Professional Documents
Culture Documents
Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Malaysia 2011
PHASE 1
October 2011 (reflecting the legal and regulatory framework as at August 2011)
This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the OECD or of the governments of its member countries or those of the Global Forum on Transparency and Exchange of Information for Tax Purposes. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
Please cite this publication as: OECD (2011), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Malaysia 2011: Phase 1: Legal and Regulatory Framework, Global Forum on Transparency and Exchange of Information for Tax Purposes: Peer Reviews, OECD Publishing. http://dx.doi.org/10.1787/9789264126657-en
Series: Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews ISSN 2219-4681 (print) ISSN 2219-469X (online)
OECD 2011
You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to rights@oecd.org Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at info@copyright.com or the Centre franais dexploitation du droit de copie (CFC) at contact@cfcopies.com.
TABLE OF CONTENTS 3
Table of Contents
About the Global Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Information and methodology used for the peer review of Malaysia . . . . . . . . . . 9 Overview of Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 A. Availability of information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.2. Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 21 54 62
B. Access to information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 B.1. Competent Authoritys ability to obtain and provide information . . . . . . . . 66 B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 77 C. Exchanging information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.1. Exchange of information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.2. Exchange of information mechanisms with all relevant partners . . . . . . . . C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . . C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . . 79 80 87 89 90 91
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
4 TABLE OF CONTENTS Summary of Determinations and Factors Underlying Recommendations. . . . 93 Annex 1: Jurisdictions Response to the Review Report . . . . . . . . . . . . . . . . . . 97 Annex 2: List of all Exchange-of-Information Mechanisms in Force. . . . . . . . 98 Annex 3: List of all Laws, Regulations and Other Relevant Material . . . . . . .101
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
EXECUTIVE SUMMARY 7
Executive Summary
1. This report summarises the legal and regulatory framework for transparency and exchange of information in Malaysia. The international standard which is set out in the Global Forums Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information, is concerned with the availability of relevant information within a jurisdiction, the competent authoritys ability to gain access to that information, and in turn, whether that information can be effectively exchanged on a timely basis with its exchange of information partners. 2. Malaysia is one of the most developed economies in South-East Asia. It has progressed from an economy dependent on agriculture and primary commodities to a manufacturing-based, export-driven economy spurred on by high technology, knowledge-based and capital-intensive industries. Malaysia hosts the worlds largest Islamic banking and financial centre. The island of Labuan is where Malaysias International Business and Financial Centre (IBFC), established in 1990, is located. 3. In 2009, Malaysia committed to the internationally agreed standard for international exchange of information (EOI) in tax matters. Since then, Malaysia has actively sought to update and extend its network of double taxation conventions: since that time it has signed 18 Double Tax Conventions (DTCs)/protocols to existing DTCs, all of which fully conform to the standard, 10 of which are in force and 5 are not in force but have already been ratified by Malaysia. A further 15 agreements are under various stages of negotiation. Although Malaysia has embarked on an ambitious programme of negotiation of protocols to its treaties to bring them to the standard, currently, however, only 10 of Malaysias 71 DTCs fully meet the international standard. It is recommended that Malaysia continues its program of renegotiating its treaties which are not to the standard and examines ways to bring all agreements up to the international standard as soon as practicable. 4. Malaysias commercial and tax laws provide for extensive registration and licensing requirements which, coupled with customer due diligence rules provided under Malaysia anti-money laundering legislation, guarantee that ownership and identity information is available for virtually all types of
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
8 EXECUTIVE SUMMARY
companies, partnerships, trusts and foundations. Identity information may not be always available in respect of trusts whose trustees are not subject to the anti-money laundering legislation; although Malaysian authorities estimate that this would involve a very narrow category and that common law obligations will ensure that identity information is always kept. Accounting records, including underlying documentation, are also available and are required to be kept for at least five years in Malaysia; however, there is no express obligation to maintain underlying documentation in the case of entities in the Labuan IBFC or certain Malaysian trusts that do not carry business in Malaysia or are not in receipt of Malaysian source income. The effectiveness of the obligations to keep ownership and accounting information is generally supported by a comprehensive system of sanctions. The same holds true with regard to bank information, the availability of which is prescribed under the anti-money laundering legislation. 5. Malaysias competent authority has broad powers to obtain relevant information from any person who holds the information and has measures to compel the production of such information. However, Malaysia does not have the power to obtain and provide information that is held outside Malaysia, even if such information is in the control of a person within its territorial jurisdiction. This gap in Malaysian legal framework is mitigated by the fact that Malaysian laws require that most relevant ownership and accounting information is kept in Malaysia. 6. Malaysia is only able to access bank information to answer an exchange of information request received pursuant to a DTC/tax information exchange agreement (TIEA) containing an equivalent of Article 26(5) of the OECD Model Tax Convention. Only DTCs/TIEAs containing this explicit provision are considered to override domestic secrecy laws. Ten of Malaysias DTCs or protocols contain such a provision (as well as eight treaties or protocols signed but not yet in force). 7. The laws of Malaysia allow it to enter into TIEAs and negotiations of TIEAs are underway. Malaysias authorities do not currently have the power to access information in the Labuan IBFC in order to respond to an EOI request made pursuant to a TIEA. However, Malaysia is now also working to amend its legislation in order to enable it to obtain and exchange information pursuant to such EOI instruments. 8. Malaysias response to the recommendations in this report, as well as the practical implementation of the legal framework will be assessed during the Phase 2 Peer Review of Malaysia, which is scheduled for the first half of 2013.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
INTRODUCTION 9
Introduction
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
10 INTRODUCTION
Overview of Malaysia
12. Malaysia is a federal constitutional monarchy located in South East Asia, across two regions divided by the South China Sea. Peninsular Malaysia, facing the Straits of Malacca, borders with Thailand and is linked to Singapore by two bridges; East Malaysia, situated on the Borneo island, borders with Brunei and Indonesia. The country covers an area of approximately 329 847 square kilometres. Its population of 28.5 million is unevenly distributed with about 20 million inhabitants living on the Malaysian Peninsula and 8 million on East Malaysia.1 Malaysias population embraces a variety of ethnic groups, Malay being the majority, followed by Chinese, indigenous Orang Asli, Indian, and others. While Islam is the religion of the country, with Muslims composing around 60% of the population, other religions are freely practiced. 13. Malaysia acquired independence from the United Kingdom in 1957. The Federal Constitution established a constitutional monarchy, in which the elected King (Yang di-Pertuan Agong) is the head of the country and The Prime Minister and his Cabinet exercise federal executive power. Government takes the form of a parliamentary democracy. The Parliament, divided into the Senate (Dewan Negara) and the House of Representatives (Dewan Rakyat), exercises legislative power, and of superior and subordinate courts are vested with judicial authority. The federation is made up of 13 states (Negeri) and 3 federal territories2, these latter being administered by the government through the Ministry of Federal Territories and Urban Wellbeing. Major cities are Kuala Lumpur, Klang, and Johor Bahru. 14. With a total 2010 gross domestic product (GDP) of EUR 289.62 billion,3 Malaysia is one of the most developed economies in South-East Asia. The service sector accounts for about 50% of total GDP, industry for about 41% and agriculture for 9%. The pillars of the economy are manufacturing (notably electronic products), natural resources (petroleum and natural gas), finance and tourism. Malaysia is an active trading nation, ranked in the top 20 trading nations in the world, with a total merchandise export of EUR 138.79 billion in 2010.4 Its main trading partners are the Peoples Republic of China, Japan, Singapore, the United States, the European Union and Thailand.
1. 2. 3. 4.
www.statistics.gov.my, accessed in June 2011. Labuan, Kuala Lumpur, and Putrajaya. GDP calculated for 2010 based on purchasing-power-parity (PPP). See IMF, World Economic Outlook Database, April 2011. www.imf.org, accessed June 2011. Asian Development Bank, Asian Development Outlook 2011: Malaysia. www.adb. org/documents/books/ado/2011/ado2011-mal.pdf, accessed June 2011.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
INTRODUCTION 11
15. The official Malaysian currency is the ringgit (MYR).5 From the middle of 2005, the Central Bank (Bank Negara Malaysia) adopted a managed float foreign exchange regime against several key currencies. 16. Malaysia is a member of the Asia Pacific Economic Co-operation (APEC), the Association of Southeast Asian Nations (ASEAN), the United Nations (UN) and the World Trade Organisation (WTO). It is a founding member of the Global Forum.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
12 INTRODUCTION
Malaysia apply throughout the country, including making laws applicable to States as regards international agreements (Art.76 Constitution). 20. The superior courts are the High Court in the States of Malaya (High Court in Malaya), and the High Court in the States of Sabah and Sarawak (High Court in Sabah and Sarawak), Court of Appeal, and the Federal Court, while the Magistrates Courts, the Sessions Courts, and other courts8 are classified as subordinate courts. 21. The application of common law in Malaysian criminal cases is specified in section 5 of the Criminal Procedure Code (Act 593) which states that English law shall be applied in cases where no specific legislation has been enacted. In addition, sections 3 and 5 of the Civil Law Act 1956 allow for the application of English common law, equity rules, and statutes in Malaysian civil cases where no specific laws have been made. 22. The Federal Government, composed of Yang di-Pertuan Agong and the Cabinet, headed by the Prime Minister, has treaty-making power, while the Federal Parliament has the exclusive power to implement treaties domestically. The Prime Minister himself or the Foreign Minister or any Cabinet Minister authorised to do so, signs and ratifies international treaties.
Taxation system
23. Article 96 of the Constitution provides that no tax or rate shall be levied by or for the purposes of Malaysia except by or under the authority of federal law. The law governing income taxation is the Income Tax Act 1967 (ITA). Income tax is charged on a territorial basis and upon remittance. However, the businesses of banking, insurance and air and sea transport are subject to taxes on worldwide income. Income tax rates for resident individuals range from 1% to 26%, and non-resident individuals are taxed at a flat rate of 26%. Companies with paid-up capital of MYR 2.5 million (EUR 575 000) or less are subject to corporate tax at 20% on chargeable income up to MYR 500 000 (EUR 115 000) and 25% on chargeable income above that threshold. For companies with paid-up capital of more than MYR 2.5 million and non-resident companies, chargeable income is taxed at 25%. An individual is resident if he is present in Malaysia for more than 182 days in a year, while a company is deemed resident if its management and control are exercised in Malaysia.
