MY-US Inter-Governmental Agreement legislated

Malaysia-United States of America (US) Inter-Governmental Agreement (IGA) legislated

The US Foreign Account Tax Compliance Act (FATCA) aims to reduce tax evasion by US persons and Financial Institutions (FIs) outside the US are required to provide information on their clients who are US persons, to the US Inland Revenue Service (US IRS). The US has also developed IGA models as tools to facilitate the FIs’ compliance with FATCA.

On 21 July 2021, Malaysia signed an agreement with the US on a Model 1 IGA to implement the FATCA, where reporting Malaysia-based FIs will provide the IRB with the account information of US persons with accounts in Malaysia. The IRB will then exchange such information with the US IRS, similar to the process under the Common Reporting Standard (CRS). To legislate this, the Income Tax (Agreement between the Government of Malaysia and the Government of the United States of America to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act) Order 2022 [P.U.(A) 278] (Agreement) was gazetted on 1 September 2022.

The following Rules and Regulations in connection to the implementation of provisions on obligations arising under the Agreement were also gazetted on 1 September 2022:

• Income Tax (Automatic Exchange of Financial Account Information between the Government of Malaysia and the Government of the United States of America to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act) Rules 2022 [P.U.(A) 279], which applies to a Malaysian FI^Note
• Labuan Business Activity Tax (Automatic Exchange of Financial Account Information between the Government of Malaysia and the Government of the United States of America to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act) Regulations 2022 [P.U.(A) 280], which applies to any Labuan entity stated in the Schedule to the Labuan Business Activity Tax Act 1990 which is a Malaysian FI^Note