In the realm of international business and taxation, transparency and accountability are paramount. To ensure fair tax practices and combat tax evasion, countries around the world have implemented various regulations, one of which is Country-by-Country Reporting (CbCR). Malaysia, like many other jurisdictions, has adopted CbCR as part of its commitment to international tax compliance. In this article, we’ll delve into what CbCR entails in Malaysia, outlining everything companies need to know to fulfill their reporting requirements.

Country-by-Country Reporting (CbCR) is a key component of the Base Erosion and Profit Shifting (BEPS) Action Plan, developed by the Organisation for Economic Co-operation and Development (OECD). The primary objective of CbCR is to enhance transparency in multinational enterprises (MNEs) by requiring them to disclose essential financial and tax-related information on a country-by-country basis.

CbCR requirements in Malaysia apply to multinational enterprises (MNEs) with consolidated group revenue equal to or exceeding MYR 3 billion (approximately USD 720 million) in the preceding financial year.

The ultimate parent entity of the MNE group is responsible for filing the CbCR in Malaysia. However, if the parent entity is not required to file in Malaysia or there is no agreement for exchange of information, a surrogate parent entity within the group may be designated to file on behalf of the group.

The CbCR must include detailed information regarding the MNE group’s allocation of income, taxes paid and accrued, stated capital, accumulated earnings, tangible assets, and the number of employees for each tax jurisdiction in which the group operates.

The CbCR must be submitted within 12 months from the last day of the reporting fiscal year of the MNE group.

Failure to comply with CbCR requirements in Malaysia may result in penalties, including fines and other regulatory actions. Penalties rang from RM20,000 to RM100,000 ($4,500 to $22,500). There are also penalties for not meeting notification requirements or providing inaccurate information.

Preparation and Submission Process

1. Data Collection:

Gather necessary financial and tax-related information for each entity within the MNE group, including revenue, profits, taxes paid, and other relevant data.

2. Report Compilation:

Consolidate the collected data into a comprehensive CbCR format following the guidelines provided by the Malaysian tax authorities.

3. Submission:

File the CbCR electronically through the Malaysian Inland Revenue Board’s (IRB) online portal or any other prescribed method. Ensure timely submission to avoid penalties.

4. Review and Compliance:

Review the submitted CbCR for accuracy and compliance with Malaysian regulations. Address any discrepancies or errors promptly.