Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Malaysia 2011

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					GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE
OF INFORMATION FOR TAX PURPOSES



Peer Review Report
Phase 1
Legal and Regulatory Framework

MALAYSIA
      Global Forum
    on Transparency
      and Exchange
 of Information for Tax
Purposes Peer Reviews:
      Malaysia 2011
                    PHASE 1




                    October 2011
  (reflecting the legal and regulatory framework
                 as at August 2011)
This work is published on the responsibility of the Secretary-General of the OECD.
The opinions expressed and arguments employed herein do not necessarily reflect
the official views of the OECD or of the governments of its member countries or
those of the Global Forum on Transparency and Exchange of Information for Tax
Purposes.

This document and any map included herein are without prejudice to the status of
or sovereignty over any territory, to the delimitation of international frontiers and
boundaries and to the name of any territory, city or area.


  Please cite this publication as:
  OECD (2011), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer
  Reviews: Malaysia 2011: Phase 1: Legal and Regulatory Framework, Global Forum on
  Transparency and Exchange of Information for Tax Purposes: Peer Reviews, OECD
  Publishing.
  http://dx.doi.org/10.1787/9789264126657-en



ISBN 978-92-64-12664-0 (print)
ISBN 978-92-64-12665-7 (PDF)



Series: Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews
ISSN 2219-4681 (print)
ISSN 2219-469X (online)




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                                                                                                 TABLE OF CONTENTS – 3




                                            Table of Contents


About the Global Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
   Information and methodology used for the peer review of Malaysia . . . . . . . . . . 9
   Overview of Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
   Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

A. Availability of information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
   Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   19
   A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      21
   A.2. Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            54
   A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             62
B. Access to information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
   Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
   B.1. Competent Authority’s ability to obtain and provide information . . . . . . . . 66
   B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 77
C. Exchanging information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
   Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   79
   C.1. Exchange of information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        80
   C.2. Exchange of information mechanisms with all relevant partners . . . . . . . .                                       87
   C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       89
   C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . .                             90
   C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . .                             91




PEER REVIEW REPORT – PHASE 1: LEGAL AND REGULATORY FRAMEWORK – MALAYSIA © OECD 2011
4 – TABLE OF CONTENTS

Summary of Determinations and Factors Underlying Recommendations. . . . 93

Annex 1: Jurisdiction’s Response to the Review Report . . . . . . . . . . . . . . . . . . 97
Annex 2: List of all Exchange-of-Information Mechanisms in Force. . . . . . . . 98
Annex 3: List of all Laws, Regulations and Other Relevant Material . . . . . . .101




                   PEER REVIEW REPORT – PHASE 1: LEGAL AND REGULATORY FRAMEWORK – MALAYSIA © OECD 2011
                                                                          ABOUT THE GLOBAL FORUM – 5




                             About the Global Forum

           The Global Forum on Transparency and Exchange of Information for Tax
       Purposes is the multilateral framework within which work in the area of tax
       transparency and exchange of information is carried out by over 100 jurisdic-
       tions, which participate in the Global Forum on an equal footing.
            The Global Forum is charged with in-depth monitoring and peer review of
       the implementation of the international standards of transparency and exchange
       of information for tax purposes. These standards are primarily reflected in the
       2002 OECD Model Agreement on Exchange of Information on Tax Matters
       and its commentary, and in Article 26 of the OECD Model Tax Convention on
       Income and on Capital and its commentary as updated in 2004. These stand-
       ards have also been incorporated into the UN Model Tax Convention.
            The standards provide for international exchange on request of foresee-
       ably relevant information for the administration or enforcement of the domes-
       tic tax laws of a requesting party. Fishing expeditions are not authorised but
       all foreseeably relevant information must be provided, including bank infor-
       mation and information held by fiduciaries, regardless of the existence of a
       domestic tax interest or the application of a dual criminality standard.
            All members of the Global Forum, as well as jurisdictions identified by
       the Global Forum as relevant to its work, are being reviewed. This process is
       undertaken in two phases. Phase 1 reviews assess the quality of a jurisdiction’s
       legal and regulatory framework for the exchange of information, while Phase 2
       reviews look at the practical implementation of that framework. Some Global
       Forum members are undergoing combined – Phase 1 plus Phase 2 – reviews.
       The Global Forum has also put in place a process for supplementary reports
       to follow-up on recommendations, as well as for the ongoing monitoring of
       jurisdictions following the conclusion of a review. The ultimate goal is to help
       jurisdictions to effectively implement the international standards of transpar-
       ency and exchange of information for tax purposes.
           All review reports are published once approved by the Global Forum and
       they thus represent agreed Global Forum reports.
           For more information on the work of the Global Forum on Transparency
       and Exchange of Information for Tax Purposes, and for copies of the pub-
       lished review reports, please refer to www.oecd.org/tax/transparency.


