Harmful Tax Practices – 2023 Peer Review Reports on the Exchange of Information on Tax Rulings

763. 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.

764. 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.

765. In the prior years’ peer review reports, it was determined that Malaysia’s undertakings to identify past rulings and all potential exchange jurisdictions were sufficient to meet the minimum standard. Malaysia’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

766. For Malaysia, future rulings are any tax rulings within scope that are issued on or after 1 September 2017.

767. In the prior years’ peer review reports, it was determined that Malaysia’s undertakings to identify past and future rulings and all potential exchange jurisdictions have met all the ToR, except for identifying all potential exchange jurisdictions for future rulings (ToR I.A.2.1). Therefore, Malaysia was recommended to ensure that all potential exchange jurisdictions are identified swiftly for all future rulings.

768. In the prior year’s peer review report, it was noted that a process had been created for identifying potential exchange jurisdictions and taxpayers needed to provide the information required in the Annex C template upon approval of the preferential regime. The promotional agency of Malaysia would monitor the information provided by the taxpayer. Malaysia noted that in case taxpayers do not provide the information required in the Annex C template, it will identify potential exchange jurisdictions using the “best efforts approach”. During the year in review, Malaysia changed this approach. If the taxpayer does not submit the information required in the Annex C template, the ruling request will be deemed incomplete and the ruling cannot be granted. As this issue has been resolved, the recommendation is now removed.

769. In the prior years’ peer review reports, it was determined that Malaysia’s review and supervision mechanism was sufficient to meet the minimum standard. Malaysia’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

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

771. 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.

772. 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

773. 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).

774. Malaysia’s internal procedures and timelines to provide information on rulings to the Competent Authority remain unchanged, and therefore the recommendation to reduce the timelines for providing information on rulings to the Competent Authority without undue delay remains.

775. During the year in review, no exchanges took place and no data on the timeliness of exchanges is reported. Malaysia issued 31 rulings, but no information was exchanged during the year of review. Malaysia confirms that exchanges took place in the year 2024. The reason for the delay was that Malaysia was in the process of developing a system to enable the exchange of information on rulings. This will be assessed in next year’s peer review, and the recommendation to ensure that the exchanges of information on future rulings occur as soon as possible remains.

776. 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).

777. As there was no information on rulings exchanged by Malaysia for the year in review, no statistics can be reported.

[1] OECD (2021), BEPS Action 5 on Harmful Tax Practices - Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD Publishing, Paris, http://www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparency-framework.pdf.

[3] OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris, https://doi.org/10.1787/9789264241190-en.

[2] OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris, https://doi.org/10.1787/9789264115606-en.