Submission of information for U.S. Reportable Accounts by Malaysian Financial Institutions to commence on 30 June 2023

07 September 2022

The Agreement between the Government of Malaysia and the Government of the United States of America to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act (‘the Agreement’) signed between governments of Malaysia and the United States of America on 21 July 2021 was gazetted on 1 September 2022 [P.U.(A) 278/22] pursuant to section 132B of the Income Tax Act 1967.

The Agreement, inter alia, seeks to improve international tax compliance and provide for the implementation of the Foreign Account Tax Compliance Act (FATCA) of the United States of America which provides a reporting regime for U.S. Reportable Accounts¹.

In furtherance of its obligations under the Agreement, the Malaysian Government issued the following subsidiary legislation on 1 September 2022:

Income Tax (Automatic Exchange of Financial Account Information between the Government of Malaysia and the Government of the United States of America to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act) Rules 2022 [P.U.(A) 279/22] (‘the Rules’); and

Labuan Business Activity Tax (Automatic Exchange of Financial Account Information between the Government of Malaysia and the Government of the United States of America to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act) Regulations 2022 [P.U.(A) 279/22] (‘the Regulations’).

The Rules and Regulations, inter alia, require a Reporting Malaysian Financial Institution² to furnish to the Director General of Inland Revenue of Malaysia, a return stating the information (as applicable) specified in Article 2 of the Agreement in the format as may be determined by the said Director General:

in respect of the calendar years 2014 to 2022, on or before 30 June 2023; and

in respect of every following calendar year, on or before 30 June of the year following the end of the calendar year to which the return relates.³

The Agreement requires a Reporting Malaysian Financial Institution to apply the due diligence procedures contained in Annex I of the Agreement to identify U.S. Reportable Accounts and accounts held by Non-Participating Financial Institutions⁴.

It is to be noted that, subject to prescribed exceptions, a Reporting Malaysian Financial Institution includes a Custodial Institution, a Depository Institution, an Investment Entity, and a Specified Insurance Company (each as defined in the Agreement).

As a general rule, the Malaysian Government is to exchange the information received from the Reporting Malaysian Financial Institutions by the later of nine months after the end of the calendar year to which the information relates or the next September 30th after the Agreement enters into force.

Alert by Lim Koon Huan (Partner and Co-Head) of the Compliance Practice of Skrine

¹The term ‘U.S. Reportable Account’ is defined in paragraph (y) of Article 1(1) of the Agreement.

² The term ‘Reporting Malaysian Financial Institution’, is defined in paragraph (n) of Article 1(1) of the Agreement read, inter alia, with paragraphs (g), (l) and (o) of Article 1(1) of the Agreement.

³ See Rule 5(1) of the Rules and Regulation 5(1) of the Regulations.

⁴ The term ‘Non-Participating Financial Institutions’ is defined in paragraph (o) of Article 1(1) of the Agreement.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.

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Submission of information for U.S. Reportable Accounts by Malaysian Financial Institutions to commence on 30 June 2023