PEER REVIEW REPORT – PHASE 1: LEGAL AND REGULATORY FRAMEWORK – MALAYSIA © OECD 2011
                                                                               EXECUTIVE SUMMARY – 7




                                 Executive Summary

       1.       This report summarises the legal and regulatory framework for trans-
       parency and exchange of information in Malaysia. The international standard
       which is set out in the Global Forum’s Terms of Reference to Monitor and
       Review Progress Towards Transparency and Exchange of Information, is
       concerned with the availability of relevant information within a jurisdiction,
       the competent authority’s ability to gain access to that information, and in
       turn, whether that information can be effectively exchanged on a timely basis
       with its exchange of information partners.
       2.      Malaysia is one of the most developed economies in South-East Asia.
       It has progressed from an economy dependent on agriculture and primary
       commodities to a manufacturing-based, export-driven economy spurred
       on by high technology, knowledge-based and capital-intensive industries.
       Malaysia hosts the world’s largest Islamic banking and financial centre. The
       island of Labuan is where Malaysia’s International Business and Financial
       Centre (IBFC), established in 1990, is located.
       3.       In 2009, Malaysia committed to the internationally agreed standard
       for international exchange of information (EOI) in tax matters. Since then,
       Malaysia has actively sought to update and extend its network of double
       taxation conventions: since that time it has signed 18 Double Tax Conventions
       (DTCs)/protocols to existing DTCs, all of which fully conform to the standard,
       10 of which are in force and 5 are not in force but have already been ratified
       by Malaysia. A further 15 agreements are under various stages of negotiation.
       Although Malaysia has embarked on an ambitious programme of negotiation
       of protocols to its treaties to bring them to the standard, currently, however,
       only 10 of Malaysia’s 71 DTCs fully meet the international standard. It is
       recommended that Malaysia continues its program of renegotiating its treaties
       which are not to the standard and examines ways to bring all agreements up to
       the international standard as soon as practicable.
       4.      Malaysia’s commercial and tax laws provide for extensive registra-
       tion and licensing requirements which, coupled with customer due diligence
       rules provided under Malaysia anti-money laundering legislation, guarantee
       that ownership and identity information is available for virtually all types of



PEER REVIEW REPORT – PHASE 1: LEGAL AND REGULATORY FRAMEWORK – MALAYSIA © OECD 2011
8 – EXECUTIVE SUMMARY

     companies, partnerships, trusts and foundations. Identity information may not
     be always available in respect of trusts whose trustees are not subject to the
     anti-money laundering legislation; although Malaysian authorities estimate
     that this would involve a very narrow category and that common law obliga-
     tions will ensure that identity information is always kept. Accounting records,
     including underlying documentation, are also available and are required to be
     kept for at least five years in Malaysia; however, there is no express obligation
     to maintain underlying documentation in the case of entities in the Labuan
     IBFC or certain Malaysian trusts that do not carry business in Malaysia or are
     not in receipt of Malaysian source income. The effectiveness of the obliga-
     tions to keep ownership and accounting information is generally supported
     by a comprehensive system of sanctions. The same holds true with regard to
     bank information, the availability of which is prescribed under the anti-money
     laundering legislation.
     5.       Malaysia’s competent authority has broad powers to obtain relevant
     information from any person who holds the information and has measures to
     compel the production of such information. However, Malaysia does not have
     the power to obtain and provide information that is held outside Malaysia,
     even if such information is in the control of a person within its territorial juris-
     diction. This gap in Malaysian legal framework is mitigated by the fact that
     Malaysian laws require that most relevant ownership and accounting informa-
     tion is kept in Malaysia.
     6.      Malaysia is only able to access bank information to answer an
     exchange of information request received pursuant to a DTC/tax information
     exchange agreement (TIEA) containing an equivalent of Article 26(5) of the
     OECD Model Tax Convention. Only DTCs/TIEAs containing this explicit
     provision are considered to override domestic secrecy laws. Ten of Malaysia’s
     DTCs or protocols contain such a provision (as well as eight treaties or proto-
     cols signed but not yet in force).
     7.      The laws of Malaysia allow it to enter into TIEAs and negotiations of
     TIEAs are underway. Malaysia’s authorities do not currently have the power
     to access information in the Labuan IBFC in order to respond to an EOI
     request made pursuant to a TIEA. However, Malaysia is now also working to
     amend its legislation in order to enable it to obtain and exchange information
     pursuant to such EOI instruments.
     8.      Malaysia’s response to the recommendations in this report, as well as
     the practical implementation of the legal framework will be assessed during the
     Phase 2 Peer Review of Malaysia, which is scheduled for the first half of 2013.




