The Malaysian Business Reporting System (MBRS)

The Malaysian Business Reporting System (MBRS) introduced by SSM in 2018, is an online submissions platform based on the eXtensible Business Reporting Language (XBRL) format. MBRS allows the submission for:

1. Annual Return (AR)
2. Financial Statement Report (FS); and
3. Exemption Applications (EA) related to the FS and AR.

Since March 2019, businesses have been required to submit Annual Returns (ARs), Exempt Company (EPC) certificates, and unaudited Financial Statements (FS) via MBRS. With the launch of MBRS 2.0, companies must now prepare for a more extensive and detailed reporting structure.

MBRS Filing Requirements

All companies, including foreign entities registered in Malaysia and required to submit their annual statutory financial statements (FS) to SSM, must comply with MBRS filing requirements.
On 26 November 2024, SSM announced the mandatory digital submission of FS under MBRS 2.0, with a phased implementation to facilitate a smoother transition for businesses. The mandate now extends to all entities, including previously exempt sectors such as banking, financial, and insurance institutions regulated by Bank Negara Malaysia.

What’s New in MBRS 2.0

MBRS 2.0 enhances its predecessor with improved functionality, expanded filing coverage, and updated regulatory compliance for more efficient financial reporting to SSM. Key features of the MBRS 2.0 system includes:

Updated Filing Framework: The new filing framework under MBRS 2.0 is designed to ensure a smoother, more efficient submission process.

Broader Filing Coverage: Expands to include additional compliance documents beyond financial statements and annual returns, offering a more comprehensive reporting framework.

Improved XBRL taxonomy: The eXtensible Business Reporting Language (XBRL) framework has been enhanced to streamline financial reporting

User friendly Interface and system functionality: More efficient submissions, smarter compliance checks, real-time error detection.

MBRS 2.0 Phased Implementation

Benefits of MBRS 2.0

Streamlined Compliance
MBRS 2.0 simplifies financial reporting by automating submission processes, reducing manual intervention, and ensuring compliance with statutory requirements. The improved digital framework enhances accessibility and efficiency for businesses filing with SSM.

Improved Data Quality and efficiency
Advanced validation checks and real-time error detection enhance the accuracy and reliability of financial data. Automation minimizes human errors, while optimized workflows speed up processing, making submissions smoother and more efficient.

Enhanced Transparency
Standardized reporting aligned with MFRS and MPERS ensures greater consistency and accessibility of financial information. This improves corporate governance, regulatory oversight, and investor confidence.

Cost Savings
By eliminating manual paperwork and streamlining reporting processes, MBRS 2.0 reduces administrative costs, saving businesses time and resources while enhancing operational efficiency.

How We Can Help

Shifting to MBRS 2.0 brings challenges, especially for organisations unfamiliar with digital reporting and XBRL-based filing requirements.

Preparing the XBRL file for financial statements involves:

• Identifying and tagging financial and non-financial information from signed and audited FS
• Mapping data accurately to the corresponding element labels within the MBRS Taxonomy
• Leveraging expertise for cost savings and efficiency

Many organisations lack in-house expertise or resources to manage this transition smoothly. Outsourcing the conversion and submission process can be a cost-effective and efficient solution, allowing you to focus on your core business operations while ensuring compliance.

Conclusion

With MBRS 2.0 now in effect, organisations must act proactively to ensure compliance. Investing in the right systems and expert guidance can ease the transition. If you need support, our team is ready to help ensure a smooth and compliant filing process.

Malaysia’s fiscal landscape is undergoing significant changes with the announcement of the 2024 Budget, including a notable increase in the service tax rate. This shift, alongside the reintroduction of the Sales and Service Tax since 2018, reflects the nation’s proactive stance toward economic challenges. The experts at ECOVIS Malaysia outline the changes.

Change in Malaysia’s Service Tax Rate from 6% to 8%

Following the unveiling of Malaysia’s 2024 Budget, that was presented in Parliament on 13 October 2023, numerous taxation reform measures will be implemented in 2024 to broaden the country’s revenue base.

