Malaysia's Inland Revenue Board has updated its Pillar 2 Global Minimum Tax guidance with new Domestic Top-up Tax implementation rules and an expanded FAQ addressing safe harbour eligibility, filing deadlines based on Ultimate Parent Entity financial year-ends, acceptance of MFRS and MPERS accounting standards for DTT computations, and use of unaudited local accounts—with GMT requirements applying from 1 January 2025 and first returns due 30 June 2027.
Malaysia’s Inland Revenue Board has updated its Pillar 2 Global Minimum Tax guidance with new Guidelines on Domestic Top-up Tax implementation in Malaysia and an updated FAQ, both on 3 February 2026.
The GMT requirements apply for fiscal years starting on or after 1 January 2025, with first returns and payments due 30 June 2027, ensuring Malaysian entities within large MNEs face a 15% minimum effective tax rate through Domestic Top-up Tax (DTT) and Multinational Top-up Tax (MTT).
On 8 October 2021, 136 members of the OECD/G20 Inclusive Frame work on Base Erosion Profit Shifting (BEPS) have joined the Statement on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy. The Two-Pillar Solution is comprised of Pillar One and Pillar Two. Pillar One aims to ensure a fairer distribution of profits and taxing rights among countries with respect to the largest multinational enterprises (MNEs). Meanwhile, Pillar Two puts a floor on tax competition on corporate income tax through the introduction of a global minimum corporate tax rate that countries can use to protect their tax bases. The Global Anti-Base Erosion (GloBE) Rules are the main Pillar Two Rules which set out the scope and mechanism of the new global minimum effective tax rate (ETR) of 15%. A top-up tax will be charged when the group’s ETR in a jurisdiction falls below the 15% level.
The following new FAQs are provided in the updated GMT FAQ:
10: What are the adjustments required under the Transitional CbCR Safe Harbour to prepare a Qualified CbC Report?
A safe harbour served as transitional relief for MNE groups in the initial years, during which the GloBE rules came into effect. When applying the Transitional Country-by-Country Reporting (CbCR) Safe Harbour (TCSH), the group must ensure that its CbC report is based on the group’s Qualified Financial Statement (QFS). This requirement is necessary for the report to be considered a qualified CbC report under the GloBE Rules. The financial information in the QFS shall not be adjusted to align with the GloBE Rules, except for adjustments made to the Purchase Price Allocation (PPA) to meet the consistent reporting condition, as well as adjustments concerning goodwill impairment.
11: Is an MNE Group eligible for the Transitional CbCR Safe Harbour if it fails to submit its CbC Report?
When applying for TCSH, the submission of a CbC Report is a prerequisite. MNE groups that are subject to CbC reporting and fail to do so will not be eligible for the TCSH.
18: Does the 15-month (or 18-month transitional) filing deadline for the top-up tax return refer to the financial year end of each Constituent Entity, or to that of the Ultimate Parent Entity (UPE)?
The 15 month (18-month transitional) due date for submitting the top-up tax return is based on the financial year end of the UPE, not the respective Constituent Entity (CE).
Similarly, in the scenario where a Joint Venture (JV) has different financial year end from its UPE, the Top-up Tax Return of the JV would be due 15 month (18-month transitional) from the financial year end of the UPE.
21: If different entities within an MNE Group apply MFRS and MPERS respectively, are both sets of financial statements acceptable for DTT computations under the ITA 1967?
The Malaysian Financial Reporting Standards (MFRS) and the Malaysian Private Entities Reporting Standards (MPERS) are Malaysia’s local accounting standards. Therefore, financial statements prepared under these standards may be used to determine the FANIL for DTT computation purposes provided that all other conditions in Section 164(2) of the ITA 1967 are met.
22: Where CEs in Malaysia have a different financial year end (FYE) from the UPE due to mergers, acquisitions, or liquidation, will transitional relief be available to mitigate mismatched reporting periods when applying local accounting standards for DTT purposes?
The condition set in Section 164(2)(a) of the ITA 1967 is intended to avoid mismatch in the financial years of the local accounts to that of the Consolidated Financial Statement (CFS) which could result in mismatches between the QDMTT computations and the computations that would have been required under the GloBE Rules.
We do not foresee any omission issues will arise in the year where there is mergers, acquisitions or liquidation, where the financial year for that relevant CE differs from the rest of the entities in the MNE Group. Therefore, for these scenarios, all the CEs in Malaysia still be able to use local financial statements for DTT computation purposes if all other conditions in Section 164(2) of the ITA 1967 are met.
23: In the scenario where in scope Constituent Entity in Malaysia prepare unaudited accounts, is it permissible to use such local financial statements for the determination of DTT?
Yes, local financial statements prepared in accordance with MASB or MPERS may be used by Constituent Entities for DTT purposes, as long as those accounts are also used for SSM submission or corporate income tax filing and all conditions under Section 164(2)(a) are met.