                   PEER REVIEW REPORT – PHASE 1: LEGAL AND REGULATORY FRAMEWORK – MALAYSIA © OECD 2011
                                                                                      INTRODUCTION – 9




                                        Introduction


Information and methodology used for the peer review of Malaysia

       9.       The assessment of the legal and regulatory framework of Malaysia
       was based on the international standards for transparency and exchange
       of information as described in the Global Forum’s Terms of Reference to
       Monitor and Review Progress Towards Transparency and Exchange of
       Information For Tax Purposes, and was prepared using the Global Forum’s
       Methodology for Peer Reviews and Non-Member Reviews. The assessment
       was based on the laws, regulations, and exchange of information mechanisms
       in force or effect as at August 2011, Malaysia’s responses to the Phase 1 ques-
       tionnaire and supplementary questions, other materials supplied by Malaysia,
       and information supplied by partner jurisdictions.
       10.      The Terms of Reference breaks down the standards of transparency
       and exchange of information into ten essential elements and 31 enumer-
       ated aspects under three broad categories: (A) availability of information;
       (B) access to information; and (C) exchange of information. This review
       assesses Malaysia’s legal and regulatory framework against these elements
       and each of the enumerated aspects. In respect of each essential element a
       determination is made that either: (i) the element is in place; (ii) the element
       is in place but certain aspects of the legal implementation of the element need
       improvement; or (iii) the element is not in place. These determinations are
       accompanied by recommendations for improvement where relevant. A sum-
       mary of findings against those elements is annexed to this report.
       11.     The assessment was conducted by a team, which consisted of two
       expert assessors, with two representatives of the Global Forum Secretariat:
       Jacqueline Baumgartner, Senior Legal Policy Adviser, Cayman Islands and Ms.
       Petra Koerfgen, Federal Central Tax office, Germany; with Ms. Renata Teixeira
       and Ms. Ting Yang from the Global Forum Secretariat. The assessment team
       assessed the legal and regulatory framework for transparency and exchange of
       information and relevant exchange of information mechanisms in Malaysia.




PEER REVIEW REPORT – PHASE 1: LEGAL AND REGULATORY FRAMEWORK – MALAYSIA © OECD 2011
10 – INTRODUCTION

Overview of Malaysia

      12.      Malaysia is a federal constitutional monarchy located in South East
      Asia, across two regions divided by the South China Sea. Peninsular Malaysia,
      facing the Straits of Malacca, borders with Thailand and is linked to Singapore
      by two bridges; East Malaysia, situated on the Borneo island, borders with
      Brunei and Indonesia. The country covers an area of approximately 329 847
      square kilometres. Its population of 28.5 million is unevenly distributed with
      about 20 million inhabitants living on the Malaysian Peninsula and 8 million
      on East Malaysia.1 Malaysia’s population embraces a variety of ethnic groups,
      Malay being the majority, followed by Chinese, indigenous Orang Asli,
      Indian, and others. While Islam is the religion of the country, with Muslims
      composing around 60% of the population, other religions are freely practiced.
      13.     Malaysia acquired independence from the United Kingdom in
      1957. The Federal Constitution established a constitutional monarchy, in
      which the elected King (Yang di-Pertuan Agong) is the head of the country
      and The Prime Minister and his Cabinet exercise federal executive power.
      Government takes the form of a parliamentary democracy. The Parliament,
      divided into the Senate (Dewan Negara) and the House of Representatives
      (Dewan Rakyat), exercises legislative power, and of superior and subordi-
      nate courts are vested with judicial authority. The federation is made up of
      13 states (Negeri) and 3 federal territories2, these latter being administered
      by the government through the Ministry of Federal Territories and Urban
      Wellbeing. Major cities are Kuala Lumpur, Klang, and Johor Bahru.
      14.     With a total 2010 gross domestic product (GDP) of EUR 289.62 billion,3
      Malaysia is one of the most developed economies in South-East Asia. The ser-
      vice sector accounts for about 50% of total GDP, industry for about 41% and
      agriculture for 9%. The pillars of the economy are manufacturing (notably
      electronic products), natural resources (petroleum and natural gas), finance
      and tourism. Malaysia is an active trading nation, ranked in the top 20 trading
      nations in the world, with a total merchandise export of EUR 138.79 billion
      in 2010.4 Its main trading partners are the People’s Republic of China, Japan,
      Singapore, the United States, the European Union and Thailand.




1.    www.statistics.gov.my, accessed in June 2011.
2.    Labuan, Kuala Lumpur, and Putrajaya.
3.    GDP calculated for 2010 based on purchasing-power-parity (PPP). See IMF, World
      Economic Outlook Database, April 2011. www.imf.org, accessed June 2011.
4.    Asian Development Bank, Asian Development Outlook 2011: Malaysia. www.adb.
      org/documents/books/ado/2011/ado2011-mal.pdf, accessed June 2011.


                    PEER REVIEW REPORT – PHASE 1: LEGAL AND REGULATORY FRAMEWORK – MALAYSIA © OECD 2011
                                                                                      INTRODUCTION – 11



       15.     The official Malaysian currency is the ringgit (MYR).5 From the
       middle of 2005, the Central Bank (Bank Negara Malaysia) adopted a man-
       aged float foreign exchange regime against several key currencies.
       16.    Malaysia is a member of the Asia Pacific Economic Co-operation
       (APEC), the Association of Southeast Asian Nations (ASEAN), the United
       Nations (UN) and the World Trade Organisation (WTO). It is a founding
       member of the Global Forum.

