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Malaysia to Implement Global Minimum Tax & QDMTT in 2024

In today’s 2023 Budget Speech, the Malaysian government joined the growing number of countries that have announced they will be implementing the 15% global minimum tax under Pillar Two.

Whilst the Budget Speech is, as you’d expect, lacking any detail, the Finance Minister said:

‘…To enable Malaysia to broaden its tax base while remaining competitive in attracting foreign direct investment, the Government will introduce a minimum effective tax rate globally as recommended under Pillar 2 of the BEPS 1 Action Plan and intend to implement the Qualified Domestic Minimum Top-up Tax after further research is made and targeted in 2024…’

Malaysia is therefore to both implement Pillar Two and enact a qualified domestic minimum top-up tax in 2024.

The OECD Report on Tax Incentives and Pillar Two recommends that jurisdictions consider implementing a qualifying domestic minimum top-up tax. 

The key risk is that a jurisdiction offers a tax incentive which lowers an MNEs effective tax rate (ETR) in a jurisdiction to below 15%, with top-up tax then levied under Pillar Two in another jurisdiction under the income inclusion rule or the under-taxed payments rule.
The jurisdiction then effectively loses out twice as it needs to administer the tax incentive that is ineffective, and it also loses out on the tax revenue.  See our analysis of the OECD Report on Tax Incentives and Pillar Two.
The Chief Executive of Malaysia’s Inland Revenue Board announced in August 2022 that Malaysia intended to implement the global minimum tax.