types of rulings within the scope of the transparency framework: (i) preferential regimes;1 (ii) cross-border unilateral APAs and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles; (iii) rulings providing for unilateral downward adjustments; (iv) permanent establishment rulings; and (v) related party conduit rulings.

2. For Malaysia, past rulings are any tax rulings within scope that are issued either (i) on or after 1 January 2015 but before 1 September 2017; and (ii) on or after 1 January 2012 but before 1 January 2015, provided they were still in effect as at 1 January 2015. Future rulings are any tax rulings within scope that are issued on or after 1 September 2017.

3. In the prior years’ peer review report, it was determined that Malaysia’s undertakings to identify past and future rulings and all potential exchange jurisdictions were sufficient to meet the minimum standard. In addition, it was determined that the Malaysia’s review and supervision mechanism was sufficient to meet the minimum standard. The Malaysia’s implementation remains unchanged, and therefore continues to meet the minimum standard.

4. Malaysia has met all of the ToR for the information gathering process and no recommendations are made.

Exchange of information (ToR II.B)

Legal basis for spontaneous exchange of information (ToR II.B.1, II.B.2)

5. Malaysia has the necessary domestic legal basis to exchange information spontaneously. Malaysia notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

6. Malaysia has international agreements permitting spontaneous exchange of information, including: (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011[2]) (“the Convention”) and (ii) bilateral agreements in force with 73 jurisdictions.2

Completion and exchange of templates (ToR II.B.3, II.B.4, II.B.5, II.B.6, II.B.7)

7. In the prior years’ peer review report, it was determined that Malaysia’s internal policies, processes and procedures for the completion and exchange of templates were sufficient to meet the minimum standard, except for the provision of information on rulings to the Competent Authority without undue delay, and the timely spontaneous exchange of information on future rulings (ToR II.B).

8. Malaysia is still implementing a process to undertake exchanges of information within the timelines of the Action 5 transparency framework. During the year in review, Malaysia transmitted 57 exchanges all related to rulings issued in earlier years. Therefore, the recommendation to ensure that the exchanges of information on future rulings occur as soon as possible remains.

9. For the year in review, the timeliness of exchanges is as follows:

 

Future rulings within the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
	0	57	N/A	N/A

 

Follow-up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
	0	N/A	N/A

Conclusion on section B

10. Malaysia has the necessary legal basis to undertake spontaneous exchange of information. Malaysia is recommended to continue its efforts to reduce the timeliness for providing the information on rulings to the Competent Authority and to complete the templates for all relevant future rulings and to ensure that the exchanges of information on future rulings occur as soon as possible (ToR II.B).

Statistics (ToR IV.D)

11. As no rulings were issued, no statistics can be reported.

 

Category of ruling	Number of exchanges	Jurisdictions exchanged with
Rulings related to preferential regime	57	Australia, Belgium, Brunei Darussalam, China (People’s Republic of), France, Germany, Hong Kong (China), India, Indonesia, Ireland, Japan, Liechtenstein, Macau (China), Netherlands, Philippines, Singapore, Switzerland, Chinese Taipei, Thailand, United Kingdom, Viet Nam
Cross-border unilateral APAs and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles	0	N/A
Cross-border rulings providing for a unilateral downward adjustment to the taxpayer’s taxable profits that is not directly reflected in the taxpayer’s financial / commercial accounts	0	N/A
Permanent establishment rulings	0	N/A
Related party conduit rulings	0	N/A
IP regimes: total exchanges on taxpayers benefitting from the third category of IP assets, new entrants benefitting from grandfathered IP regimes; and taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption	0	N/A
Total	57

Matters related to intellectual property regimes (ToR I.A.1.3)

12. Malaysia does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015[3]) were imposed.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved

Recommendation for improvement

Malaysia experienced delays in the exchange of information on rulings and did not undertake spontaneous exchange of information on the issued tax rulings within the scope of the transparency framework during the year in review.

Malaysia is recommended to continue its efforts to reduce the timeliness for providing the information on rulings to the Competent Authority and to complete the templates for all relevant future rulings and to ensure that the exchanges of information on future rulings occur as soon as possible. This recommendation remains unchanged since the 2017, 2018, 2019, 2020, 2021, 2022 and 2023 peer review reports.

Notes

← 1.  1) Pioneer status – contract R&D, 2) Biotechnology industry, 3) Principal hub, 4) MSC Malaysia, 5) Green technology services and 6) Special economic regions, 7) High technology regime and 8) Treasury management centre.

← 2.  Participating jurisdictions to the Convention are available here: www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm. Malaysia also has bilateral agreements with Albania, Argentina, Australia, Austria, Bahrain, Bangladesh, Belgium, Bosnia and Herzegovina, Brunei Darussalam, Canada, Chile, China (People’s Republic of), Croatia, Czechia, Denmark, Egypt, Fiji, Finland, France, Germany, Hong Kong (China), Hungary, India, Indonesia, Iran, Ireland, Italy, Japan, Jordan, Kazakhstan, Korea, Kuwait, Kyrgyzstan, Laos, Lebanon, Luxembourg, Malta, Mauritius, Mongolia, Morocco, Myanmar, Namibia, Netherlands, New Zealand, Norway, Pakistan, Papua New Guinea, Philippines, Poland, Qatar, Romania, Russia, San Marino, Saudi Arabia, Seychelles, Singapore, South Africa, Spain, Slovak Republic, Sri Lanka, Sudan, Sweden, Switzerland, Syrian Arab Republic, Thailand, Türkiye, Turkmenistan, United Arab Emirates, United Kingdom, Uzbekistan, Venezuela, Viet Nam and Zimbabwe.