       General information on the legal and tax system

       Legal system
       17.       Malaysia’s legal system is based on a common law framework – a direct
       result of the colonisation by Britain from the early 1800s to 1950s – where written
       laws and the principles of English common law, adapted to local circumstances,
       case law and local customary law co-exist. Among the written laws are the Federal
       Constitution together with the constitutions of the 13 states, legislation enacted by
       the Parliament and State Assemblies, and subsidiary legislation made by bodies
       under the powers conferred on them by Acts of Parliament or State Assemblies.
       Federal laws prevailif inconsistency arises between a federal and a state law.
       18.      The Federal Constitution is the supreme law of the land providing
       the legal framework for legislation, courts and administrative aspects of the
       law. It also defines the powers of the government and the monarch, as well as
       the rights of the citizens, and the separation of powers amongst the executive,
       judicial and legislative branches. Below the Federal Constitution, legislative
       instruments are in the form of: Acts passed by Parliament; Regulations and
       other subsidiary legislation passed by the executive (Ministerial Regulations);
       and, State laws and regulations. In addition, all the guidelines made by the
       relevant competent authorities are mandatory and enforceable.
       19.      The Federal Constitution provides for the separation of competences
       between the Federation and the States. The federal government has legislative
       power over external affairs, including making laws and implementing treaties
       domestically, justice (except civil law cases among Malays or other Muslims
       and other indigenous peoples, adjudicated under Islamic and customary law),
       federal citizenship, finance, taxation, commerce, industry, and other matters.6
       States enjoy legislative power over matters such as land, local government,
       Shariah law7 and Shariah courts. Federal laws enacted by the Parliament of

5.     MYR 1 = EUR 0.23 as of 19 June 2011. www.xe.com, accessed 18 June 2011.
6.     www.state.gov/r/pa/ei/bgn/2777.htm.
7.     Shariah courts hear cases on specific matters involving Muslims only. The
       Constitution recognises Muslim law (Shariah) under article 121, limiting it to


PEER REVIEW REPORT – PHASE 1: LEGAL AND REGULATORY FRAMEWORK – MALAYSIA © OECD 2011
12 – INTRODUCTION

      Malaysia apply throughout the country, including making laws applicable to
      States as regards international agreements (Art.76 Constitution).
      20.      The superior courts are the High Court in the States of Malaya (High
      Court in Malaya), and the High Court in the States of Sabah and Sarawak
      (High Court in Sabah and Sarawak), Court of Appeal, and the Federal Court,
      while the Magistrates’ Courts, the Sessions Courts, and other courts8 are clas-
      sified as subordinate courts.
      21.      The application of common law in Malaysian criminal cases is speci-
      fied in section 5 of the Criminal Procedure Code (Act 593) which states that
      English law shall be applied in cases where no specific legislation has been
      enacted. In addition, sections 3 and 5 of the Civil Law Act 1956 allow for the
      application of English common law, equity rules, and statutes in Malaysian
      civil cases where no specific laws have been made.
      22.      The Federal Government, composed of Yang di-Pertuan Agong and
      the Cabinet, headed by the Prime Minister, has treaty-making power, while
      the Federal Parliament has the exclusive power to implement treaties domes-
      tically. The Prime Minister himself or the Foreign Minister or any Cabinet
      Minister authorised to do so, signs and ratifies international treaties.

      Taxation system
      23.      Article 96 of the Constitution provides that “no tax or rate shall be
      levied by or for the purposes of Malaysia except by or under the authority
      of federal law”. The law governing income taxation is the Income Tax Act
      1967 (ITA). Income tax is charged on a territorial basis and upon remittance.
      However, the businesses of banking, insurance and air and sea transport
      are subject to taxes on worldwide income. Income tax rates for resident
      individuals range from 1% to 26%, and non-resident individuals are taxed
      at a flat rate of 26%. Companies with paid-up capital of MYR 2.5 million
      (EUR 575 000) or less are subject to corporate tax at 20% on chargeable
      income up to MYR 500 000 (EUR 115 000) and 25% on chargeable income
      above that threshold. For companies with paid-up capital of more than MYR
      2.5 million and non-resident companies, chargeable income is taxed at 25%.
      An individual is resident if he is present in Malaysia for more than 182 days
      in a year, while a company is deemed resident if its management and control
      are exercised in Malaysia.


      family and inheritance matters as regards only to the Muslim population. Shariah
      law is administered by a separate system of Shariah courts.
8.    The Sessions Court, Magistrates’ Court, Juvenile Court, Penghulu Court and
      Native Court.