One of the hottest measures among Malaysians is that the service tax rate has been increased from 6% to 8% with effect from 1 March 2024. Sales and Service Tax (SST) has been reintroduced in Malaysia after the country only implemented Goods and Services Tax (GST) between April 2015 and July 2018. This change marks a notable shift in the country’s monetary policy framework, reflecting its response to the prevailing economic conditions and is expected to generate an estimated additional RM3 billion in revenue.

In accordance with subsection 10(2) of the Service Tax Act 2018 (STA 2018) Malaysia, the Ministry of Finance has increased the service tax rates for all existing taxable services except for the following categories which are deemed to be essential services and have been maintained at 6%.

1. Food and beverage services,
2. Telecommunication services,
3. Parking space rental services; and
4. Logistic services (newly imposed).

Determination of the Service Tax Rate during the Transitional Period Effect of the Service Tax Rate Change

Due to the change in service tax rate, the Royal Customs Department of Malaysia has issued a guideline to address the transitional period issues. We summarise the scenario below when the taxable services are to be taxed at 6% or 8%.

Extending the scope of taxable services

In accordance with section 8 of the STA 2018, the Minister of Finance has extended the scope of new taxable services with effect from 1 March 2024. The new taxable services are as follows:

Given the above two major changes in the 2024, it is likely that the government will gradually consider further expanding the scope of taxable services in the near future. It is unlikely that the government will re-introduce the GST, but in another version of the SST similar to the VAT or GST of other countries.

In a historic move for the country, the Malaysian Prime Minister, who is also Minister of Finance, unveiled the eagerly awaited 2024 budget on 13 October 2023, which sets a new spending record of MYR 393.8 billion. Its real significance lies in its distribution, with MYR 303.8 billion earmarked for operating expenditure and the remaining MYR 90 billion dedicated to development, with an additional MYR 2 billion set aside for contingency savings. The experts at ECOVIS MALAYSIA TAX SDN BHD explain the details of this comprehensive reform.

Entitled Economic Reforms, Empowering the People, the budget reflects the government’s commitment to fostering economic growth while ensuring that the benefits of this growth are felt by the citizens of Malaysia. This dual focus underscores the government’s recognition of the importance of a thriving economy and the well-being of its people, a vision that aims to set the nation on a path to a more prosperous and equitable future.

The allocation for operating expenditure is substantial and signals the intent to meet essential day-to-day needs and commitments efficiently. At the same time, the significant development expenditure reflects the government’s determination to invest in infrastructure, innovation and long-term progress, thus securing a prosperous future for Malaysia.

The inclusion of a MYR 2 billion contingency savings fund demonstrates prudence in financial management, ensuring that unexpected challenges can be met without compromising the nation’s fiscal stability.

The following aspects will massively reshape the tax landscape in Malaysia.

1. Capital gains tax
   A pivotal reform introduced in the 2024 budget is the implementation of a 10% capital gains tax, which will take effect on 1 March 2024. The tax will apply to the net profit generated from the sale of unlisted shares of local companies. However, there are certain exemptions in place to encourage specific types of investments. Notably, the tax will not apply to cases involving Initial Public Offerings (IPOs), internal restructuring, and investments by venture capital firms. These exemptions are crucial for incentivising investments in new and innovative businesses, while the tax itself will contribute to government revenue by ensuring that profits from share sales are captured in the tax net.
   
2. High value goods tax
   Another remarkable development is the introduction of a high value goods tax, designed to target high-value items such as jewellery and luxury watches. This will range from 5% to 10%, depending on the value threshold of the item in question. Foreign tourists will be eligible for an exemption from this tax, which is a significant move to encourage tourism and attract international visitors who may wish to make high-value purchases in Malaysia. This tax will not only generate revenue for the government, but also serve to balance the impact of luxury consumption on society.
   
3. Global minimum tax
   One of the most forward-looking changes introduced in the 2024 budget is the commitment to implement a global minimum tax in 2025. This will apply to companies with a global income of at least EUR 750 million (equivalent to MYR 3 billion). The concept of a global minimum tax is part of a broader international effort to ensure that multinational corporations pay their fair share of taxes, regardless of where they operate. With the introduction of this tax, Malaysia is aligning itself with global tax reform initiatives and aiming to ensure that multinational companies do not engage in tax avoidance practices that can erode the nation’s tax base.
   