8.
family and inheritance matters as regards only to the Muslim population. Shariah law is administered by a separate system of Shariah courts. The Sessions Court, Magistrates Court, Juvenile Court, Penghulu Court and Native Court.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
INTRODUCTION 13
24. Corporate profits are subject to a one-tier corporate tax system, and thus dividends paid by resident companies are not subject to withholding tax. The withholding tax on interest is 15%, and for royalties, fees for technical services and other income it is 10%. There are also other direct taxes such as real property gains tax, and indirect taxes such as sales tax, service tax, excise duty and import duty. There is no tax on capital gains. 25. Malaysia has tax incentives for manufacturing, agriculture and tourism activities. Incentives include pioneer status, investment tax allowance, reinvestment allowance and double deductions, with the objective of developing Malaysia and changing the economy from agriculture-based to industrybased. Incentives are available under the Promotion of Investments Act 1986 and the ITA. The Labuan Business Activity Tax Act (LBATA) establishes a separate regime for taxing business activities in the Labuan International Business and Financial Centre (IBFC). 26. The free zones (FZs) of Malaysia include 15 free commercial zones and 19 free industrial zones. Within the FZs, companies are subject to minimum customs formalities and are exempt from import duties on raw material, machinery and component parts. Companies established at the FZs are subject to the same reporting requirements applicable to Malaysian companies in general. 27. Double taxation conventions (DTCs) and taxation information exchange agreements (TIEAs) prevail over all domestic laws (ITA ss.132 and 132A). 28. Malaysia committed to the internationally agreed standard for the exchange of information for tax purposes in 2009. As of June 2011, Malaysia is signatory to 71 DTCs providing for international exchange of information (EOI) in tax matters. A complete list of Malaysias DTCs is set out in Annex 2 to this report. The Minister of Finance is empowered to make provisions, by Order (by way of notification in the Government Gazette), for affording relief from double taxation and exchange of information foreseeably relevant to the administration or assessment or collection or enforcement of the taxes under the ITA or other taxes of every kind under any written law and any foreign tax (ITA ss.132 and 132A).
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
14 INTRODUCTION
parallel. The stock market capitalisation to GDP is 180%; much higher than most other South East Asian countries. 30. As of May 2011, there are 1 184 local and foreign financial institutions in Malaysia, including 24 commercial banks, 15 investment banks, 21 Islamic banks, 6 development financial institutions, 45 insurance companies, 15 takaful (Islamic insurance) operators, 6 money brokers, 37 insurance/ takaful brokers, 36 loss adjusters, 16 financial advisers, 74 payment system operators, 53 payment instruments issuers and 836 money changers. 31. Capital market institutions and market intermediaries are regulated and supervised by the Securities Commission Malaysia. Licensed dealers, fund managers, futures brokers and futures fund managers are licensed under the Capital Markets & Services Act 2007 (CMSA) and management companies are approved under the Securities Commission Act 1993 (SCA). 32. The Companies Commission of Malaysia (CCM) incorporates companies and registers businesses and provides company and business information to the public. It is also the leading authority for the improvement of corporate governance. 33. Under the anti-money laundering / counter terrorism-financing (AML/CFT) regime, Bank Negara Malaysia is the competent authority appointed by the Minister of Finance. Financial institutions and a range of designated non-professional businesses and professions are obliged entities under the Anti-Money Laundering and Anti-Terrorism Financing Act 2001 (AMLATFA) and must conduct customer due diligence. 34. Over more than 30 years, Malaysia has been active in Islamic banking,9 Islamic insurance10, the Islamic capital market and the Islamic money market. Malaysia leads the global Islamic bond (sukuk) market with a 65% share. In 2005, Malaysia launched the first Islamic real estate trusts and introduced Asias first Islamic exchange traded fund. In 2008, Malaysias Islamic banking assets reached EUR 50.67 billion with an average growth rate of 20% annually. In 2008, the total assets of Malaysias takaful industry were EUR 167.84 million. Takaful assets and net contributions experienced strong growth of an average of 20% and 27% respectively from 2005 to 2010.
9. Islamic banking is a system of banking that complies with Islamic law also known as Shariah law. The underlying principles that govern Islamic banking are mutual risk and profit sharing between parties, the assurance of fairness for all and that transactions are based on an underlying business activity or asset. Takaful (Islamic insurance) is a concept whereby a group of participants mutually guarantee each other against loss or damage. Each participant fulfils his/her obligation by contributing a certain amount of donation (or tabarru) into a fund, which is managed by a third party the takaful operator.
10.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
INTRODUCTION 15
35. The Malaysia International Islamic Financial Centre (MIFC) is an initiative which comprises a community network of financial and market regulatory bodies, government ministries and agencies, financial institutions, human capital development institutions and professional services companies that are participating in the field of Islamic finance. The MIFC comprises Sukuk creation, Islamic fund and wealth management, international Islamic banking, international takaful and human capital development. Under the MIFC initiative, Islamic financial institutions benefit from various incentives, including licences to conduct foreign currency businesses, tax incentives and facilitative immigration policies.11
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
16 INTRODUCTION
legislation applicable to financial services carried on in the Labuan IBFC.12 The amount of assets held by banks licensed in the Labuan IBFC in 2010 was EUR 23.7 billion, out of EUR 386.3 billion in total in Malaysia. 39. The Labuan Islamic Financial Securities and Services Act 2010 (LIFSSA) provides an overall framework that brings together rules and guidelines on Islamic finance. It provides for a range of Islamic financial products and addresses Shariah compliance for trusts and foundations as well as providing for the establishment of a Shariah Supervisory Council. 40. All of the international standards for effective EOI are applicable to Labuan entities. The Director General of Inland Revenue (DGIR)s access powers extend also to entities in Labuan. Moreover, the Labuan Business Activity Tax Act provides the DGIR with specific authority to access information in Labuan for EOI purposes.
Relevant professions
41. Lawyers, certified accountants and company secretaries are subject to oversight by their respective professional associations and self-regulatory organisations (SROs). Guidelines issued by the various professional associations and SROs are not binding on these professionals and are not considered part of the legal and regulatory framework for the purpose of this assessment. 42. There are about 27 180 public chartered accountants in Malaysia. They are required by law to be members of the Malaysian Institute of Accountants (MIA). 43. There are more than 13 500 lawyers providing services in Malaysia. Each advocate or solicitor in Peninsular Malaysia becomes a member of the Malaysian Bar once he/she qualifies and holds a valid practising certificate. Advocates in Sabah and Sarawak are governed by the Advocates Ordinance Sabah 1953 and Advocates Ordinance Sarawak 1953 respectively and can apply for membership in the Sabah Law Association and Advocates Association of Sarawak respectively. Advocates and other professionals in the Labuan IBFC are subject to the same professional requirements as the rest of Malaysia. 44. In Malaysia, company secretaries are governed by section 139A of the Companies Act 1965 (CA). A company secretary can either be licensed by the
12. In particular the Labuan Financial Services Authority Act 1996; Labuan Companies Act 1990; Labuan Financial Services and Securities Act 2010; Labuan Islamic Financial Services and Securities Act 2010; Labuan Trusts Act 1996; Labuan Limited Partnerships and Limited Liability Partnerships Act 2010; Labuan Foundations Act 2010; and Labuan Business Activity Tax Act 1990.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
INTRODUCTION 17
CCM or be regulated by prescribed bodies, such as the Malaysian Institute of Chartered Secretaries and Administrators and the Malaysian Association of Company Secretaries. As at 22 July 2011, the total number of company secretaries licensed by the CCM is 9 650. The number of company secretaries regulated by prescribed bodies is 52 349.
Recent developments
45. A number of relevant laws and legislative amendments have been promulgated in 2010 and 2011, as follows: major tax offences were listed as predicate offences for money laundering purposes under the AMLATFA; the Labuan Foundations Act 2010; Labuan Financial Services and Securities Act 2010; Labuan Islamic Financial Services and Securities Act 2010; and the Labuan Limited Partnerships and Limited Liability Partnerships Act 2010 were enacted; and new Income Tax (Request for Information) Rules and a new Central Bank Circular were enacted in July 2011 concerning access to and exchange of information for tax purposes. 46. Section 132A of the ITA, introduced in February 2011, enables the Government to enter into TIEAs with any foreign country for the exchange of information where no DTC is yet in force. Malaysia has not entered into any TIEAs yet, however, it has recently concluded TIEA negotiations with Bermuda. 47. The CCM will be introducing the limited liability partnership (LLP) as an alternative business vehicle to provide a wider choice for businesses to structure their operations. The CCM will be empowered to request for information from LLPs, including information concerning the partners. 48. The Malaysian authorities expect to submit for parliamentary approval in October 2011 bills of law covering the following topics: a new law to empower its competent authority to call for information for the purpose of replying to a request made pursuant to a TIEA in the Labuan IBFC; and a new law to empower its competent authority to access information controlled by persons in Malaysia.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
A. Availability of information
Overview
49. Effective exchange of information requires the availability of reliable information. In particular, it requires information on the identity of owners and other stakeholders as well as information on the transactions carried out by entities and other organisational structures. Such information may be kept for tax, regulatory, commercial or other reasons. If such information is not kept or the information is not maintained for a reasonable period of time, a jurisdictions competent authority may not be able to obtain and provide it when requested. This section of the report describes and assesses Malaysias and Labuan IBFCs legal and regulatory framework on availability of information. 50. The Companies Act requires the filing of information on the legal ownership of companies with the Registrar. It also requires companies to maintain registers of their members/shareholders. Foreign companies with share capital which have a place of business in Malaysia or carry on business in Malaysia must maintain registers of those shareholders resident in Malaysia who choose to be registered. The Income Tax Act requires Malaysian and foreign controlled companies13 to provide details of their major shareholders.
13. Controlled companies are defined in the ITA as companies not having more than 50 members/shareholders and controlled by not more than five persons (ss.2 and 139).
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
55. In respect of accounting information, in Malaysia and in the Labuan IBFC, general tax obligations complement commercial law obligations which, taken together, result in relevant entities being required to maintain accounting records. Generally, relevant entities in Malaysia are subject to requirements to keep accounting records, including underlying documentation, for the minimum period required by the standards (five years). There are no express provisions in the laws regulating the Labuan IBFC requiring the maintenance of underlying documentation, however. In addition, Malaysian trusts that do not carry on business in Malaysia, do not remit income to Malaysia and are not in receipt of Malaysian source income are not required to maintain underlying documentation either. 56. In respect of banks and other financial institutions, the anti-money laundering/counter-financing of terrorism regime imposes appropriate obligations to ensure that all records pertaining to customers accounts as well as related financial and transaction information are available.
57. This section will address in separate items ownership and identity information available in Malaysia and in the Labuan IBFC.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
66. As at 19 July 2011, there were 950 312 companies operating in Malaysia (excluding the Labuan IBFC), out of which 948 164 were companies limited by shares (942 895 private, 5 268 public), 1 824 companies limited by guarantee. 14 companies limited by shares and by guarantee and 295 unlimited companies. Among the private companies, between 2008 and July 2011 there were 118 285 exempt private companies.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
Foreign companies
74. Foreign companies that establish a place of business in Malaysia or carry on business in Malaysia must register under the Companies Act (CA s.332(1)). The concept of foreign company includes a company, corporation, society, association or other body incorporated outside Malaysia and an unincorporated society, association or other body which under the law of its place of origin may sue or be sued, or hold property in the name of the secretary or other officer of the body or association duly appointed for that purpose and which does not have its head office or principal place of business in Malaysia (s.4). Foreign companies with or without share capital may be registered in Malaysia. 75. Foreign controlled companies (i.e. foreign companies not having more than 50 members/shareholders and controlled (as defined under s.139) by not more than five persons (s.2)) must file information on their five major
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
shareholders as part of their annual tax returns. Foreign controlled companies constitute over 90% of foreign companies registered in Malaysia. In relation to foreign companies that do not qualify as controlled companies, the Malaysian authorities have powers to request ownership information based on their general powers to call for information provided for in the ITA (s.81). 76. Upon registration in Malaysia, a foreign company must lodge with the Registrar various information, including a certified copy of the certificate of its incorporation or registration in its place of incorporation or origin, a certified copy of its charter, statute or memorandum and articles or other instrument constituting or defining its constitution, a list of its directors and a memorandum of appointment or power of attorney stating the names and addresses of one or more natural persons resident in Malaysia authorised to accept service of process on its behalf (CA s.332(1)). There is no express obligation to provide information on the ownership of the company to the Registrar. 77. After registration, foreign companies continue to be subject to reporting requirements including notification to the Registrar of any changes in the memorandum or articles lodged with the Registrar, including changes in the directors of the foreign company and changes in the registered office of the company in Malaysia (CA s.335).