                    PEER REVIEW REPORT – PHASE 1: LEGAL AND REGULATORY FRAMEWORK – MALAYSIA © OECD 2011
                                                                                      INTRODUCTION – 13



       24.      Corporate profits are subject to a one-tier corporate tax system, and
       thus dividends paid by resident companies are not subject to withholding tax.
       The withholding tax on interest is 15%, and for royalties, fees for technical
       services and other income it is 10%. There are also other direct taxes such
       as real property gains tax, and indirect taxes such as sales tax, service tax,
       excise duty and import duty. There is no tax on capital gains.
       25.     Malaysia has tax incentives for manufacturing, agriculture and tour-
       ism activities. Incentives include pioneer status, investment tax allowance,
       reinvestment allowance and double deductions, with the objective of develop-
       ing Malaysia and changing the economy from agriculture-based to industry-
       based. Incentives are available under the Promotion of Investments Act 1986
       and the ITA. The Labuan Business Activity Tax Act (LBATA) establishes
       a separate regime for taxing business activities in the Labuan International
       Business and Financial Centre (IBFC).
       26.      The free zones (FZs) of Malaysia include 15 free commercial zones
       and 19 free industrial zones. Within the FZs, companies are subject to mini-
       mum customs formalities and are exempt from import duties on raw material,
       machinery and component parts. Companies established at the FZs are sub-
       ject to the same reporting requirements applicable to Malaysian companies
       in general.
       27.    Double taxation conventions (DTCs) and taxation information exchange
       agreements (TIEAs) prevail over all domestic laws (ITA ss.132 and 132A).
       28.      Malaysia committed to the internationally agreed standard for the
       exchange of information for tax purposes in 2009. As of June 2011, Malaysia
       is signatory to 71 DTCs providing for international exchange of information
       (EOI) in tax matters. A complete list of Malaysia’s DTCs is set out in Annex
       2 to this report. The Minister of Finance is empowered to make provisions,
       by Order (by way of notification in the Government Gazette), for “affording
       relief from double taxation” and “exchange of information foreseeably rel-
       evant to the administration or assessment or collection or enforcement of the
       taxes under the ITA or other taxes of every kind under any written law and
       any foreign tax …” (ITA ss.132 and 132A).

       Overview of the financial sector and relevant professions

       Financial sector
       29.      Malaysia has a well-developed financial sector, with total financial
       assets amounting to nearly three times its GDP. As at end-2010, the finan-
       cial services sector contributes 11.6% to GDP. Malaysia has a dual financial
       system where both conventional and Islamic financial systems operate in



PEER REVIEW REPORT – PHASE 1: LEGAL AND REGULATORY FRAMEWORK – MALAYSIA © OECD 2011
14 – INTRODUCTION

      parallel. The stock market capitalisation to GDP is 180%; much higher than
      most other South East Asian countries.
      30.      As of May 2011, there are 1 184 local and foreign financial institu-
      tions in Malaysia, including 24 commercial banks, 15 investment banks, 21
      Islamic banks, 6 development financial institutions, 45 insurance companies,
      15 takaful (Islamic insurance) operators, 6 money brokers, 37 insurance/
      takaful brokers, 36 loss adjusters, 16 financial advisers, 74 payment system
      operators, 53 payment instruments issuers and 836 money changers.
      31.     Capital market institutions and market intermediaries are regulated
      and supervised by the Securities Commission Malaysia. Licensed dealers,
      fund managers, futures brokers and futures fund managers are licensed under
      the Capital Markets & Services Act 2007 (CMSA) and management compa-
      nies are approved under the Securities Commission Act 1993 (SCA).
      32.     The Companies Commission of Malaysia (CCM) incorporates com-
      panies and registers businesses and provides company and business infor-
      mation to the public. It is also the leading authority for the improvement of
      corporate governance.
      33.     Under the anti-money laundering / counter terrorism-financing
      (AML/CFT) regime, Bank Negara Malaysia is the competent authority
      appointed by the Minister of Finance. Financial institutions and a range of
      designated non-professional businesses and professions are obliged entities
      under the Anti-Money Laundering and Anti-Terrorism Financing Act 2001
      (AMLATFA) and must conduct customer due diligence.
      34.      Over more than 30 years, Malaysia has been active in Islamic
      banking,9 Islamic insurance10, the Islamic capital market and the Islamic
      money market. Malaysia leads the global Islamic bond (sukuk) market with
      a 65% share. In 2005, Malaysia launched the first Islamic real estate trusts
      and introduced Asia’s first Islamic exchange traded fund. In 2008, Malaysia’s
      Islamic banking assets reached EUR 50.67 billion with an average growth
      rate of 20% annually. In 2008, the total assets of Malaysia’s takaful industry
      were EUR 167.84 million. Takaful assets and net contributions experienced
      strong growth of an average of 20% and 27% respectively from 2005 to 2010.

9.    Islamic banking is a system of banking that complies with Islamic law also
      known as Shariah law. The underlying principles that govern Islamic banking
      are mutual risk and profit sharing between parties, the assurance of fairness for
      all and that transactions are based on an underlying business activity or asset.
10.   Takaful (Islamic insurance) is a concept whereby a group of participants mutu-
      ally guarantee each other against loss or damage. Each participant fulfils his/her
      obligation by contributing a certain amount of donation (or tabarru) into a fund,
      which is managed by a third party – the takaful operator.


