PUTRAJAYA: Malaysia has agreed in principle to implement minimum global tax of 15 per cent on certain multinational companies (MNCs), said Inland Revenue Board (IRB) chief executive officer Datuk Mohd Nizom Sairi.

He said Malaysia is among 136 countires announced by the Organisation for Economic Co-operation and Development (OECD) previously as being ready to undertake reform in the global taxation system.

The international taxation system reform is expected to be implemented from 2023 globally and Malaysia will abide by the decision made at the OECD level, he added.

"Malaysia is actively involved in the working group discussions to ensure the interests of developing economies such as Malaysia are not left out of the policies made by OECD," Mohd Nizom told reporters after officiating the Third Malaysia Tax Policy Forum here, today.

He said the implementation of the tax system is to make sure business entities pay their taxes fairly to the host countries and avoid tax leakages.

To ensure the MNCs pay taxes accordingly, the IRB will develop a comprehensive strategy to address global tax compliance risk, besides urging the companies to be more transparent, he said.

The IRB is also monitoring the MNCs operating in Malaysia and local companies operating in foreign countries to identify whether there is the occurence of transfer pricing.

"Under the IRB Multinational Tax Branch, there are close to 3,000 MNCs under its monitoring. For local companies, not many. Not all use transfer pricing but we monitor closely.

"Most of the international companies (engage in) cross-border business but for local companies, if there is occurence of transfer pricing between companies within the group, it will enjoy the benefit of tax holiday or incentive when the tax rate is low," he said.

Transfter pricing is the price determined for transactions made between two or more related entities within the organisation of various companies.

Earlier, in his speech, Mohd Nizom said the tax rate of 15 per cent will reallocate profits of more than USS$125 billion (US$1=RM4.45) from about 100 of the world's largest and most profitable multinational enterprises (MNEs) to all countries.

In October 2021, the OECD announced that 136 countries and jurisdictions out of the 140 members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting had agreed that certain MNEs will be subject to a minimum tax rate of 15 per cent.

-- BERNAMA