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
companies, they will necessarily have access to the companys register of members. No legal provision requires that directors or officers hold information on the owners of the company which they serve as directors or officers.
Nominees in Malaysia
88. No indication needs to be given in the share registers or information filed with the Registrar or the Inland Revenue Board of Malaysia (IRBM) when shares or other interests in companies are held by nominees on behalf of third parties. However, where a companys shares are held by a nominee on behalf of the companys directors, the identity of the beneficial owners needs to be disclosed in the report attached to balance sheets and consolidated balance sheets prepared by the Malaysian company (CA s.169(6)). 89. Pursuant to the Securities Industry (Central Depositories) Act 1991 (SICDA), every securities account opened with a central depository must be in the name of the beneficial owner of the deposited securities or in the name of an authorised nominee (SICDA s.25). The person opening the securities
15. Pursuant to the Standard Guidelines on Anti-Money Laundering and Counter Financing of Terrorism, beneficial owner refers to any natural person(s) who ultimately owns or controls a customer and/or the person on whose behalf a transaction is being conducted. It also incorporates those persons who exercise ultimate effective control over a legal person or arrangement. For companies the person(s) who ultimately owns or controls a customer and/or the person on whose behalf a transaction is being conducted includes the natural person with a controlling interest and the natural persons who comprise the mind and management of company (Appendix). Reporting institutions under the Standard Guidelines are required to identify shareholders with majority or more than 25 percent controlling interest, which ever is applicable.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
Conclusion
91. The Companies Act requires filing of information on the legal ownership and identity of companies with the Registrar. It also requires companies to maintain registers of their members/shareholders. Domestic and foreign companies qualifying as controlled companies are required to file information on their five major shareholders. In addition, financial institutions and some other service providers are required under anti-money laundering legislation to obtain information on the ownership chain for all of their customers. While nominees who are acting on behalf of the companys directors and those which are lawyers, certified accountants, company secretaries or financial institutions must identify the persons for whom they act, it is possible that some persons acting as nominees fall outside this group and are not required to maintain information on the persons for whom they act. The Malaysian authorities considered that such group would represent a narrow category and that in any case the Registrar or the tax authorities would be able to request those nominees to disclose the clients ownership information based on the general powers to call for information the authorities have under the CA and the ITA (CA s.11(a) and ITA s.81).
Companies in the Labuan IBFC (ToR 16 A.1.1) Types of companies in the Labuan IBFC
92. The Labuan IBFC has autonomy to issue laws and regulations on companies. The Labuan Company Act 1990 (LCA) rules the incorporation
16. Terms of Reference to Monitor and Review Progress towards Transparency and Exchange of Information.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
and management of companies in Labuan. The LCA deals with: (i) companies incorporated in Labuan (Labuan companies); (ii) foreign Labuan companies; and (iii) Labuan protected cell companies (Labuan PCC). 93. A Labuan company can be incorporated as: a company limited by shares; a company limited by guarantee; or an unlimited company (LCA s.14). 94. A Labuan company limited by shares can be privately or publicly owned (LCA ss.15(7), 18 and 21). The requirements to incorporate a Labuan company are: (i) a minimum of one subscriber to the shares of the company; (ii) no minimum capital requirement, unless the company undertakes licensed activities (minimum capital of MYR 10 million (EUR 2 300 000) for banks and MYR 300 000 (EUR 69 000) for captive insurance companies); (iii) minimum of one director (s.87); and (iv) a resident secretary (s.93(1)). 95. A foreign Labuan company is a foreign company that has a place of business or is carrying on business in Labuan (LCA s.120) and is registered in Labuan (ss.16 and 121). The LCA provides for a very broad definition of the expression carrying on business in Labuan. This expression embraces: (i) carrying on business in, from or through Labuan; (ii) establishing or using a share transfer or share registration office in Labuan or administering, managing or otherwise dealing with property situated in Labuan as an agent, legal personal representative or trustee, whether by servants or agents or otherwise; and (iii) cases where the Minister17 has given specific notice under the terms described in the LCA (s.120). 96. A Labuan protected cell company (PCC) is a Labuan company established under normal company rules with the ability to segregate its assets and liabilities into different cells, separated from the general assets of the PCC (LCA s.130). A Labuan PCC may only be formed to conduct licensed activities dealt with by the Labuan Financial Services and Securities Act 2010 (LFSSA) and the Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA).18 The incorporation of or the conversion to a Labuan PCC requires
17. 18. Minister is defined as the Minister for the time being charged with the responsibility for financing (LCA s.2). Licensed activities under the LFSSA include the activities of Labuan Securities and Capital Market (excluding public fund), Labuan trust companies, Labuan managed trust company, Labuan banks, Labuan investment banks, Labuan insurance and insurance-related, Labuan financial businesses, Labuan private trust company, company management and exchanges. Licensed activities under the LIFSSA include activities of Labuan islamic securities and capital market
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
shareholding to the LFSA at the time they occur. However, the trust company as the resident secretary (company secretary) of the Labuan company must keep all records of transfer of shares and ready to be inspected by the Authority at any point of time (LCA s.93(3)). In addition, updated ownership information is provided every year in the annual return. Companies not having share capital are not required to include a list of its members in the annual return but merely to inform the address where such list is kept, if it is kept elsewhere than in its registered office (s.109(4)(5)). 103. Pursuant to the Labuan Business Activity Tax Act 1990 (LBATA), the Director General of the Inland Revenue Board (DGIR) is empowered to call for information from any person and disclose such information with governments where a DTA exist (s.22). The DGIR is also granted powers to disclose information upon a request from any tax authority of any government or any territory outside Malaysia (s.22A); however his powers to call for information are limited to the cases where a DTA is in place.
Foreign companies
104. Foreign companies that wish establish a place of business in Labuan or carry on business in Labuan and are not already registered under the Companies Act 1965 (CA) must register under the Labuan Companies Act 1990 (LCA s.121). 105. In order to register as a foreign Labuan company, the foreign company must lodge with the LFSA various information, including a certified copy of the certificate of its incorporation or registration in its place of incorporation or origin, a certified copy of its charter, statute or memorandum and articles or other instrument constituting or defining its constitution, a list of its directors, a memorandum of appointment or power of attorney stating the name of a Labuan trust company authorised to accept service of process on its behalf, a statutory declaration made by an officer of the Labuan trust company (LCA s.121). The law does not expressly require the lodging of information concerning the owners/shareholders (whether legal or beneficial owners). Ownership information concerning Labuan foreign companies is available to the Labuan trust company that functions as registered office of the foreign company, as further analysed in this section. 106. A foreign Labuan company must lodge with the LFSA an annual return containing the prescribed particulars and accompanied by such copies of documents as are required to be included in the return (LCA s.129). The relevant return does not require information on the ownership of the foreign Labuan company (Form 40 of the Labuan Companies Regulations 2010), however.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
Conclusion
120. In essence, the Labuan Companies Act requires filing of information on the legal ownership and identity of companies with the LFSA. It also requires Labuan companies and PCCs to maintain registers of their members/ shareholders. All Labuan companies, PCCs and Labuan foreign companies must have registered offices at licensed Labuan trust companies and these trust companies are required to identify and keep records of the ownership (including beneficial ownership) of the companies which are their clients. In addition, financial institutions and some other service providers are required under anti-money laundering legislation to obtain information on the ownership chain for all of their customers. Where nominees are not lawyers or certified accountants or financial institutions or acting by way of business and are not acting on behalf of the directors of the company, information is not required to be available on the persons for whom they act.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
shares. Moreover, private controlled companies have to report annually to the tax authorities their five largest shareholders irrespective of the nature of shares held and are in many cases are also subject to due diligence under the AMLAFTA. Finally, the Malaysian authorities are not aware of any case where such shares exist now. In light of these considerations, the gap is not considered to be material. This issue will be further followed up in Malaysias Phase 2 review. 122. The authorities are currently drafting a new Companies Bill and is considering introducing a transitional provision for registration of bearer shares after which such shares will no longer be recognised.
20.
Business includes every form of trade, commerce, craftsmanship, calling, profession or other activity carried on for the purpose of gain, but does not include any office or employment or any charitable undertaking or any occupation specified in the Schedule of ROBA. The Schedule includes, inter alia, the activities of cultivators, fishermen, craftsmen, door-to-door salesmen that act for their own account and for the purpose of gaining their own livelihood, under the conditions described on the Schedule.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
necessary information for purposes of carrying out the provisions of that act. See further Part B of this report for analysis of Malaysias powers to access information. 128. In addition, under section 30 of the PA, the partners of a general partnership are bound to render true accounts and full information of all things affecting the partnership to any partner or his legal representatives. Thus, the partners would have to keep the information regarding the identities of all partners. Moreover, in order to meet their obligation to file annual tax returns partnerships would be required to know who their partners are.
Conclusion
130. Overall, legal ownership and identity information is available to the Registrar or the IRBM in respect of all partnerships operating in Malaysia. In addition to this, financial institutions and some other service providers are required under anti-money laundering legislation to obtain information on the ownership chain for all of their customers.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
of change is made (ss.6(1) and 51(1)). Among the changes to be informed to the LFSA are any changes of a partner in a Labuan LP or a Labuan LLP (according to Form 3 Notice of Changes to Labuan Partnership Agreement and Form 16 Notice of Changes to a Recognized Limited Liability Partnership Agreement).
