Professional services firm Deloitte believes that the dissolution of Parliament will not affect the 15 per cent 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 (GST), 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 per cent – 0 per cent) will be collected by other countries that implement GMT,” they said in a statement yesterday.
They cited another example where there is a lowly taxed Malaysian subsidiary of a foreign-headquartered multinational corporation (MNC), according to Bernama.
They said unless Malaysia adopts GMT, in particular Qualified Domestic Minimum Top-Up Tax (QDMTT), the top-up tax of 15 per cent 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 design of QDMTT 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 Jan 1, 2024.
“Whilst the first GMT return will only be due much later, an early understanding of the impact of GMT and preparation will be key to an effective and efficient implementation,” they said.
Prime Minister Ismail Sabri Yaakob announced on Oct 10, 2022 that Parliament has been dissolved, paving the way for the 15th General Election (GE15) to be held within 60 days.
Under Budget 2023 tabled by Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz on Oct 7, 2022, the government said it would introduce the GMT rate as recommended under Pillar 2 of the Base Erosion and Profit Shifting (BEPS) Action Plan 1 and implement the QDMTT upon completion of a detailed study.
The tax is targeted for the year 2024.