TP Ticker – October 2018

Malaysian Template on CbC Reporting Notification

On 19 October, the Inland Revenue Board of Malaysia published an example template for country-by-country (“CbC”) reporting notification of local affiliates whose ultimate parent in a different jurisdiction submits a CbC report. This notification as non-reporting entity serves to inform the tax administration that the CbC report has been submitted by the ultimate parent or a surrogate entity in the respective other jurisdiction. Provided there exists a working exchange relationship between Malaysia and the respective other jurisdiction, this relieves the local affiliate from its obligations to submit the CbC report locally. Accordingly, the template foresees the inclusion of the tax identification number of the reporting entity and its tax jurisdiction. It also allows for the listing of all other local affiliates of the multinational enterprise in Malaysia. (The template for the notification can be found on the website of the Inland Revenue Board of Malaysia here; general information on CbC reporting requirements in Malaysia are available here.)

With the implementation of CbC reporting in local tax compliance laws, multinational enterprises often face a disproportional burden in following up with the related notification requirements. Local teams are often already fraught with other responsibilities and can easily overlook this requirement and its deadlines. Headquarters on the other hand may have similar challenges in supervising and supporting their subsidiaries compliance status. The situation is exacerbated by the unfortunate fact that nearly all jurisdictions expect a notification annually, even if the relevant facts – the reporting entity that submits the CbC report and its location – do not change. (By now, Slovakia is the only country I am aware of, that requires subsequent notifications only when these facts change.) Tax administrations still seems to be in a stage where they try to find out how to handle CbC reporting and notification efficiently. Some, like Malaysia, require paper-based submissions while others have established web-based solutions. Notification deadlines, too, are sometimes widely different. It remains to be observed how fast and to which degrees these methods will reach a consistent and simplified form. Another current challenge is to determine for each jurisdiction of the local affiliates of the group, if an active exchange relationship with the jurisdiction of the CbC reporting entity exists. This can – with reasonable certainty – be solved with help of the OECD website. The OECD attempts to keep track of the exchange relationship and enables to check it between any two jurisdictions here: http://www.oecd.org/tax/beps/country-by-country-exchange-relationships.htm

The template for the notification can be found on the website of the Inland Revenue Board of Malaysia here: http://lampiran1.hasil.gov.my/pdf/pdfam/ANNEX_C.pdf
while general information on CbC reporting requirements in Malaysia are available here: http://www.hasil.gov.my/bt_goindex.php?bt_kump=6&bt_skum=2&bt_posi=1&bt_unit=3&bt_sequ=1&CSRF_TOKEN=c5bd558b2e556870321b7aa8044e35357cc5a391