Foreign LLPs
140. In order to have a place of business or carry on a business under the Labuan IBFC, a foreign LLP must be first registered with the LFSA as a recognised LLP under the LLPLLPA (s.48). As part of the registration process, a recognised LLP must file: a certified copy of the certificate of incorporation or registration in the place of origin; a certified copy of the partnership agreement; a list of partners containing their particulars; the full name and address of a designated partner responsible for duties and obligations of the LLP; and the name of the Labuan trust company that represents the LLP; amongst other information. Any changes to any particulars entered in the register must be reported to the LFSA within 30 days after the change occurred (s.50(2)). Similar to domestic partnerships, the requirements of registration and identification under the LLPLLPA refer to legal ownership only.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
Conclusion
145. Legal ownership and identity information is either filed with the LFSA or required to be kept by the partnership itself in respect of all partnerships operating in the Labuan IBFC. In addition to this, financial institutions and some other service providers are required under anti-money laundering legislation to obtain information on the ownership chain for all of their customers.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
148. A trustee of a Malaysian trust can be a natural person or corporate entity, and does not have to be a resident of Malaysia. The types of trusts created under the laws of Malaysia may be categorised as: express trusts; and unit trusts. 149. An express trust is a trust created under the common law where the provisions of the trust manifest the certainty of intention, subject matter, and objects. Evidence in writing is required for a declaration of trust in respect of any immovable property or a disposition of an equitable interest. Private trusts do not need to be publicly registered in Malaysia. 150. 151. Unit trusts are essentially a means for investment in a portfolio of securities and are therefore regulated by the Securities Commission (SC). The trustee of a unit trust must obtain prior approval from the SC (Capital Markets & Services Act 2007 (CMSA) s.289). An approved trustee must be a public trustee or a public trust resident in Malaysia. It must also meet certain minimum financial and operational requirements (as specified in Chapter 4 of the Guidelines on Unit Trust Funds).
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
164. Notwithstanding the above, Malaysian laws impose no restrictions on who can provide trust services. Therefore, an individual or legal entity which does not qualify as a reporting institution under the AMLATFA ie, not an accountant, lawyer, company secretary, insurance company or bank or to the other cases listed above could still act as a trustee by way of business. Such individuals and legal entities, as well as those who act as trustees other than by way of business are not subject to obligations under the AML/ CFT Regulation, guidelines and instructions and, therefore, are not required to conduct CDD on their customers. Those individuals and legal entities are subject to common law obligations to maintain information on the trust.
Conclusion
165. In essence, identity and ownership information is available in respect of trusts administered by trust companies and other service providers that qualify as reporting institutions under the AMLATFA. Malaysias regulatory framework targets the major avenues of trust formation and administration by regulated trust intermediaries. It is possible, however, that individuals and legal entities not subject to the AMLATFA act as trustees. Those trustees would only be subject to common law obligations concerning the collection of information on the ownership of settlors and beneficiaries of trusts. Although the Malaysian authorities estimate that these trustees would constitute a very narrow category, there is a risk that appropriate information on the settlors and beneficiaries of the trusts for which they act is not properly kept in Malaysia.
Trusts in the Labuan IBFC (ToR A.1.4) Types of trusts in the Labuan IBFC
166. The Labuan Trusts Act 1996 (LTA) is the central piece of legislation governing trusts in the Labuan IBFC. Pursuant to the LTA, there are five types of trusts that can be created in the Labuan IBFC: purpose trusts (s.11A); charitable trusts (s.11B); Labuan special trusts (Part IVA); Labuan spendthrift/protected trusts (s.11E); and Labuan Islamic trust. 167. A purpose trust is a trust established under the framework of the LTA for a particular purpose or purposes, charitable or not.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
Authority (LFSA) by the trustee (LTA s.12(1)(2)). No information concerning the identity of the settlor and the beneficiaries is required by the LFSA. The information to be provided upon registration of the trust is limited to: (i) the name of the trust; (ii) the date of its creation; (iii) the name and address of the trust company acting as trustee; (iv) the address of the registered office of the Labuan trust company; and (v) the proper law of the trust (s.12(3)).
Conclusion
177. Overall, legal ownership and identity information is available to the LFSA in respect of all trusts in the Labuan IBFC due to the requirement of having a Labuan trust company as a trustee. The Labuan trust company is required to be the or one of the trustees and that such trust companies are subject to AMLATFA obligations. This is complemented by common law obligations on all trustees to maintain information concerning trusts. In addition to this, financial institutions and some other service providers are
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
Conclusion
190. Overall, legal ownership and identity information is available in respect of all foundations in the Labuan IBFC. Foundations must keep documents at their registered offices, including their charters, which detail the founders and beneficiaries. Compulsory registration with the LFSA requires identification of the foundation council members. In addition, a foundation must have a Labuan trust company as its secretary and the Labuan trust company is obliged under AML/CFT legislation to identify the founders, foundation council members and beneficiaries. Financial institutions and some other service providers are also required under AML/CFT legislation to conduct full CDD on foundations which are their customers.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
substantial shareholdings, companies are liable on conviction to a fine of MYR 5 000 (EUR 1 150) and also a default penalty of MYR 500 (EUR 115) (s.69L(4)). Substantial shareholders who fail to notify the company of their interest or of the change or the cease of their interest are liable on conviction to a fine not exceeding MYR 1 million (EUR 230 000) and a default penalty of MYR 50 000 (EUR 11 500) (s.69M). 195. The Companies Act also provides specific penalties applicable to foreign companies failing to lodge any of the prescribed returns or to keep the branch register at their registered office in Malaysia. In such cases, the company and every officer of the company who is in default and every agent of the company who knowingly and wilfully authorises or permits the default is guilty of an offence and liable on conviction to a fine of MYR 1 000 (EUR 230) and also to a default penalty (s.349). The same penalty applies if a foreign company fails to lodge with the Registry the particular of any changes or alterations made in relation to its agent or agents or the name or address of any agent within one month (or within such further period as the Registrar in special circumstances apply) (s.335). 196. Partnerships that fail to comply with the obligation to report any change in the particulars registered to the Registrar within 30 days after the change commit an offence. Offenders are liable on conviction to a fine not exceeding MYR 10 000 (EUR 2 300) or to imprisonment for a term not exceeding one year or to both (ROBA s.12(A)). 197. Penalties for trustees-administrators not complying with record keeping and reporting obligations for trusts may be summarised as follows: failure to lodge with the CCM an annual statement of the liabilities of the company to the public in its trustee capacity, its list of members and a summary report is subject to a fine of MYR 50 (EUR 12) for every day during which the default continue (TCA ss.30 and 21); and failure to lodge with the CCM its annual return and its particulars (general requirement to any company including companies that act as trustees-administrators) result in a fine of to a fine of MYR 2 000 (EUR 460) (CA s.165).
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
Conclusion
200. Relevant laws applicable in Malaysia in particular the Companies Act 1965, the Trust Companies Act 1949 and the Anti-Money Laundering and Anti-Terrorism Financing Act 2001 contain enforcement provisions to ensure the availability of information. Some offences are subject to significant fines and imprisonment. The effectiveness of the enforcement provisions which are in place in Malaysia will be considered as part of the Phase 2 Peer Review.
Enforcement provisions to ensure availability of information in the Labuan IBFC (ToR A.1.6)
201. The laws applicable in the Labuan IBFC also provide for detailed penalties for non-compliance with key obligations to maintain ownership and identity information. 202. Companies face penalties for failure to lodge the prescribed returns with the LFSA or to keep any of the prescribed registers. In case of failure to lodge the return of allotment, offenders are liable on conviction to a fine of MYR 10 000 (EUR 2 300) and also to a default penalty (LCA s.43(2)). For failure to lodge the annual return, the company and every officer of the company who is in default is guilty of an offence and liable on conviction to a fine of MYR 10 000 (EUR 2 300) and also to a default penalty (s.109(6)). Failure to maintain the register of members triggers conviction to a fine of MYR 10 000 (EUR 2 300) and also to a default penalty (LCA s.105(3)). 203. The Labuan Companies Act also provides for specific penalties applicable to foreign companies failing to lodge the annual return and prescribed documents. In such cases, the company who is in default is guilty of an offence and liable on conviction to a fine a fine not exceeding MYR 10 000 (EUR 2 300) (LCA s.142(2)). In addition, the foreign Labuan company and
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
every officer of the company who failed to inform the location of registered office and any change thereof within one month is guilty of an offence and liable on conviction to a fine a fine of MYR 10 000 (EUR 2 300) and also to a default penalty (s.123). 204. Partnerships that fail to comply with the obligation to report any change in the particulars registered to LFSA within 30 days after the change commit an offence. Offenders are liable on conviction to a penalty as specified by the LFSA (LLPLLPA s.6). The LLPLLPA provides for a general penalty corresponding to a fine not exceeding MYR 500 (EUR 115) to be applied when no penalty is expressly provided (s.77). 205. Labuan trustees are liable on conviction to a fine of MYR 10 000 (EUR 2 300) in case of non-compliance with record keeping and reporting obligations as specified below (LTA s.12): failure to notify the LFSA with regard to changes in the particulars of the registered Labuan trust within one month of the change; failure to notify the LFSA with regard to the termination of the trust in the prescribed form within one month of the termination; and failure to notify the LFSA in the prescribed form as to whether the trust is still in existence and whether he is still the trustee thereof not later than one month after every anniversary of the registration of the trust in Labuan. 206. With respect to Labuan foundations, the LFA requires that the secretary of the Labuan foundation to file a notice of change of particulars of registration signed by an officer of the Labuan foundation within 30 days after the change (s.17(1)). The secretary and every officer who is in default of this section shall be liable to an administrative penalty in an amount not exceeding MYR 500 (EUR 115) for each day of non-compliance and such amount shall in total exceed MYR 10 000 (EUR 2 300) (s.78(3)). Similarly, the referenced penalties apply to Labuan Islamic foundations (Labuan Islamic Financial Services and Securities Act s.107(2)).
Failure to comply with tax law reporting obligations in the Labuan IBFC
208. Failure to file a statutory declaration or a return of profits (LBATA ss.22 and 22A) constitutes an offence under section 23 of the LBATA and
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
Conclusion
209. Relevant laws applicable in the Labuan IBFC in particular the Labuan Companies Act 1990, the Labuan Limited Partnerships and Limited Liability Partnerships Act 2010, the Labuan Trusts Act 1996, the Labuan Foundations Act 2010, the Labuan Business Activity Tax Act 1990 and the Anti-Money Laundering and Anti-Terrorism Financing Act 2001 contain enforcement provisions to ensure the availability of information. The effectiveness of the enforcement provisions which are in place in the Labuan IBFC will be considered as part of the Phase 2 Peer Review.
Determination and factors underlying recommendations
Phase 1 determination The element is in place, but certain aspects of the legal implementation of the element need improvement. Factors underlying recommendations Not all nominees are required to have information available on the persons for whom they act. Recommendations An obligation should be established for all nominees to maintain relevant ownership and identity information where they act as the legal owner on behalf of any other person. An obligation should be established to maintain information in all cases in relation to settlors, trustees and beneficiaries of trusts with a trustee in Malaysia.
Not all trustees are required to have information available on the identity of settlors and beneficiaries of trusts.