4. Implementation of e-invoicing
   The adoption of e-invoicing is another crucial step towards modernising tax administration in Malaysia. Starting on 1 August 2024, businesses with an annual turnover or revenue exceeding MYR 100 million will be required to implement e-invoicing. As of 1 July 2025, this requirement will gradually extend to various other categories of businesses. E-invoicing will not only streamline the process of tax collection but also reduce the potential for errors, fraud, and tax evasion. This forward-looking approach aligns with the broader global trend of embracing digital technology in tax administration.
   

With the introduction of the above measures, Malaysia is positioning itself as a forward-thinking nation ready to embrace the challenges and opportunities of a rapidly changing economic and tax environment.

The Inland Revenue Board of Malaysia (IRBM) has issued the latest Income Tax (Transfer Pricing) Rules 2023, which are effective from the 2023 assessment year and replace the Income Tax (Transfer Pricing Rules) 2012. The experts from ECOVIS MALAYSIA TAX SDN BHD explain what companies must pay attention to.

What the New Transfer Pricing Rules Bring

The rules apply to controlled transactions given in subsection 140A (2) of the Income Tax Act and are used in determining and applying the arm’s length price for the acquisition or supply of property or services in accordance with these rules. This article highlights some of the key changes which taxpayers making such transactions must be aware of.

The New Definition of Contemporaneous Transfer Pricing Documentation (CTPD)

Under the new rules, a person who enters into a controlled transaction must prepare a CTPD prior to the due date for furnishing a return in the basis period of an assessment year in which the controlled transaction takes place.

The CTPD must contain:

• Multinational enterprise group information (master file information).
• The individual’s business information (local file information).
• Information and documentation regarding the cost contribution arrangement.

Timeline: The CTPD must be prepared prior to the tax return lodgement due date and furnished within 14 days upon request by the IRBM.

Date: The CTPD completion date must be provided.

Non-applicable information: The CPTD must also include information, data or documents concerning non-applicability.

Taxpayers are obliged to prepare full transfer pricing documentation if the company has:

• gross income of more than MYR 25 million and
• total related party transactions of more than MYR 15 million or
• receives financial assistance of more than MYR 50 million (does not apply to transactions involving financial institutions).

Hierarchy of Transfer Pricing Methods No Longer Applies

According to the 2012 rules, the IRBM required transfer pricing methods to be selected on a hierarchy basis to assess applicability and reliability. However, the new 2023 rules remove this hierarchy of methods.

Director General’s Power

The director general of the IRBM has the right to:

• Make an adjustment to reflect the arm’s length price or arm’s length interest rate for a transaction by substituting or imputing the price or interest rate, as appropriate.
• Adjust the price of the controlled transaction to the median if the price is outside the arm’s length range, or to any point above the median if the price is within the arm’s length range. This applies when the uncontrolled transaction is of a lesser degree and any of the comparability defects cannot be quantified, identified or adjusted.

Impose a surcharge in accordance with subsection 140A(3C) of the Income Tax Act.

Arm’s Length Range

Definition: The Income Tax (Transfer Pricing) Rules 2023 defines the “arm’s length range” as a range of figures or a single figure falling between the value of 37.5 percent and 62.5 percent of the data set and acceptable to the director general in determining whether the arm’s length price has been applied in a controlled transaction. This range is derived by either applying the same transfer pricing methodology to multiple comparable data or applying different methods, as determined under rule 6 of the Income Tax (Transfer Pricing) Rules 2023.

According to rule 6, the methods for determining the arm’s length price are:

• The traditional transactional method.
• The transactional profit method.
• Any other method allowed by the director general which provides the highest degree of comparability between the transactions.

The introduction of these enhancements to the transfer pricing rules aims to increase taxpayers’ transfer pricing compliance and make it easier for the IRBM to enforce. Taxpayers must ensure that they take the appropriate steps to ensure compliance, as the rules are becoming more stringent.