                    PEER REVIEW REPORT – PHASE 1: LEGAL AND REGULATORY FRAMEWORK – MALAYSIA © OECD 2011
                                                                                      INTRODUCTION – 15



       35.      The Malaysia International Islamic Financial Centre (MIFC) is an
       initiative which comprises a community network of financial and market
       regulatory bodies, government ministries and agencies, financial institutions,
       human capital development institutions and professional services companies
       that are participating in the field of Islamic finance. The MIFC comprises
       Sukuk creation, Islamic fund and wealth management, international Islamic
       banking, international takaful and human capital development. Under the
       MIFC initiative, Islamic financial institutions benefit from various incen-
       tives, including licences to conduct foreign currency businesses, tax incen-
       tives and facilitative immigration policies.11

       The Labuan International Business and Financial Centre (Labuan
       IBFC)
       36.      Labuan is one of the three Federal Territories of Malaysia. It is an
       archipelago, made up of one main island and six islets, off the northwest coast
       of Borneo. Administered directly by the Ministry of the Federal Territories
       and Urban Wellbeing of Malaysia since 1984, it became an international
       business and financial centre (IBFC) in 1990 with specifically designed leg-
       islation and regulations. Labuan IBFC focuses on five main areas; holding
       companies, captive insurance, public and private funds, wealth management,
       and Shariah-compliant Islamic finance structures. Labuan laws are part and
       parcel of Malaysia’s laws which undergo the same process of enactment
       through the Parliament of Malaysia. However, the Labuan laws govern the
       entities that carry on Labuan business activities in the Labuan IBFC only.
       37.      Pursuant to the LBATA, Labuan IBFC entities carrying on trading
       activity are charged tax at 3% of net audited profits or can elect to be levied at
       the flat rate of MYR 20 000 (EUR 4 600). Entities undertaking non-trading
       activity are not subject to tax. There are no withholding taxes on dividends,
       interest, royalties, management and technical fees or lease rental received
       from Labuan IBFC entities. In addition, they are exempted from stamp duties
       on instruments made in connection with Labuan IBFC business activities. A
       Labuan IBFC entity may also make an irrevocable election to be taxed under
       Malaysia’s ITA.
       38.      In the Labuan IBFC, banking, insurance, leasing and capital market
       entities and other professions (service providers) are licensed, regulated, and
       supervised by the Labuan Financial Services Authority (LFSA), the sole
       regulatory authority in the IBFC. The LFSA is also responsible for the regis-
       tration of Labuan IBFC companies, limited partnerships and limited liability
       partnerships and for the establishment of trusts and foundations. Its principal
       functions are to administer, enforce and carry into effect the provisions of the

11.    www.mifc.com/index.php?ch=menu_exp&pg=menu_exp_ovr, accessed June 2011.


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16 – INTRODUCTION

      legislation applicable to financial services carried on in the Labuan IBFC.12
      The amount of assets held by banks licensed in the Labuan IBFC in 2010 was
      EUR 23.7 billion, out of EUR 386.3 billion in total in Malaysia.
      39.     The Labuan Islamic Financial Securities and Services Act 2010
      (LIFSSA) provides an overall framework that brings together rules and guide-
      lines on Islamic finance. It provides for a range of Islamic financial products
      and addresses Shariah compliance for trusts and foundations as well as pro-
      viding for the establishment of a Shariah Supervisory Council.
      40.     All of the international standards for effective EOI are applicable to
      Labuan entities. The Director General of Inland Revenue (DGIR)’s access
      powers extend also to entities in Labuan. Moreover, the Labuan Business
      Activity Tax Act provides the DGIR with specific authority to access infor-
      mation in Labuan for EOI purposes.

      Relevant professions
      41.      Lawyers, certified accountants and company secretaries are subject
      to oversight by their respective professional associations and self-regulatory
      organisations (SROs). Guidelines issued by the various professional associa-
      tions and SROs are not binding on these professionals and are not considered
      part of the legal and regulatory framework for the purpose of this assessment.
      42.    There are about 27 180 public chartered accountants in Malaysia.
      They are required by law to be members of the Malaysian Institute of
      Accountants (MIA).
      43.      There are more than 13 500 lawyers providing services in Malaysia.
      Each advocate or solicitor in Peninsular Malaysia becomes a member of
      the Malaysian Bar once he/she qualifies and holds a valid practising cer-
      tificate. Advocates in Sabah and Sarawak are governed by the Advocates
      Ordinance Sabah 1953 and Advocates Ordinance Sarawak 1953 respectively
      and can apply for membership in the Sabah Law Association and Advocates
      Association of Sarawak respectively. Advocates and other professionals in the
      Labuan IBFC are subject to the same professional requirements as the rest of
      Malaysia.
      44.   In Malaysia, company secretaries are governed by section 139A of the
      Companies Act 1965 (CA). A company secretary can either be licensed by the

12.   In particular the Labuan Financial Services Authority Act 1996; Labuan Companies
      Act 1990; Labuan Financial Services and Securities Act 2010; Labuan Islamic
      Financial Services and Securities Act 2010; Labuan Trusts Act 1996; Labuan
      Limited Partnerships and Limited Liability Partnerships Act 2010; Labuan
      Foundations Act 2010; and Labuan Business Activity Tax Act 1990.