210. A condition for exchange of information for tax purposes to be effective, is that reliable information, foreseeably relevant to the tax requirements of a requesting jurisdiction is available, or can be made available, in a timely manner. This requires clear rules regarding the maintenance of accounting records.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
General requirements in Malaysia (ToR A.2.1) Relevant entities governing laws in Malaysia
211. The Companies Act (CA) requires every company to keep (s.167(1)): such accounting and other records as will sufficiently explain the transactions and financial position of the company and enable true and fair profit and loss accounts and balance-sheets and any documents required to be attached thereto to be prepared from time to time and shall cause those records to be kept in such manner as to enable them to be conveniently and properly audited. 212. This means companies in Malaysia are required to maintain accounting records which: (i) correctly explain all transactions; (ii) enable the financial position of the company to be determined with reasonable accuracy at any time; and (iii) allow financial statements to be prepared. In addition, all companies are required to have their financial statements laid before the company at the annual general meeting (CA s.169(1) to (3)). The directors of the company are responsible for ensuring: that the financial statements comply with the approve accounting standards (s.166A(3)); and unless the company is exempt from the audit requirements, that the financial statements are audited (sec.169(4)). 213. Exempt private companies are required to lay their balance sheets and profit and loss statements before the company at their annual general meetings. Exempt private companies are not required to file audited accounts with the Registrar. Notwithstanding the above, the relevant accounting standards continue to apply to such entities (CA s.165A). Exempt private companies that meet certain requirements are not required to lodge their balance sheet and profit and loss account annually with the CCM (Eighth Schedule). 214. A foreign company carrying on business in Malaysia is required to lodge a copy of its balance sheet with the Registrar within two months of its annual general meeting along with a duly audited statement showing: assets used in and liabilities arising out of its operations in Malaysia as at the date on which its balance sheet was made up, and a duly audited profit and loss account (CA s.336). The Registrar may waive the foreign company from the obligation to lodge the accounting statements in the cases described in the CA (s.336(5))23.The foreign company is still required to prepare and maintain such
23. Section 336(5) establishes a waiver in following cases the (i) it would be impractical to comply with this obligation having regard to the nature of the companys
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
in the ITA to keep accounting records and underlying documentation: (i) if a company does not carry on business in Malaysia, does not remit income to Malaysia and is not in receipt of Malaysian source income; and (ii) in the case of a trust with a Malaysian trustee which does not carry on business in Malaysia, does not remit income to Malaysia and is not in receipt of Malaysian source income. In relation to accounting records, however, Malaysian companies and trustees remain subject to the obligations to keep accounting records established at the CA and TIA respectively. 218. Records required to be kept in relation to all arrangements and entities that carry on a business in Malaysia include (s.82(9)): books of account recording receipts or payments or income and expenditure; invoices, vouchers, receipts, and such other documents as in the opinion of the Director General are necessary to verify the entries in any books of account; and any other records as may be specified by the director general. 219. If the persons gross receipts from his business in the preceding calendar year exceeded MYR 150 000 (EUR 49 200) from the sale of goods, or MYR 100 000 (EUR 32 800) from the performance of services, he is further required to issue a printed receipt serially numbered for every sum received in respect of goods sold or services performed in the course of or in connection with the business and he has to retain a duplicate of every such receipt (ITA s.82(1)(b)). However, where a machine is used for recording sales, a receipt may be dispensed with if the Director General is satisfied that such machine automatically records all sales made and the total of all sales made in each day is transferred at the end of the day to a record of sales (s.82(2)).
Conclusion
220. General tax obligations complement commercial law obligations and, taken together, result in all relevant entities that carry on a business in Malaysia being required to maintain accounting records which: (i) correctly explain all transactions; (ii) enable the financial position of the entity or arrangement to be determined with reasonable accuracy at any time; and (iii) allow financial statements to be prepared.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
records, including underlying documentation, for the minimum period required by the standards (five years). The exception is a trust with a Malaysian trustee which does not carry on business in Malaysia, does not remit income to Malaysia and is not in receipt of Malaysian source income.
General requirements in the Labuan IBFC (ToR A.2.1) Relevant entities governing laws in the Labuan IBFC
226. The Labuan Companies Act requires every company to keep such accounting and other records as will sufficiently explain the transactions and financial position of the company (s.110(1)). The LCA also requires companies to make appropriate accounting entries within 90 days of the completion of the transactions to which they relate (s.110(2)). 227. The LCA does not require that Labuan company accounts are audited, unless: (i) other laws in Labuan in respect of financial services so require; (ii) the companys articles so provide; or (iii) the company makes a offer for subscription or purchase of securities as detailed in section 113. There is no specific requirement that the financial statements comply with approved accounting standards. 228. The directors of a Labuan company are responsible for ensuring that (LCA s.111): the audited accounts or unaudited accounts, as the case may be, of the company are laid at a meeting of members not more than nine months after the date to which the accounts are made up; and an annual certificate from a director is lodged with the Authority within 30 days of the accounts being laid before the company at a meeting of members stating that he has considered the accounts and certifying, with or without qualifications: (i) that those accounts show that the company was solvent at the date they were made up; (ii) that he is unaware of any circumstances which may render those accounts untrue; (iii) that no circumstances have occurred since the date to which those accounts were made up which would render the company insolvent. 229. The accounting requirements in the LCA apply to all Labuan companies, including foreign companies and Labuan PCCs (s.110 combined with s.2(1)). 230. Under the LLPLLPA (s.70), limited partnerships and limited liability partnerships must keep such accounting and other records as are sufficient to explain their transactions and disclose with reasonable accuracy at any time the partnerships financial position. The LLPLLPA does not provide guidance on which accounting records are to be prepared. Every general partner
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
Tax law
233. The Labuan Business Activity Tax Act does not expressly require that companies, partnerships, trusts or foundations keep accounting records. Companies carrying out trading activity in Labuan are implicitly required to prepare accounts, as the chargeable profits of a Labuan entity carrying on a Labuan trading activity is the net profits as reflected in the audited accounts in respect of such Labuan trading activity (s.4(2)).
Conclusion
234. Commercial and regulatory law obligations, taken together, result in all relevant entities in Labuan being required to maintain accounting records which: (i) correctly explain all transactions; (ii) enable the financial position of the entity or arrangement to be determined with reasonable accuracy at any time; and (iii) allow financial statements to be prepared.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
24.
Return of allotment of shares for cash should be filed for not less than six years; any annual return or balance sheet that should be lodged for not less than seven years or any document creating or evidencing a charge or the complete or partial satisfaction of a charge where a memorandum of satisfaction of the charge has been registered for not less than seven years; any other document (other than the M&As or any other document affecting them) which has been lodged, filed or registered for not less than fifteen years. Any document lodged, filed or registered that relates to a Labuan company or a foreign Labuan company that has been dissolved or has ceased to be registered is to be kept for at least fifteen years. In addition, the approved auditor shall retain for seven years a copy of the accounts to which his certificate relates (s.111(2B) LCA). Further, s.82(1) and s.82(2) of the LFSSA require the Labuan trust company to maintain all records as may be required under the law for a period of not less than 6 years from the date of closure of an account or the date when the transaction has been completed or terminated.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
the identity of the reporting institution where the transaction occurred; and the date, time and amount of the transaction. 241. Further, section 16 of the AMLATFA requires the reporting institutions to identify their customers, obtaining information inter alia with respect to the customers representative capacity, domicile, legal capacity, occupation or business purpose. 242. The Standard Guidelines on AML/CFT requires the reporting institutions to keep records relevant to the accounts and transactions, which include the periodic account statements and account opening documents. Subparagraph 6.1.1 of the Standard Guidelines states as follows: The reporting institution should keep the relevant records including any material business correspondences and documents relating to transactions, in particular, those obtained during customer due diligence procedures, for at least six years after the transaction has been completed or after the business relations with the customer have ended. 243. In addition, section 3 of the AMLATFA defines transaction as include an arrangement to open an account involving two or more person and any related transaction between any of the persons concerned and another. 244. Under the AMLATFA, reporting institutions are required to maintain records for a period of not less than 5 years from the date an account has been closed or the date the transaction has been completed or terminated (AMLATFA s.17). Reporting institutions are also required to maintain records to enable the reconstruction of any transaction in excess of such amount as the competent authority may specify, for a period of not less than 5 years from the date the transaction has been completed or terminated (s.17).
