Pillar Two Global Minimum Tax Compliance and Advisory Services

As gazetted in the Finance (No. 2) Act 2023, Malaysia is set to implement the Global Minimum Tax ("GMT") starting from 1 January 2025. This marks a significant step toward aligning Malaysia’s tax framework with the OECD’s Global Anti-Base Erosion ("GloBE") Model Rules under Pillar Two of the BEPS 2.0 initiative. The GMT ensures that large multinational enterprise ("MNE") groups are subject to a minimum effective tax rate ("ETR") of 15% in every jurisdiction they operate in.

Malaysia’s GMT framework introduces two types of top-up taxes:

Domestic Top-Up Tax ("DTT"): Applied at the local level to ensure the effective tax rate meets the minimum threshold.
Multinational Top-Up Tax ("MTT"): Applies to profits reported in low-tax jurisdictions outside Malaysia.

These rules apply to members of MNE groups with annual consolidated revenues of EUR 750 million or more in at least two of the four immediately preceding financial years.

What is Pillar Two?

Pillar Two is part of the OECD’s global tax reform to curb base erosion and profit shifting by introducing a global minimum tax rate of 15% for large multinationals. It aims to ensure that profits earned by MNEs are taxed at a minimum level, regardless of where the business is conducted or profits are booked. This prevents jurisdictions from engaging in a "race to the bottom" by offering ultra-low tax regimes to attract global companies.

Purpose of OECD Pillar Two

The primary objectives of Pillar Two include:

Promoting fairness in global taxation by reducing incentives for profit shifting.
Protecting tax bases of jurisdictions, especially developing economies.
Creating a level playing field by ensuring large MNEs pay a minimum level of tax regardless of operating location.
Increasing global tax transparency and reducing harmful tax competition between countries.

Who Is Subject to the Global Minimum Tax?

The Global Minimum Tax applies to:

Multinational Enterprise (MNE) Groups and large domestic groups with annual consolidated revenues of at least EUR 750 million in two out of the past four financial years.
Both Malaysian-headquartered groups and foreign MNEs operating in Malaysia fall within scope if the threshold is met.

These rules apply regardless of the industry or sector, and include both public and privately held entities.

How BDO Can Help You Navigate GMT in Malaysia

Assessment & Planning

Impact Assessment
Safe Harbour Review
Data & Design Requirements Mapping

Compliance & Implementation

Reporting & Compliance System Evaluation
System Implementation
Preparation & Filing

Training & Advisory

Documentation & Trainings
Technical Advisory

For a detailed overview of how BDO can support your organisation in navigating Pillar Two requirements, access our service brochure below.

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To gain deeper insights into your organisation’s readiness for Pillar Two, access the self-assessment checklist below.

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You may also click here to visit our BDO Global Pillar Two webpage.

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For expert guidance on GMT Compliance in Malaysia, reach out to our professional tax advisors today. We are here to help you achieve clarity, compliance, and strategic advantages in your global tax planning.