FATCA is one of the initiatives introduced by the United States to improve the practice of exchange of information on tax matters, especially among US persons.
To know more about FATCA:
Foreign Account Tax Compliance Act (FATCA)
For Malaysia, this bilateral initiative adds to the work it has been doing at international meetings led by the Organization for Economic Cooperation and Development (OECD) to improve tax transparency in line with best practices.
The signing of the Intergovernmental Agreement between the Government of Malaysia and the Government of the United States continues to mark the warm bilateral relationship between both countries.
The Agreement, signed on 21st July 2021 by the Secretary General of Treasury, YBhg Dato’ Asri bin Hamidon and the United States Ambassador to Malaysia, His Excellency Amb. Brian McFeeters took place virtually at Putrajaya and Kuala Lumpur in the presence of the Deputy Minister of Finance II, YB Tuan Mohd Shahar bin Abdullah.
Malaysia joins 113 countries through this signing to implement the Foreign Account Tax Compliance Act (FATCA).
The Agreement between the governments of Malaysia and the United States of America to improve international tax compliance and implement the Foreign Account Tax Compliance Act (called "the Agreement") was signed on July 21, 2021. It was gazetted on September 1, 2022, as required by section 132B of the Income Tax Act of 1967.
To meet its obligations under the Agreement, the Malaysian Government gazetted the following subsidiary laws on September 1, 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 (‘the Rules’); and
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 (‘the Regulations’).
The Rules and Regulations, among other things, say that a Reporting Malaysian "Financial Institution" must furnish the Director General of Inland Revenue of Malaysia a return with the information (if any) listed in Article 2 of the Agreement in the format that the Director General may determine:
for the years 2014 - 2022, on or before June 30, 2023; and
For each following calendar year, by June 30 of the year after the end of the year to which the return applies.
Financial Institution (FI)
any entity that
accepts deposits in the ordinary course of a banking or similar business,
holds financial assets for the account of others as a substantial portion of its business, or
is engaged (or holding itself out as being engaged) primarily in the business of investing, reinvesting, or trading securities, partnership interests, commodities or similar financial instruments
Note that a Reporting Malaysian Financial Institution can be a Custodial Institution, a Depository Institution, an Investment Entity, or a Specified Insurance Company, as long as certain rules are followed (each as defined in the Agreement).
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