Determination and factors underlying recommendations
Phase 1 determination The element is in place.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
B. Access to information
Overview
245. A variety of information may be needed in a tax enquiry and jurisdictions should have the authority to obtain all such information. This includes information held by banks and other financial institutions as well as information concerning the ownership of companies or the identity of interest holders in other persons or entities, such as partnerships and trusts, as well as accounting information in respect of all such entities. This section of the report examines whether Malaysias legal and regulatory framework gives to the authorities access powers that cover the right types of persons and information and whether rights and safeguards would be compatible with effective exchange of information. 246. Malaysias competent authority has broad powers to obtain any relevant information from any person who holds the information and has measures to compel the production of such information. The ability of Malaysias competent authority to obtain information for international exchange of information (EOI) in tax matters is derived from its general access powers under the Income Tax Act, coupled with some secondary rules on exchange of information. No domestic interest requirement exists for Malaysias competent authority to exercise its information gathering powers. These powers are exercised by issuance of a notice requesting the production of the information, and non-compliance can be sanctioned with significant penalties. This power covers access to identity, ownership and accounting information. 247. In relation to the Labuan IBFC, a separate specific law (Labuan Business Activity Tax Act)gives the competent authority the ability to obtain and provide requested information. The power to exchange information applies irrespective of how a request is made, e.g. under a DTC or a tax information exchange agreement (TIEA). As a result, information which is already available to the competent authoritiy can be exchanged under all EOI instruments, including TIEAs. However, the competent authoritys power to call for provision of information in relation to entities in the Labuan IBFC can currently
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
250. The competent authority for exchanging information in Malaysia is the Minister of Finance or his authorised representative. The Minister of Finance has authorised via letter the following persons, inter alia, as its representatives: the Director of the Department of International Taxation of the Inland Revenue Board of Malaysia and the Director General of the Inland Revenue Board of Malaysia (DGIR). Based on their authorisation, they are the competent authority for both EOI requests received from treaty partners and Malaysian requests sent to treaty partners. 251. The Income Tax Act (ITA) contains provisions on access powers available in Malaysia and the Labuan Business Activity Tax Act 1990 contains provisions delegating access powers in the Labuan IBFC to the DGIR. 252. The Income Tax Act (ITA) contains provisions on access powers but does not expressly provide that these may be used to collect information for EOI purposes. However, section 132 which gives DTCs the force of law provides in subsection (4) that in addition to provisions for relief from double
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
taxation, other provisions relating to tax under this Act or to foreign tax of the territory to which the arrangements relate are given effect under this section. A provision with similar effects is contained in section132A with regard to TIEAs. The ITA gives tax authorities information gathering powers for the purposes of this Act. Therefore, the competent authority can use the normal access powers available to the Inland Revenue Board of Malaysia in order to obtain information requested by a foreign authority under a DTC or TIEA. 253. Pursuant to the ITA, the DGIR is granted powers to call for production of specific returns and books (s.78); call persons for the delivery of their bank account statements (s.79); access buildings and documents (s.80); and call for information for the purposes of the ITA (s.81). 254. Section 81 of the ITA provides that: 81. The Director General may require any person to give orally or may by notice under his hand require any person to give in writing within a time specified in the notice all such information or particulars as may be demanded of him by the Director General for the purposes of this Act and which may be in the possession of that person: Provided that, where that person is a public officer or an officer in the employment of a local authority or statutory authority, he shall not by virtue of this section be obliged to disclose any particulars as to which he is under a statutory obligation to observe secrecy. 255. With regard to the powers granted under section 81 of the ITA, the ITA is complemented by the Income Tax (Request for Information) Rules 2011 (the Rules) which expressly provide the Inland Revenue Board of Malaysia (its DGIR or delegated officers) with the power to use its powers under Section 81 to answer an EOI request made pursuant to a DTC. According to the Malaysian authorities, the Rules are intended mainly to address access to bank information and only refer to section 81, so that the DGIR does not need to exhaust all other measures to obtain such information before obtaining it directly from the bank, as this would affect the timeliness of the response to requests for information. The access powers provided for in the other sections can still be exercised by the DGIR pursuant to the ITA even though they are not mentioned in the Rules. The Rules do not address requests made pursuant to TIEAs, as the competent authorities powers to access information in connection to TIEAs and the relevant EOI procedure are already specified in great detail in the TIEAs themselves.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
Ownership and identity information (ToR B.1.1), and Accounting records (ToR B.1.2)
257. The DGIR is granted powers under section 81 of the ITA to call any person to provide, orally or in writing, information that may be required for the purposes of the ITA. However, those powers contain a restriction: the DGIR is not able to access information that is in the hands of public officers if they have a statutory obligation to observe secrecy in relation to such information (s.81, last sentence). 258. As a result of this provision, the DGIR may not be able to access, for example, certain ownership information held by the Registrar. Based on the CA, the Registrar is also prohibited by the Companies Act from divulging or communicating any information acquired in an inspection to any person (except for the purposes of the CA or in the course of a criminal procedure) (CA, s.7(B)(4)). In any case, the DGIR can access such information directly from the relevant persons, as noted previously in Part A of this report.26
25. Section 22: For the purpose of this Act, the Director General may by notice in writing require any person to furnish such information or particulars as may be required by him or for compliance with any double taxation arrangements entered into by the Government of Malaysia; (2) Where any person, without reasonable excuse, fails to comply with the notice mentioned in subsection (1), he shall be guilty of an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit. The Malaysian authorities confirmed that all information contained in documents filed or lodged with the Registrar, and certificate of incorporation or any certificate filed under the CA are available to the DGIR. However, information acquired by the Registrar pursuant to sections 7B, 7C and 7D cannot be disclosed to the DGIR. The scope of these sections may cover any object, article, material, or other documents
26.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
259. With specific regard to EOI requests, pursuant to section 3(3) of the Income Tax (Request for Information) Rules 2011 (the Rules), the DGIR, upon receipt of an EOI request, may, by notice under section 81 of the ITA, require the person referred to in the request to provide the information as requested by the foreign competent authority within the time specified in the notice. 260. This wording largely copies the one of section 81 of the ITA, pursuant to which the Director General may require any person to give orally, or may by notice27 require any person to give in writing within a time specified in the notice, all such information or particulars for the purposes of the Income Tax Act and which may be in the possession of that person. The Rules refer only to written notices, while section 81 also provide for the possibility to require a person to give information orally. The Rules set specific conditions for the competent authority to consider an EOI request, before making use of its information gathering powers. The requesting authority must state in the request the following information: (a) identity of the person under examination or investigation; (b) the period for which the information is requested; (c) a statement of the information sought including the details and form as the competent authority wishes to receive the information from the Director General; (d) the tax purpose for which the information is requested; (e) the grounds for believing that the information requested is in the possession or control of a person within the jurisdiction of Malaysia; (f) to the extent known, the name and address of any person believed to be in possession of the requested information; (g) a statement that the request is inconformity with the law and administrative practices of the territory of the competent authority, that if the request was within the jurisdiction of the territory of the competent authority, then the competent authority would be able to obtain the information pursuant to the laws of its own territory or in accordance with the normal course of administrative practice and is in conformity with the double taxation arrangement; and (h) a statement that the competent authority has pursued all means available in its own territory to obtain the information, except those that would give rise to disproportionate difficulties. These requirements are consistent with the standard and follow the guidance provided by the OECD Model TIEA, in particular with regard to the identity of taxpayers and the holders of information.
disclosed to the Registrar. The Malaysia Central Bank, the competent authority under the AMLATFA, is also prohibited from disclosing information to the DGIR for purposes other than the ones described in the AMLATFA. As such, the Central Bank can only disclose information which relates to the investigation of the offences listed under the Second Schedule of AMLATFA which are under IRBMs purview. However, IRBM is authorized to obtain the necessary information directly from the reporting institutions listed in the First Schedule of the AMLATFA. Notices may be served personally or by ordinary or registered post, pursuant to section 145 of the ITA.
27.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
266. In addition, section 81 combined with the Rules gives the DGIR the power to go directly to the bank to request information in order to respond to an intervention request for information in accordance with a DTC provision akin to Article 26(5) of the OECD Model Tax Convention. As a general rule, after receiving a request for information from the foreign competent authority, the DGIR will request the information from the account holder concerned and if it fails to obtain it, the DGIR will subsequently ask the information directly from the bank (Rules s.4(2)). However, section 4(3) of the Rules grants discretionary powers to the DGIR to request information directly from a bank without having to request it from the account holder first (see discussion under Part B.2 below). 267. In order for banks to co-operate with the DGIRs requests under the Rules, the Central Bank issued the Circular on the Disclosure of Customer Information to the Inland Revenue Board of Malaysia of 29 July 2011 (the Circular). Since, in Malaysia, banks are required by law28 to disclose information only based on an authorisation in writing from the Central Bank, the Central Bank, by means of the Circular, has granted a blanket authorisation, in which it authorises licensed banks, Islamic banks and other prescribed financial institutions to disclose bank information to the DGIR, provided that the request contains certain information. As required under section 6.1 of the Circular, in order to disclose information, the bank must receive a notice in writing issued by the Internal Revenue Board of Malaysia (IRBM) pursuant to section 81 of the ITA that contains the identity information of the account holder under examination or investigation. In addition, the Circular provides that, as a general rule, the bank must receive a statement from the IRBM confirming that the account holder has failed to comply with the IRBMs request within the timeline specified (s.6.3). In such a case, the bank is required to notify its customer of the information and documents it has furnished to the IRBM. As an exception to this requirement, section 6.4 of the Circular provides that, when the request is of urgent nature or in the case where prior notification to the customer is likely to undermine the actions of the IRBM, the IRBM will not make a prior request to the account holder and the bank is not required to notify such customer of the information or documents that have been furnished to the IRBM. 268. In conclusion, the requirements for accessing bank information under a DTC which contains a provision akin to Article 26(5) of the OECD Model Tax Convention, as provided in the Rules and in the Circular are in accordance with the international standard, including with respect to the identification of the taxpayer (see paragraph 260). However, the Malaysian authorities can currently only exercise these powers to access bank information for requests received under 18 signed agreements (10 of which are force).
28. See the Banking and Financial Institution Act 1989 (s. 99(1)(i)), the Islamic Bank Act 1983 (s.34(3)) and the Development and Financial Institutions Act (s. 120(1)(k)).
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
Use of information gathering measures absent domestic tax interest (ToR B.1.3)
270. The concept of a domestic tax interest describes a situation where a contracting party can only provide information to another contracting party if it has an interest in the requested information for its own tax purposes. There is no domestic tax interest in Malaysia (including the Labuan IBFC) to obtain and provide information to a contracting party. 271. The ITA contains provisions on access powers which may also be used to collect information for EOI purposes. Section 132(4) provides that in addition to provisions for relief from double taxation, other provisions relating to tax under this Act or to foreign tax of the territory to which the arrangements relate are given effect under this section. A provision with similar effects is contained in section132A with regard to TIEAs. The ITA gives tax authorities information gathering powers for the purposes of this Act. Therefore, the competent authority can use the normal access powers available to the Inland Revenue Board of Malaysia in order to obtain information requested by a foreign authority under a DTC or TIEA.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
committed within 30 days, or such other period as the court deems fit, from the date the order is made. 274. In the Labuan IBFC, breach of the disclosure obligation in section 22 of the LBATA is an offence punishable by a fine of up to MYR 1 000 000 (EUR 230 000).
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
Bank secrecy
281. Licensed banks, Islamic banks and prescribed institutions are prohibited from disclosing any information relating to the affairs or account of a customer to any person (Banking and Financial Institutions Act 1989 (BAFIA) s.97; Islamic Banking Act 1983 (IBA) s.34(3); and Development Financial Institutions Act 2002 (DFIA) s.119(2)). These secrecy provisions exist to protect the interests of the banks customers. A person who contravenes these provisions is liable to imprisonment for up to three years and/ or a fine up to MYR 3 000 000 (EUR 690 000) (BAFIA s.103 and Fourth Schedule), imprisonment for up to three years and/or fine up to MYR 40 000 (EUR 9 200) (IBA s.34(5)) or imprisonment for up to six months and/or fine up to MYR 500 000 (EUR 115 000) (DFIA s.107). 282. Exceptions exist, including for the purposes of any criminal proceedings or where such a disclosure is authorised in writing by the Central Bank.30 To allow the competent authority to have access to bank information, the Central Bank has given a blanket authorisation via a circular to the banks to disclose bank information to the DGIR where the disclosure of the bank information to the requesting party is required by the Inland Revenue Board of Malaysia (IRBM) under section 81 of the Income Tax Act 1967 (ITA) for purposes of facilitating exchange of information pursuant to arrangements having effect under sections 132 and 132A of the ITA (please see Part B.1.1 of this report). Not complying with a request from the tax authorities is punished as any breach of section 81 of the ITA (see above). 283. In the Labuan IBFC, bank confidentiality is also protected by the Labuan Financial Services and Securities Act 2010 (s.178) and by the Labuan Islamic Financial Services and Securities Act 2010 (s.139). A person who contravenes secrecy is liable to imprisonment for up to three years and/or a fine up to MYR 1 000 000 (EUR 230 000). Among the exceptions to this
30. Exceptions to secrecy are found in BAFIA ss.98 to 99(1); IBA ss.34(3) and 34(4) and DFIA s.120.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
prohibition on disclosure of bank information are any lawfully disclosure required by the DGIR (under LBATA s.22) or by the LFSA (under LFSAA s.28B).
