Govt to implement global minimum tax in 2025

BUDGET 2025 | The government is committed to implementing the Global Minimum Tax (GMT) in 2025, said the Finance Ministry.

It said Malaysia stands to benefit from active participation in implementing GMT, which will enhance the country’s international reputation, protect the tax base, and promote a stable business environment.

It added that implementing GMT might enhance tax compliance among multinational enterprises (MNEs) and ultimately enhance the government’s revenue collection in the long term.

“It is equally important for Malaysia to have an effective tax framework for investment promotion in a more challenging global environment.

“Therefore, with the introduction of specific legislative measures and collaboration with other jurisdictions, Malaysia can ensure the successful implementation of GMT while continuing to monitor global developments,” the ministry said in its 2025 Fiscal Outlook and Federal Government Revenue Estimates report released today.

The ministry also noted that sustainable revenue generation enables the government to improve the public finances, provide better facilities for the rakyat and ensure macroeconomic stability.

Apart from that, it stated that the implementation of GMT requires the government to continue improving the relevant tax laws and administrative system, which involves amending the existing legislation to align with global practices.

“Effective implementation of GMT also requires substantial resources, including skilled talents and appropriate technology.

“Simultaneously, the government needs to enhance and formulate a more robust national investment strategy in line with the aspiration of the Madani Economy framework,” it noted.

Furthermore, the ministry said tax administration should also provide greater certainty and predictability in the tax legislation and system, with tax incentives granted based on predetermined objectives as well as clear and transparent criteria.

“Administrative procedures must be streamlined by reviewing and strengthening the overall governance of tax administration to ensure effectiveness in attracting investment relative to the implied revenue forgone.

“This is to ensure that GMT can be implemented effectively and that investment attractiveness, especially to MNEs, can be maintained or refined,” it said.

Two-pillar approach

Since 2013, the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) has developed an agreement on a two-pillar approach to ensure consistent and transparent tax legislation and environment.

Pillar One changes the rules for profit allocation and for the nexus, while Pillar Two sets the GMT at an effective rate of 15 percent for MNEs with global revenues exceeding €750 million (€1=RM4.67).

All 147 member countries of the OECD/G20 Inclusive Framework on BEPS have agreed to a GMT of 15 percent on the global profits of large MNEs.

As of June 7, 2024, 45 countries have either introduced draft legislation or passed final legislation incorporating Pillar Two’s model rules into their legal framework, with an additional 10 jurisdictions that intend to implement Pillar Two.

In the Asean region, Malaysia and Vietnam have started to implement and adopt GMT in their domestic tax policies, while Indonesia, Singapore, and Thailand are drafting their legislation.

- Bernama

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