Malaysia’s tax regime should remain current and sustainable after Covid-19
KUALA LUMPUR: The tax regime in Malaysia should remain up to date and continue to be sustainable to attract new domestic and foreign direct investment into the country following the changing investment landscape posed by Covid-19.
With pandemic restrictions easing and daily cases down by around 2,000, there are signs of a rebound for Malaysia’s economy with more businesses reopening, offering current fiscal incentives and durable that will certainly soothe the nerves of foreign investors.
“Our tax incentive regime must be current and continue to be sustainable for the changing (investment) environment.
“We may not want to compete with our neighbors head-on, but what is our niche as a country, what kind of investors are we looking for.
“And certainly incentivizing investors through tax incentives, will show that we are ‘appeasing’ to them,” Ernst & Young (EY) Malaysia tax manager Farah Rosley recently said in an interview with Bernama.
Malaysia recorded RM306.5 billion in approved investment in the manufacturing, services and primary sectors in 2021 – the highest amount of investment approved since 2006, according to the Malaysian Investment Development Authority (MIDA) .
The total number of foreign direct investment (FDI) and domestic direct investment (DDI) exceeded expectations with an outstanding performance in 2021, increasing to 83.1% from 2020.
Farah, who is also president of the Chartered Tax Institute of Malaysia, said Malaysia also needs to ensure its tax system is competitive and continue to develop and improve policies to encourage new domestic and foreign direct investment in the economy. country, while maintaining existing investments.
She said the additional taxes raised should be allocated to areas that would improve the ease of doing business and improve the investment ecosystem in the country.
“The economic situation and requirements in Malaysia are unique and we must not lose the competition.
“As a country, we must continue to adopt tax policies to encourage economic growth and support businesses, while ensuring public policy objectives are met,” said Farah, who has more than 20 years of professional experience. in the field of taxation.
Farah said that to ensure that Malaysia benefits from investments, investors who benefit from tax incentives must comply with various conditions set by the government.
“This generally includes minimum levels of investment and employment and the requirement to carry out activities such as research and development and the development of local suppliers,” she said, adding that the rate of Corporate tax in Malaysia is generally 24%.
Asked how Malaysia would benefit from the global minimum tax to ensure that multinational enterprises (MNEs) would be subject to a minimum tax rate of 15% from 2023, Farah said the implementation of the overall minimum tax should in theory increase tax collection in Malaysia.
Under the impetus of the Organization for Economic Co-operation and Development (OECD), the overall minimum tax must generally be set at 15% for all multinational groups whose turnover exceeds 750 million euros per year.
The minimum tax aims to ensure that companies pay a fair amount of tax, to reduce the tendency of large groups to transfer their activities and profits to low-tax jurisdictions and to reduce the pressure exerted on governments to lower tax rates to attract investment. — Bernama