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                                                                                      INTRODUCTION – 17



       CCM or be regulated by prescribed bodies, such as the Malaysian Institute
       of Chartered Secretaries and Administrators and the Malaysian Association
       of Company Secretaries. As at 22 July 2011, the total number of company
       secretaries licensed by the CCM is 9 650. The number of company secretaries
       regulated by prescribed bodies is 52 349.

Recent developments

       45.    A number of relevant laws and legislative amendments have been
       promulgated in 2010 and 2011, as follows:
                major tax offences were listed as predicate offences for money laun-
                dering purposes under the AMLATFA;
                the Labuan Foundations Act 2010; Labuan Financial Services
                and Securities Act 2010; Labuan Islamic Financial Services and
                Securities Act 2010; and the Labuan Limited Partnerships and
                Limited Liability Partnerships Act 2010 were enacted; and
                new Income Tax (Request for Information) Rules and a new Central
                Bank Circular were enacted in July 2011 concerning access to and
                exchange of information for tax purposes.
       46.     Section 132A of the ITA, introduced in February 2011, enables the
       Government to enter into TIEAs with any foreign country for the exchange
       of information where no DTC is yet in force. Malaysia has not entered into
       any TIEAs yet, however, it has recently concluded TIEA negotiations with
       Bermuda.
       47.      The CCM will be introducing the limited liability partnership (LLP)
       as an alternative business vehicle to provide a wider choice for businesses to
       structure their operations. The CCM will be empowered to request for infor-
       mation from LLPs, including information concerning the partners.
       48.     The Malaysian authorities expect to submit for parliamentary approval
       in October 2011 bills of law covering the following topics:
                a new law to empower its competent authority to call for information
                for the purpose of replying to a request made pursuant to a TIEA in
                the Labuan IBFC; and
                a new law to empower its competent authority to access information
                controlled by persons in Malaysia.




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                               COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 19




                      Compliance with the Standards




A. Availability of information



Overview

       49.      Effective exchange of information requires the availability of reliable
       information. In particular, it requires information on the identity of owners
       and other stakeholders as well as information on the transactions carried
       out by entities and other organisational structures. Such information may
       be kept for tax, regulatory, commercial or other reasons. If such informa-
       tion is not kept or the information is not maintained for a reasonable period
       of time, a jurisdiction’s competent authority may not be able to obtain and
       provide it when requested. This section of the report describes and assesses
       Malaysia’s and Labuan IBFC’s legal and regulatory framework on availability
       of information.
       50.     The Companies Act requires the filing of information on the legal
       ownership of companies with the Registrar. It also requires companies to
       maintain registers of their members/shareholders. Foreign companies with
       share capital which have a place of business in Malaysia or carry on business
       in Malaysia must maintain registers of those shareholders resident in Malaysia
       who choose to be registered. The Income Tax Act requires Malaysian and
       foreign controlled companies13 to provide details of their major shareholders.


13.    Controlled companies are defined in the ITA as companies not having more than
       50 members/shareholders and controlled by not more than five persons (ss.2 and
       139).


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      In the Labuan IBFC, the Labuan Companies Act requires filing of informa-
      tion on the legal ownership of companies with the Labuan Financial Services
      Authority (LFSA). It also requires Labuan companies and protected cell
      companies (PCCs) to maintain registers of their members/shareholders. All
      Labuan companies, Labuan PCCs and Labuan foreign companies must have
      registered offices at licensed Labuan trust companies and these trust com-
      panies are required to identify and keep records of the ownership (including
      beneficial ownership) of the companies which are their clients. In addition,
      both in Malaysia and in the Labuan IBFC, financial institutions and some
      other service providers are required under anti-money laundering legislation
      to obtain information on the ownership chain for all of their customers.
      51.      Overall, legal ownership and identity information is available to
      the Registrar or the tax authority in respect of all partnerships operating in
      Malaysia. In the Labuan IBFC, legal ownership and identity information is
      either filed with the LFSA or required to be kept by the partnership itself in
      respect of all partnerships operating in the Labuan IBFC. In Malaysia and in
      the Labuan IBFC, requirements are supported by the customer due diligence
      (CDD) obligations imposed on financial institutions and some other service
      providers.
      52.      In respect of trusts, identity information is available in relation to
      trusts administered by trust companies and most trust service providers.
      Malaysia’s regulatory framework targets the major avenues of trust formation
      and administration by regulating trust intermediaries that provide such trust
      services by way of business. This is complemented by common law obliga-
      tions on trustees to maintain information concerning trusts and by the anti-
      money laundering/counter-financing of terrorism (AML/CFT) obligations on
      financial institutions and a range of service providers. In the Labuan IBFC,
      in turn, legal ownership and identity information is available to the LFSA in
      respect of all trusts. Similar to the rest of Malaysia, this is complemented by
      common law and CDD obligations.
      53.     Foundations only exist in the Labuan IBFC. Legal ownership and
      identity information is available in respect of all foundations, which must
      maintain records of their founders and beneficiaries. In addition, a founda-
      tion must have a Labuan trust company as its secretary and the Labuan trust
      company is obliged under AML/CFT legislation to identify the founders,
      foundation council members and beneficiaries. Financial institutions and
      some other service providers are also required under AML/CFT legislation
      to conduct full CDD on foundations which are their customers.
      54.     Relevant laws applicable in Malaysia and in the Labuan IBFC con-
      tain enforcement provisions to ensure the availability of information. The
      effectiveness of the enforcement provisions will be considered as part of the
      Phase 2 Peer Review.