Professional secrecy
284. The international standard recognises that a requested State may decline to disclose information relating to confidential communications between attorneys, solicitors or other admitted legal representatives in their role as such and their clients to the extent that the communications are protected from disclosure under domestic law (Commentary 19.3 to the OECD Model Tax Convention). However, the scope of protection afforded to such confidential communications should be narrowly defined. Such protection does not attach to documents or record delivered to an attorney, solicitor or other admitted legal representative in an attempt to protect such documents or records from disclosure required by law. Also, information on the identity of a person such as a director or beneficial owner of a company is typically not protected as confidential communication. 285. Two sections of the Evidence Act 1950 relate to legal professional privilege. First, section 126 expressly provides that where information is covered by legal professional privilege, such information may not be disclosed unless the privilege is waived by the client: No advocate shall at any time be permitted, unless with his clients express consent, to disclose any communication made to him in the course and for the purpose of his employment as such advocate by or on behalf of his client, or to state the contents or condition of any document with which he has become acquainted in the course and for the purpose of his professional employment, or to disclose any advice given by him to his client in the course and for the purpose of such employment. 286. Section 127 of the Evidence Act provides the same privilege to any communication of the client with interpreters and the clerks and servants of advocates. 287. The Malaysian authorities have indicated that the information gathering powers of the DGIR cannot be exercised in order to obtain information subject to the legal professional privilege described in sections 126 and 127. The language of section 126 appears to cover not only the provision of legal advice and communication related to legal proceedings, but any communication connected to the attorneys employment. The Malaysian authorities have confirmed, however, that section 126 applies only to legal advice provided by advocates and not to other activities attorneys might conduct such as company formation etc. In this sense, the authorities confirmed that the legal privilege is not so wide as to restrict access to information in case a lawyer acts, for
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
In respect of EOI requests made pursuant to its EOI agreements, Malaysia should ensure that its competent authority has access to bank information. Before entering into any TIEAs, Malaysia should ensure that its competent authority has the power to obtain and provide information that is the subject of a request under a TIEA from any person within its territorial jurisdiction who is in possession or control of such information, including from financial institutions.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
C. Exchanging information
Overview
296. Jurisdictions generally cannot exchange information for tax purposes unless they have a legal basis or mechanism for doing so. A jurisdictions practical capacity to effectively exchange information relies both on having adequate mechanisms in place as well as an adequate institutional framework. In Malaysia, the legal authority to exchange information derives from bilateral mechanisms (double taxation conventions) or domestic law. This section of the report examines whether Malaysia has a network of information exchange that would allow it to achieve effective exchange of information in practice. 297. Malaysia has a large treaty network of 71 exchange of information instruments which include most of its main trading partners. Since 2009, when it committed to the standards for transparency and exchange of information in tax matters, Malaysia has signed 18 DTCs/protocols to existing DTCs, all of which fully conform to the standard, and 10 of which are in force. A further 9 agreements have been initialled and 15 agreements are under various stages of negotiation. 298. The Malaysian domestic legislation allows the exchange of bank information only where the exchange of information instrument applied contains a specific provision to this effect. Considering that none of the EOI instruments that Malaysia had signed before its commitment to the standards in April 2009 contained such a provision, these do not meet the standard. All the instruments signed by Malaysia since that time contain a full exchange of information provision, including wording akin to Article 26(5) of the OECD Model Tax Convention. In addition, Malaysia embarked in an ambitious programme of negotiation of protocols to its treaties to bring them to the standard. 299. When negotiating protocols to existing DTCs, Malaysia should also upgrade the EOI provision of the few treaties that do not allow exchange of information in respect of all persons.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
303. Malaysia has signed 71 agreements which provide for the exchange of information upon request. All of these are DTCs. While Malaysia has not yet signed any tax information exchange agreements (TIEAs), the introduction of section 132A of the ITA in February 2011 enables the government to enter into TIEAs with any foreign jurisdiction. 304. Malaysian laws do not provide for automatic exchange of information. However, in the process of audit or investigation work, information that is likely of benefit to its treaty partners is exchanged spontaneously.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2. 306. Malaysias network of DTCs generally follows the OECD Model Tax Convention. The agreements signed or revised after 2009 contain a specific reference to the exchange of information that is foreseeably relevant to the administration or enforcement of the tax laws of the Contracting States. Older DTCs generally use the term necessary in lieu of foreseeably relevant. The phrase as is necessary is recognised in the commentary to Article 26 of the OECD Model Taxation Convention to allow for the same scope of exchange as does the term foreseeably relevant.31 The Malaysian authorities have confirmed that they follow this interpretation when applying DTCs. 307. Malaysias DTCs with Denmark, New Zealand, Norway and Pakistan provide for the exchange of information which the authorities have at their disposal in the normal course of administration as is necessary for carrying out this Convention, in particular for the prevention of fraud, and for the administration of statutory provisions against legal avoidance concerning taxes covered by the Convention. As such, it might appear that exchange is restricted to information already held by the tax authorities (i.e. it excludes information that the Malaysian tax authorities do not already hold). However, the Malaysian authorities have indicated that they will use their access powers to obtain information requested under these four agreements. 308. The DTCs with Austria, Bangladesh, Switzerland, the USSR (Russia)32, and the UAE limit the exchange of information to that necessary for carrying out the provisions of the convention, not allowing for exchange of information for the administration or enforcement of the domestic laws of the Contracting States. As no obligations arise to exchange information for the implementation of domestic laws, these agreements are not consistent with the international standard.
31.
32.
The word necessary in Article 26(1) of the 2003 OECD Model Taxation Convention was replaced by the phrase foreseeably relevant in the 2005 version. The commentary to Article 26 recognises that the term necessary allows for the same scope of exchange as does the term foreseeably relevant. The agreement signed with the Union of Soviet Socialist Republics in 1987 is in force with respect to the Russian Federation.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
nominees or persons acting in an agency or fiduciary capacity. Both the OECD Model Tax Convention and the OECD Model TIEA, which are the authoritative sources of the standards, stipulate that bank secrecy cannot form the basis for declining a request to provide information and that a request for information cannot be declined solely because the information is held by nominees or persons acting in an agency or fiduciary capacity or because the information relates to an ownership interest. 315. Up until Malaysia committed to the standard in 2009, none of its DTCs contained the wording of Article 26(5) of the OECD Model Tax Convention. Since then, all the 18 treaties and protocols that Malaysia has signed incorporate this wording, 10 of which are in force.33 This updating process is key, since Malaysia cannot exchange bank information absent this provision in a treaty (see below) and Malaysia should continue to bring all other treaties in line with the international standard.
Bank information
316. As noted above, Article 26(5) of the OECD Model Tax Convention states that a contracting state may not decline to supply information solely because the information is held by a bank or other financial institution. Ten of Malaysias DTCs or protocols contain such a provision (as well as eight treaties or protocols signed but not yet in force). 317. However, the absence of this paragraph does not automatically create restrictions on exchange of bank information. The Commentary to Article 26(5) indicates that while paragraph 5, added to the OECD Model Tax Convention in 2005, represents a change in the structure of the Article, it should not be interpreted as suggesting that the previous version of the Article did not authorise the exchange of such information. 318. The Malaysian authorities state that it has been their policy not to exchange bank information absent a provision equivalent to Article 26(5) in their treaties. Therefore most of Malaysias DTCs are not to the standard. Malaysia is re-negotiating a number of DTCs in order to include such a provision and meet the standard. Malaysia is strongly encouraged to take all steps necessary to bring these protocols or new agreements into force and update the other instruments as soon as possible.
33.
The ten DTCs and protocols in force are those with Australia, Brunei, Germany, Laos, San Marino, France, Ireland, Japan, the Netherlands and the United Kingdom. The other instruments signed but not yet in force are those with Bahrain, Belgium, Kuwait, Qatar, Senegal, the Seychelles, South Africa and Turkey.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
it had occurred in the requested country. In order to be effective, exchange of information should not be constrained by the application of dual criminality principle. 324. None of the information exchange mechanisms established by Malaysia apply the dual criminality principle to restrict exchange of information.
Exchange of information in both civil and criminal tax matters (ToR C.1.6)
325. Information exchange may be requested both for tax administration purposes and for tax prosecution purposes. The international standard is not limited to information exchange in criminal tax matters but extends to information requested for tax administration purposes (also referred to as civil tax matters). 326. The information exchange mechanisms concluded by Malaysia provide for the exchange of information for both criminal and civil matters. In addition, the Malaysian authorities also confirmed that Malaysia does not differentiate between civil and criminal tax matters under its laws. As such, Malaysia can exchange information for both civil and criminal matters in all its EOI instruments.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
With Australia, Brunei, France, Germany, Ireland, Japan, Laos, the Netherlands, San Marino and the United Kingdom. With Bahrain, Belgium, Kuwait, Qatar, Senegal, the Seychelles, South Africa, and Turkey. In the 1990s and beginning of the 2000s it sometimes took Malaysias DTCs a much longer time to enter into force, e.g. with jurisdictions like Iran, Myanmar, Sudan or the Kyrgyz Republic.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
337. Ultimately, the international standard requires that jurisdictions exchange information with all relevant partners, meaning those partners who are interested in entering into an information exchange arrangement. Agreements cannot be concluded only with counterparties without economic significance. If it appears that a jurisdiction is refusing to enter into agreements or negotiations with partners, in particular ones that have a reasonable expectation of requiring information from that jurisdiction in order to properly administer and enforce its tax laws it may indicate a lack of commitment to implement the standards. 338. Malaysia has a solid history of exchange of information in tax matters. The first conventions in this regard were signed with Denmark and Norway in 1970. Malaysia possesses a broad network of 71 information exchange agreements. Since making its commitment to the international standard in transparency in 2009, Malaysia has entered into 5 new treaties38 and 13 new protocols.39
38. 39.
With Brunei, Germany, Laos, San Marino and Senegal. With Australia, Bahrain, Belgium, France, Ireland, Japan, Kuwait, the Netherlands, Qatar, the Seychelles, South Africa, Turkey and the United Kingdom.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
C.3. Confidentiality
The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
and relating to any such activity cannot be declined because of the legal professional privilege rule. 351. Legal professional privilege is covered under the limb of professional secrets in the DTCs. Considering the provisions of Article 3(2) of the respective tax treaties, for application of the tax treaties by Malaysia, this term will derive its meaning from the one it has under the domestic laws of Malaysia. As discussed previously (see Part B.1 of this report), the scope of the legal privilege in Malaysia is in line with the international standards.
Determination and factors underlying recommendations
Phase 1 determination The element is in place. Factors underlying recommendations Recommendations
Malaysia should bring these Two of Malaysias treaties do not agreements up to the standard. ensure the parties concerned will not be required to supply information that would involve disclosure of professional secrets.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
Determination
Recommendations
Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities. (ToR A.1) The element is in place, but certain aspects of the legal implementation of the element need improvement. Not all nominees are required to have information available on the persons for whom they act. An obligation should be established for all nominees to maintain relevant ownership and identity information where they act as the legal owner on behalf of any other person. An obligation should be established to maintain information in all cases in relation to settlors, trustees and beneficiaries of trusts with a trustee in Malaysia.
Not all trustees are required to have information available on the identity of settlors and beneficiaries of trusts.
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements. (ToR A.2) The element is in place, but certain aspects of the legal implementation of the element need improvement. There is no express requirement on (i) entities in the Labuan IBFC, and (ii) certain trusts that do not carry on business in Malaysia and do not derive or receive income in Malaysia, to keep underlying documentation. There should be an express requirement for all relevant entities and arrangements to keep accounting records and underlying documentation for a minimum five year period.
