Country By Country Reporting

CbCR is a form that is initiated by the Organisation for Economic Co-operation and Development (“OECD”) for Multinational Corporation Groups (“MNC Group”) (that meet certain requirements) to report income and other measures of economic activity for each country in which they conduct their activities.

CbCR is part of a wide range of international measures aimed at combating tax avoidance through more comprehensive exchanges of information between countries. The CbCR was initiated by the OECD in the Base Erosion and Profit Shifting (“BEPS”) Action 13 Report and adopted by Malaysia in 2016.

How is CbCR Governed in Malaysia?

In Malaysia, CbCR is governed by two separate regulations as follows:

Territory	Regulation	Effective date
Labuan[1]	Labuan business activity tax (country-by-country Reporting) Regulations 2017	26 December 2017
Non-Labuan entities	Income tax (country-by-country Reporting) Rules 2016 (amended in 2017)	1 January 2017

For the purposes of this article, we will only discuss the non-Labuan entities[2].[BY1]

[1] Labuan is a Federal Territory of Malaysia that maintains its own independent corporate laws and taxation regime from the rest of Malaysia.

[2] CbCR Rules for Labuan entities has been covered in our article available here.

Who needs to file the CbCR?

The CbCR Rules are applicable to:

MNC Groups with ultimate holding company incorporated in Malaysia;
MNC Group has a total consolidated group revenue of RM 3 billion in the preceding financial year;
MNC Group carries out cross-border transactions with its constituent entities[1]; and
Constituent entities are incorporate or registered, and resident in Malaysia or any other jurisdiction.

[1] A constituent entity is defined as any separate business unit which is (a)included in the consolidated financial statements or would have been included if its shares were traded in public securities exchange, (b)excluded from the consolidated financial statements solely on the basis of size or materiality, or (c)a permanent establishment of any business unit of the MNC Group if the permanent establishment has a separate financial statement prepared for financial reporting, regulatory, tax or internal management purposes.

Am I obligated to notify on CbCR obligations?

The Inland Revenue Board of Malaysia (“IRBM”) issued a notice on May 2021 announcing that constituent entities may furnish the CbCR notification using the company tax return form effective from year of assessment 2021. With this change, the notification deadline for constituent entities submitting notification through the returns has changed to the deadline of filing the return (i.e. generally 7 months after year-end).

An ultimate holding company or the surrogate holding company is to notify, in writing, the IRBM on or before the last day of the reporting financial year. For this purpose the IRB has issued a copy of a sample letter[1] required to be filled and filed with the IRBM.

[1] Available through this link ( https://www.hasil.gov.my/en/international/automatic-exchange-of-information-aeoi/country-by-country-reporting-cbcr/)

What type of information does the CbCR form require?

The CbCR form requires MNC Group to report details, by jurisdiction, regarding their global and local operations and activities. Specifically, the form is divided into three (3) tables that require the following information:

Aggregate information with regards to each jurisdiction in which the MNC Group operates relating to:
- Revenue;
- Profit before income and taxes;
- Income tax paid (on cash basis and accrued);
- Capital and Accumulated earning;
- Number of employees; and
- Tangible assets.
Identification of each constituent entity of the MNC Group, such as:
- Jurisdiction where the entity is tax resident;
- Tax jurisdiction incorporation, if different from tax jurisdiction of residence; and
- Nature of main business activity

How to submit the CbCR?

CbCR filling to IRBM is required to be submitted in accordance with the prevailing CbCR XML Schema. Data submitted to IRBM in any other format will not be accepted.

Are there any penalties for non-compliance?

Failure to furnish CbCR is an offence and would be liable to a fine of not less than RM20,000 and not more than RM100,000 or to imprisonment for a term not exceeding 6 months or to both.

Are CBC Reports Automatically exchanged?

In 2016, Malaysia signed the Multilateral Competent Authority Agreement on the exchange of CbCRs (“CbC MCAA”).

The CbC MCAA is a multilateral framework agreement based on the Convention on Mutual Administrative Assistance in Tax Matters. It provides a standardised and efficient mechanism to facilitate the automatic exchange of CbCRs. Under the CbC MCAA, signatories to the MCAA will automatically exchange CbCRs with one another on a bilateral basis if both parties are mutually agreeable.

CbCR submitted to IRBM will be provided to tax authorities of jurisdictions with which Malaysia has established bilateral Automatic Exchange of Information (“AEOI”) relationships under the MCAA.

How can we help?

Transfer Pricing Solutions Malaysia provides comprehensive support to multinational enterprises (MNEs) in navigating their Country-by-Country Reporting (CbCR) obligations, ensuring compliance with Malaysia's regulations.

Here is how we can help:

Prepare CbCR Form

We have the knowledge and experience to prepare the CbCR form accurately, including all required details and information related to your MNE's global and local operations.

XML Templates & Conversion

We have up to date CbCR form templates, and once filled with required information, we have expertise and required software for the conversion of the form to an XML Schema for the purposes of submission.

Country By Country Reporting