Emerging Markets Rates and Currencies Handbook

Tax Summary – Malaysia Malaysia Country Tax Deductibility and Considerations Inter-Co Debt Offshore Bank Loans Offshore Local Borrowing Derivatives Equities W/H Tax • 15% WHT • Under certain tax treaties typically 5-15%, with further reduction possible on country by country basis • 15% WHT • Under certain tax treaties typically 5 - 15%, with further reduction possible on country by country basis • Interest on loans guaranteed by the Malaysian government are exempt from tax • No WHT • N/A • NoWHT on dividends • Certain treaties provide for a maximum WHT on dividends should Malaysia impose in the future Deductibility of interests • Thin cap rules replaced by earning stripping rules in January 2019: • Applied to interest expense (MYR 500,000+) on any financial assistance granted in controlled transactions (between two enterprises that are associated enterprises) • Maximum amount of interest deduction allowed is 20% EBITDA • Interest expenses in excess of the maximum deduction allowed may be carried forward indefinitely • Deductible if borrowings are wholly employed in the production of gross income or being laid out on assets used or held for the production of gross income, and interest is not specifically disallowed under the Malaysia Income Tax Act • Deduction restricted if the borrowings are utilized for investments or non business purposes. However, the amount restricted which is attributable to the investments can be claimed against taxable income derived therefrom • Deductible if borrowings are wholly employed in the production of gross income or being laid out on assets used or held for the production of gross income, and interest is not specifically disallowed under the Malaysia Income Tax Act • Deduction restricted if the borrowings are utilized for investments or non business purposes. However, the amount restricted which is attributable to the investments can be claimed against taxable income derived • therefrom • N/A • N/A Deductibility of FX losses • Realized FX losses are deductible if borrowings/derivative/equity are wholly employed in the production of gross income Other Taxes/Duties • 0.5 % Stamp Tax on loan agreements • N/A • N/A Comments • N/A • N/A • N/A • N/A • N/A Note: Citigroup Inc. and any of its affiliates do not provide accounting, tax, or legal advice. Please seek advice from a relevant licensed advisor Source: Relevant legislation, publicly available sources