Banking information should be available for all account-holders. (ToR A.3) The element is in place.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
Determination
Recommendations
Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information). (ToR B.1) The element is in place, but certain aspects of the legal implementation of the element need improvement. While most laws specifically require that information is kept within Malaysia, Malaysian authorities do not have the power to obtain and provide information held outside of Malaysia, even if such information is in the control of a person within its territorial jurisdiction. Restrictions on access to bank information provided for by Malaysias domestic legislation is currently overridden in respect of only 18 of the 71 signed DTCs (10 of which are in force). Although the competent authority can exchange any information already in its possession, it does not currently have powers to access information in the Labuan IBFC in order to respond to an EOI request made pursuant to a TIEA. Malaysia should ensure that it has the power to access information sought under its EOI instruments which is controlled by persons in Malaysia, even if it is located extra-territorially.
In respect of EOI requests made pursuant to its EOI agreements, Malaysia should ensure that its competent authority has access to bank information. Before entering into any TIEAs, Malaysia should ensure that its competent authority has the power to obtain and provide information that is the subject of a request under a TIEA from any person within its territorial jurisdiction who is in possession or control of such information, including from financial institutions.
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information. (ToR B.2) . The element is in place. .
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
Determination
Recommendations
Exchange of information mechanisms should allow for effective exchange of information. (ToR C.1) The element is in place, but certain aspects of the legal implementation of the element need improvement. As a result of limitations with respect to access to information, in particular bank information, only 18 of Malaysias 71 signed agreements provide for effective exchange of information to the standard. Of these 18 agreements, 10 are in force. Malaysia should ensure that all its agreements provide for exchange of information to the standard.
The jurisdictions network of information exchange mechanisms should cover all relevant partners. (ToR C.2) The element is in place, but certain aspects of the legal implementation of the element need improvement. Malaysia can exchange information in accordance with the standard with 10 EOI partners and has ratified an additional 5 DTCs/protocols to the standard. Malaysia should update and develop its EOI network to ensure it has agreements (regardless of their form) for exchange of information with all relevant partners.
The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received. (ToR C.3) The element is in place. The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties. (ToR C.4) The element is in place. Two of Malaysias treaties do not ensure the parties concerned will not be required to supply information that would involve disclosure of professional secrets. Malaysia should bring these agreements up to the standard.
The jurisdiction should provide information under its network of agreements in a timely manner. (ToR C.5) The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
ANNEXES 97
Malaysia would like to express its sincere appreciation to the assessment team for its excellent work in evaluating Malaysias legal and regulatory framework for this Phase 1 peer review report. We believe that this report clearly demonstrates Malaysias commitment to the international standards of transparency and exchange of information. Malaysia will give due consideration to the recommendations made in the report. In particular, we have already started the legislative process of amending the Labuan Business Activity Tax Act and the Income Tax Act to provide for the exchange of information under a TIEA and to empower the Director General of Inland Revenue Board to access information in the control of a person within the jurisdiction of Malaysia. These amendments will be tabled in the coming 2012 Budget Proposals scheduled on 7 October 2011. In addition, we will introduce a transitional provision for registration of bearer shares after which such shares will no longer be recognized. As regards the remaining recommendations, Malaysia will now begin the process of examining the best way to implement them. Malaysia would also like to take this opportunity to reiterate Malaysias commitment to comply with the international standards for transparency and the exchange of tax information with our treaty partners. We also acknowledge the findings of the report and will continue to be committed to the review process.
41.
This Annex presents the jurisdictions response to the review report and shall not be deemed to represent the Global Forums views.
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
98 ANNEXES
Jurisdiction 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Albania Argentina Australia Austria Bahrain Bangladesh Belgium Bosnia and Herzegovina Brunei Canada Chile China Croatia Czech Republic Denmark Egypt Fiji Finland
Type of arrangement Double taxation convention (DTC) DTC DTC Protocol DTC DTC Protocol DTC DTC Protocol DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC
Date signed 24-01-1994 03-10-1997 20-08-1980 24-02-2010 20-09-1989 14-06-1999 14-10-2010 19-04-1983 24-10-1973 18-12-2009 21-06-2007 05-08-2009 16-10-1976 03-09-2004 23-11-1985 18-02-2002 08-03-1996 04-12-1970 14-04-1997 19-12-1995 28-03-1984
Date in force 21-08-1995 09-02-2001 1981 08-08-2011 20-09-1990 31-07-2000 Not yet in force 1984 1977 Not yet in force Not yet in force 17-06-2010 18-12-1980 25-08-2008 14-09-1986 15-07-2004 31-03-1997 04-06-1971 09-07-2002 30-07-1997 23-02-1986
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
ANNEXES 99
Jurisdiction 19 France
Type of arrangement DTC Protocol DTC New DTC DTC DTC DTC DTC DTC Protocol DTC DTC Protocol DTC DTC DTC Protocol DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC DTC Protocol DTC DTC DTC
Date signed 24-04-1975 12-11-2009 08-04-1977 23-02-2010 22-05-1989 14-05-2001 12-09-1991 11-11-1992 28-11-1998 16-12-2009 28-01-1984 19-02-1999 10-02-2010 02-10-1994 26-06-2006 05-02-2003 25-01-2010 17-11-2000 03-06-2010 20-01-2003 21-11-2002 03-10-1995 23-08-1992 27-07-1995 02-07-2001 09-03-1998 28-07-1998 07-03-1988 04-12-2009 19-03-1976 23-12-1970 29-05-1982
Date in force 23-07-1976 01-12-2010 11-02-1979 21-12-2010 26-10-1992 14-08-2003 11-08-1992 15-04-2005 10-09-1999 15-02-2011 18-04-1986 31-12-1999 01-12-2010 29-05-2000 20-05-2010 29-05-2007 Not yet in force 26-12-2006 23-02-2011 10-11-2004 29-12-2004 01-09-2000 19-08-1993 07-11-1996 29-12-2006 21-07-2008 13-12-2004 02-02-1989 19-10-2010 02-09-1976 09-09-1971 09-11-1982
20 Germany 21 Hungary
32 Laos 33 Lebanon 34 Luxembourg 35 Malta 36 Mauritius 37 Mongolia 38 Morocco 39 Myanmar 40 Namibia 41 42 Netherlands New Zealand
43 Norway 44 Pakistan
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
100 ANNEXES
Type of arrangement DTC DTC DTC DTC Protocol DTC DTC DTC DTC DTC DTC Protocol DTC DTC Protocol DTC DTC DTC DTC DTC DTC DTC DTC Protocol DTC DTC DTC Protocol DTC DTC DTC DTC
Date signed 20-05-1993 27-04-1982 16-09-1977 03-07-2008 16-02-2011 26-11-1982 31-07-1987 19-11-2009 31-01-2006 17-02-2010 03-12-2003 22-12-2009 05-10-2004 26-07-2005 05-04-2011 20-04-1982 24-05-2006 16-09-1997 07-10-1993 12-03-2002 26-02-2007 29-03-1982 27-09-1994 17-02-2010 19-11-2008 28-11-1995 10-12-1996 22-09-2009 06-10-1997 28-08-2006 07-09-1995 28-04-1994
Date in force 11-06-1999 27-07-1984 15-12-1978 28-01-2009 Not yet in force 07-04-1984 04-07-1988 28-12-2010 01-07-2007 Not yet in force 10-07-2006 Not yet in force 13-02-2006 06-07-2006 Not yet in force 13-12-1982 28-12-2007 13-08-1998 18-12-2002 28-01-2005 31-08-2007 02-02-1983 28-01-1997 Not yet in force 06-10-2009 18-09-1996 18-05-1998 28-12-2010 10-08-1999 08-01-2008 13-08-1996 Not yet in force
53 Senegal 54 Seychelles 55 Singapore 57 South Africa 58 South Korea 56 Spain 59 Sri Lanka 60 Sudan 61 Sweden 62 Syria 63 Thailand 64 Turkey 65 Turkmenistan 66 United Arab Emirates 67 United Kingdom 68 Uzbekistan 69 Venezuela 70 71 Vietnam Zimbabwe
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
ANNEXES 101
Commercial legislation
Companies Act 1965 Legal Profession Act 1976 Labuan Companies Act 1990 Labuan Limited Partnerships and Limited Liability Partnerships Act 2010 Labuan Business Activity Tax Act 1990 Partnership Act 1961 Registration of Businesses Act 1956 Societies Act 1966 Trust Companies Act 1949 Trustees (Incorporation) Act 1952 Trustees Act 1949 Labuan Companies Regulations 1990 Labuan Foundations Regulations 2010 Labuan Limited Partnerships and Limited Liability Partnerships 2010 Labuan Trusts Regulations 2010 Guidelines on Allowing a Person to be Appointed or to Act as a Trustee Under Subsection 69(2) of The Securities Commission Act 1993 Guidelines on Unit Trust Funds Guidelines on the Minimum Contents Requirements for Trust Deeds
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
102 ANNEXES
Tax legislation
Blanket Authorisation Disclosure of Customer Information to DGIRB Income Tax Act 1967 Income Tax (Request for Information) Rules 2009 Income Tax (Request for Information) Rules 2011
Financial legislation
Accountants Act 1967 Banking and Financial Institutions Act 1989 Capital Markets and Services Act 2007 Capital Markets and Services (Amendment) Act 2010 Development Financial Institutions Act 2002 Insurance Act 1996
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
ANNEXES 103
Islamic Banking Act 1983 Kootu Funds (Prohibition) Act 1971 Labuan Financial Services and Securities Act 2010 Labuan Islamic Financial Services and Securities Act 2010 Labuan Foundations Act 2010 Labuan Trusts Act 1996 Labuan Financial Services Authority Act 1996 Money-Changing Act 1998 Promotion of Investments Act 1986 Payment Systems Act 2003 Securities Commission Act 1993 Securities Commission (Amendment) Act 1995 Securities Commission (Amendment) Act 1998 Securities Commission (Amendment) Act 2000 Securities Commission (Amendment) Act 2003 Securities Commission (Amendment) Act 2007 Securities Commission (Amendment) Act 2010 Takaful Act 1984 Securities Industry (Central Depositories) Act 1991 Securities Industry (Central Depositories) (Amendment) Act 1996 Securities Industry (Central Depositories) (Amendment) Act 1998 Securities Industry (Central Depositories) (Amendment) Act 1998 Securities Industry (Central Depositories) (Amendment) Act 2000 Securities Industry (Central Depositories) (Amendment) Act 2003
Other legislation
Evidence Act 1950 Exchange Control Act 1953 High Court Order 39 High Court Order 66
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MALAYSIA OECD 2011
OECD PUBLISHING, 2, rue Andr-Pascal, 75775 PARIS CEDEX 16 (23 2011 57 1 P) ISBN 978-92-64-12664-0 No. 59647 2011
Please cite this publication as: OECD (2011), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Malaysia 2011: Phase 1: Legal and Regulatory Framework, OECD Publishing. http://dx.doi.org/10.1787/9789264126657-en This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org, and do not hesitate to contact us for more information.
-:HSTCQE=VW[[YU: