Tax advisory & planning
in Malaysia.

Corporate tax.

• Corporate tax advisory

  We will provide general consultation regarding the tax implications of a Client’s day to day transactions via phone calls, email correspondences or any other communication channels. If the Client requires a written explanation, our deliverable of the services will be in the form of email correspondence. Specifically, we provide:

  • Assistance in reviewing your company or other company’s compliance level and help you to identify the potential tax exposure which will be useful for your decision making process
  • Written advice outlining the tax implications on specific transactions or cases
  • End-to-end assistance in handling and questions from the tax authorities on your annual income tax return, preparing and handling any tax objection, including representing your company as a proxy before the tax office.
  • End-to-end assistance in handling any tax audit, including representing your company as a proxy before the tax office.

• Transfer pricing advisory

  Tax authorities all around the world are focusing on transfer pricing to ensure that goods and services flowing across borders are priced at appropriate levels. The worldwide BEPS (Base Erosion and Profit shifting) collaboration amongst 135 countries brings transfer pricing into sharp focus.

  Malaysia adopts the internationally-agreed arm’s length principle for the determination of prices for transactions between related parties. The arm’s length principle is the international standard to guide transfer pricing. It requires the transaction with a related party to be made under comparable conditions and circumstances as a transaction with an independent party.

  Malaysia has a series of regulations which require Malaysian companies to prepare transfer pricing documentation if they fall in the following categories:

  • For a person carrying on a business, the Guidelines apply to a business with gross income exceeding RM25 million (US$5.8 million), and the total amount of related party transactions exceeds RM15 million (US$3.5 million)
  • Where a person provides financial assistance, the guidelines on financial assistance are only applicable if that financial assistance exceeds RM50million (US$11.5 million). The Guidelines do not apply to transactions involving financial institutions.

  Any person which falls outside the guidelines above may opt to fully apply all relevant guidance as well as fulfil all Transfer Pricing Documentation requirements in the Malaysian Guidelines; or alternatively may opt to comply with abridged Transfer Pricing Documentation requirements.

  If a company satisfies one or more of the above tests, it must prepare transfer pricing documentation which includes:

  • Organisational structure
  • Group financial report
  • Outline of the industry and business operations of the company including current market conditions
  • Description of the Controlled Transactions (i.e. related party transactions)
  • The pricing policy used for the Controlled Transactions

  Malaysia’s tax treaties also incorporate provisions that guard against treaty abuse, and provide for exchange of information upon request in line with the internationally-agreed standard.

  Where your company is involved in the import/export of goods and services, our tax professionals can provide you with a transfer pricing report which will analyse the correct method of pricing your goods and services and include a comparability analysis with other similar transactions in the market.

  Acclime’s service includes the preparation of an Advance Pricing Agreement (APA) to be agreed with the Malaysian Director General of Taxation(DGT) under their transfer pricing policies. The process involves meeting with the DGT to discuss the APA in advance, which **Acclime** can facilitate. Concluding an APA provides certainty in pricing goods and services that flow cross border.

• CRS and FATCA

  The Common Reporting Standard (CRS) is an information standard for the Automatic Exchange Of Information (AEOI) regarding bank accounts on a global level, between tax authorities. It was developed by the Organisation for Economic Co-operation and Development (OECD) in 2014 with the purpose of combating tax evasion.

  The Foreign Account Tax Compliance Act (FATCA) generally requires financial institutions (FI) and certain other non-financial entities that are foreign to the U.S. to report on assets held by their U.S. account holders or be subject to withholding on withholdable payments.

  When a company opens a bank account, the bank will require the company to make a statement as to the company’s status under either CRS or FATCA. A CRS statement will be required from any entity whose beneficial owners are not US citizens. A FATCA statement will be required where any beneficial owners are US citizens. The classification process is far from straightforward, with Banks’ “how to” guides stretching to 20 pages or more. An Acclime professional can assist with the correct classification for your company.

  CRS classifications

  There are 3 categories of classification of companies under CRS. The category will determine whether a bank is required to report the existence of the account to the IRAS, which would then share the information with the tax authority where the beneficial owner is tax resident.

  1. Financial Institution (FI) – An FI is an Investment Entity (managing investments on behalf of others), a Custodial Entity, a Depository Institution or a Specified Insurance Company. Each of these definitions have a number of sub parts making the classification somewhat complex
  2. Active Non Financial Institution (Active NFI) – This is a company that is not a FI but carries on an active business AND not more than 50% of its assets are passive assets (e.g. money sitting in a bank account. For operating companies, most will fall in this classification, unless they have substantial bank balances (e.g. from profits not yet distributed).
  3. Passive Non Financial Institution (Passive NFI) – This is a company that is not an Active NFI.

  Depending on your Entity’s classification, and where its resident for tax purposes, it may be a Reportable Person. That means details of the account will be reportable to the tax authority in Singapore. That authority will then send your details to the tax authority where your Entity or Controlling Person(s)is/are tax resident.

  Financial Institution – Not reportable

  Active NFI – The entity is a reportable entity unless it falls in one of the exemptions (e.g. Government owned, Regularly traded on an exchange, charity)

  Passive NFI – The entity is a reportable entity, as is the Controlling Person(s) of the Passive NFI

  If Reporting is required, the persons name, Tax ID number and account balance must be reported as well as any dividends, interest or sales proceeds from financial assets that have been paid into the account during the year.

  As the classification process is quite complex and there are penalties for getting it wrong, it is advisable to have professional advice regarding the classification of your company. Acclime’s tax experts will be able to assist and advise you as to the correct classification of your company.

  FATCA Classification

  Although the definitions under FATCA and CRS are similar, there are differences which could cause your company to have a different FATCA classification from its CRS classification.

  Malaysia’s Inter Governmental Agreement (IGA) with the US as regards FATCA is still being finalised. However, the US Treasury, in a letter dated 25th April 2017, has agreed that Malaysia remains on the Treasury IGA list and continues to be treated as if it has an IGA in effect. As a result, banks in Malaysia need to comply with the reporting obligations.

  FATCA has 3 categories of company:

  1. Financial Institution (FI)- this is very similar to the CRS FI definition, but also includes Holding companies and Treasury Centres of financial groups
  2. Non Financial Foreign Entity (NFFE) – a NFFE is a company that is not a FI but carries on an active business AND not more than 50% of its assets are passive assets (e.g. money sitting in a bank account). For operating companies, most will fall in this classification, unless they have substantial bank balances (e.g. from profits not yet distributed). This is the same definition as Active NFI under CRS.
  3. Passive NFFE – this is an entity that is not an Active NFFE.

  The reporting obligations are similar to CRS for the above entity classifications, with the form that needs to be completed differing based on the classification, and in many cases sub classification of the entity.

  The classification process is quite complex and there are penalties for getting it wrong, it is advisable to have professional advice regarding the classification of your company. Acclime’s tax experts will be able to assist and advise you as to the correct classification of your company.