Malaysia has adopted Country-by-Country Reporting (CbCR) as part of its commitment to the OECD Base Erosion and Profit Shifting (BEPS) Action 13 initiative. The regulation aims to enhance tax transparency and prevent tax avoidance by multinational enterprises (MNEs).

The Inland Revenue Board of Malaysia (IRBM) administers CbCR compliance, requiring certain MNEs to file annual reports detailing their global allocation of income, taxes, and business activities.

This guide provides chief financial officers and tax professionals with a detailed overview of CbCR requirements in Malaysia, covering applicability, reporting obligations, filing procedures, penalties, and key resources.

Applicability of CbCR in Malaysia

Reporting Threshold

CbCR obligations apply to MNE groups that:

• Have annual consolidated group revenue of at least MYR 3 billion in the preceding fiscal year.
• Include at least one entity or permanent establishment in Malaysia.

Local Filing Requirement

A Malaysian entity must submit a CbC report if:

• It is the Ultimate Parent Entity (UPE) of the MNE group.
• It has been designated as the Surrogate Parent Entity (SPE) for CbCR purposes.
• The UPE is located in a jurisdiction that does not require CbCR or lacks an information exchange agreement with Malaysia.

Relevant Legislation

• Income Tax (Country-by-Country Reporting) Rules 2016, effective from 1 January 2017.
• OECD BEPS Action 13: Provides the international standard for CbCR requirements.

CbCR Reporting Requirements

Content of the CbC Report

The CbC report must include financial data for each tax jurisdiction where the MNE operates, covering:

• Total revenue (from related and unrelated transactions).
• Profit or loss before income tax.
• Income tax paid and accrued.
• Declared capital and accumulated earnings.
• Number of employees.
• Tangible assets, excluding cash or cash equivalents.

Notification Requirement

• All Malaysian entities within an MNE group must notify the IRBM of the reporting entity and its jurisdiction.
• Notification must be submitted electronically before the fiscal year-end. (IRBM CbCR Guidelines)

Submission Platform

• Reports must be filed electronically via the IRBM’s CbCR Filing Portal, using the OECD CbCR XML schema.

Resources

• Filing guidelines and instructions are available on the IRBM website:
  Inland Revenue Board of Malaysia

Filing Deadlines

• CbC Reports: Must be submitted within 12 months after the fiscal year-end.
  • Example: For a fiscal year ending on December 31, 2023, the report must be filed by December 31, 2024.
• Notifications: Must be submitted before the fiscal year-end.

Penalties for Non-Compliance

Sanctions and Consequences

Failure to comply with CbCR requirements in Malaysia may result in:

• A fine of up to MYR 1 million.
• Imprisonment of up to 6 months, or both.
• Additional penalties for continued non-compliance.
• Increased scrutiny from the IRBM, leading to tax audits.

Mitigation Measures

• Companies can request extensions or appeal penalties if they can demonstrate a reasonable cause for non-compliance.

Confidentiality and Data Exchange

Data Protection

• The IRBM ensures that CbC reports remain confidential and are used solely for tax risk assessment purposes.
• Reports are automatically exchanged with jurisdictions that have a bilateral exchange agreement with Malaysia (Malaysia MCAA Agreement).