(Tax Update) : Global Minimum Tax in Malaysia : What Every SME Boss Should Know (Even If You're Not a Multinational)

(Tax Update) Global Minimum Tax in Malaysia: What Every SME Boss Should Know (Even If You're Not a Multinational)

On 1 January 2025, Malaysia will officially implement the Global Minimum Tax (GMT) under Part XI of the Income Tax Act 1967 (ITA 1967). While the primary target of this new tax regulation is large multinational enterprise (MNE) groups, many small and medium-sized enterprises (SMEs) may still be indirectly impacted.

This article explains the background, important deadlines, business implications, and tax consequences in simple and professional terms, tailored especially for SME business owners.

1. Background: What Is the Global Minimum Tax?

The GMT is a global initiative led by the Organisation for Economic Co-operation and Development (OECD) to combat profit shifting and base erosion by large multinationals. Its objective is to ensure that MNE groups pay a minimum effective tax rate of 15%, regardless of where they operate.

Malaysia, like many other countries, is aligning with this global effort to create a more equitable tax environment. The GMT will apply to MNE groups with annual global revenue of at least EUR 750 million, based on their consolidated financial statements.

Although most Malaysian SMEs will not fall directly under this threshold, understanding the GMT and how it affects the broader business environment is important — especially if your company is part of an MNE’s supply chain, is a subsidiary of a foreign group, or plans to expand internationally in the future.

2. Key Dates and Timeline

Malaysia’s GMT implementation includes several important milestones:

1 January 2025 – Effective Date
The GMT applies to MNE groups whose financial year begins on or after this date.
31 December 2025 – Closing Date
Marks the end of the first reporting year under the GMT framework for MNEs with a full 12-month financial year.
30 June 2027 – Key Submission Deadline
MNE groups must submit the following within 18 months of the financial year-end:
- Top-up Tax Return (TTR) – To declare any additional tax liabilities required to meet the 15% minimum tax rate.
- Global Information Return (GIR) – A comprehensive disclosure form detailing compliance with GMT rules.
- Top-up Tax Payment – Any shortfall in tax must be paid by this deadline.
January 2028 – Audit and Review Begins
Tax authorities will begin risk assessments and audits to ensure proper compliance with GMT requirements.

3. Impact on Malaysian Businesses, Especially SMEs

While SMEs are not directly targeted by GMT, the indirect implications can be significant:

Increased Data Requests
SMEs supplying to MNEs may be required to provide more financial or operational data to assist MNEs in complying with their GMT obligations.
Pricing Pressure
If the GMT increases the tax burden on MNEs, they may renegotiate pricing, reduce costs, or cut non-essential services, potentially affecting suppliers, subcontractors, and service providers.
Group Restructuring
Some local business groups may find themselves close to the EUR 750 million threshold or part of a larger MNE structure. GMT could trigger internal reviews of group structures and tax planning strategies.
Heightened Compliance Standards
SMEs working closely with MNEs might be expected to adopt higher standards in financial reporting, documentation, and tax governance.

4. Tax Impact: What Should SMEs Do Now?

For most SMEs, there is no direct tax payment under GMT unless they fall under the global revenue threshold. However, this is a good opportunity to:

Review your company group structure, especially if you’re expanding or have international dealings.
Ensure proper documentation of related party transactions and transfer pricing arrangements.
Strengthen your tax governance, financial reporting, and risk management processes.
Engage your tax agent or consultant to assess potential long-term impact or compliance requirements.

Final Thought

The Global Minimum Tax is often viewed as a “big boys’ rule,” but the ripple effects can easily reach SMEs. If your business is in the supply chain of a multinational, has overseas dealings, or aims for regional expansion, understanding GMT is not just optional — it’s necessary.

Staying informed and proactive will help your business adapt to global tax changes and remain competitive in the evolving business landscape.

Talk to your tax advisor today — being prepared is better than being caught off guard.

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