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       55.      In respect of accounting information, in Malaysia and in the Labuan
       IBFC, general tax obligations complement commercial law obligations
       which, taken together, result in relevant entities being required to maintain
       accounting records. Generally, relevant entities in Malaysia are subject to
       requirements to keep accounting records, including underlying documenta-
       tion, for the minimum period required by the standards (five years). There are
       no express provisions in the laws regulating the Labuan IBFC requiring the
       maintenance of underlying documentation, however. In addition, Malaysian
       trusts that do not carry on business in Malaysia, do not remit income to
       Malaysia and are not in receipt of Malaysian source income are not required
       to maintain underlying documentation either.
       56.      In respect of banks and other financial institutions, the anti-money
       laundering/counter-financing of terrorism regime imposes appropriate obliga-
       tions to ensure that all records pertaining to customers’ accounts as well as
       related financial and transaction information are available.

A.1. Ownership and identity information
 Jurisdictions should ensure that ownership and identity information for all relevant
 entities and arrangements is available to their competent authorities.


       57.    This section will address in separate items ownership and identity
       information available in Malaysia and in the Labuan IBFC.

       Companies in Malaysia (ToR 14 A.1.1)

       Types of companies
       58.      The 1965 Companies Act (CA) is the central piece of legislation govern-
       ing the incorporation and management of companies in Malaysia. Depending on
       the liability assumed by their members, companies can be (CA s.14):
                companies limited by shares;
                companies limited by guarantee; or
                unlimited companies.
       59.     In addition, until 1986, a company could also be incorporated as a
       company limited by shares and guarantee. The total number of companies
       limited by share and guarantee still existing in Malaysia is 14.

14.    Terms of Reference to Monitor and Review Progress Towards Transparency and
       Exchange of Information.


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22 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      60.      Companies limited by shares are the most common type of compa-
      nies in Malaysia. A company limited by shares is one where the liability of
      its members is limited to the amount unpaid on the shares held by them (CA
      s.4). Companies limited by shares may be incorporated as: (i) private limited
      companies, with no more than 50 members (identified through the expression
      “Sendirian Berhad” or the abbreviation “Sdn. Bhd”); or (ii) public limited com-
      panies (identified through the expression “Berhad” or the abbreviation “Bhd”).
      61.     A company limited by guarantee is one where the liability of its
      members is limited to the amount that the members have undertaken to
      contribute should the company be wound up (CA s.4). Companies limited by
      guarantee are usually formed for non-profit making purposes. This type of
      company is commonly used for trade associations, charitable bodies, clubs,
      professional and learned associations, some religious bodies and the like.
      Companies limited by guarantee must use the profits and other sources of
      income for furtherance of the objects of the company.
      62.      An unlimited company is one where the members’ liability for its
      debts is unlimited.
      63.      These major types of companies can be further broken into private
      companies (restrictions on share issue, transfer and investment) or public
      companies (able to issue shares and debentures to the public and its shares are
      freely transferable).
      64.      A private company qualifies as an “exempt private company” if: (i) no
      beneficial interest on its share is held directly or indirectly by any corpora-
      tion; and (ii) it has not more than 20 members. An exempt private company is
      exempted from certain regulatory accounting requirements, such as the need
      to submit its balance sheet and profit and loss account with its annual return.
      It is subject to the regular obligations related to the provision of ownership
      information.
      65.     Companies are formed or created through the process of incorpora-
      tion pursuant to the CA. The CA provides that any two or more persons may
      incorporate a company by subscribing their names to a Memorandum and
      complying with the registration requirements (CA s.14). There must be at
      least:
              two natural persons whose principal or only place of residence is in
              Malaysia, to be named as first directors in the memorandum of the
              intended company (CA s.122); and
              one natural person whose principal or only place of residence is
              Malaysia, to be appointed as secretary of the intended company (CA
              s.139A) and who must be a qualified and licensed Secretary under
              the CA.



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       66.     As at 19 July 2011, there were 950 312 companies operating in
       Malaysia (excluding the Labuan IBFC), out of which 948 164 were companies
       limited by shares (942 895 private, 5 268 public), 1 824 companies limited by
       guarantee. 14 companies limited by shares and by guarantee and 295 unlim-
       ited companies. Among the private companies, between 2008 and July 2011
       there were 118 285 exempt private companies.

       Information held by authorities in Malaysia
       67.      All companies qualified as “controlled companies” are required to
       submit in their annual tax returns information on their five major sharehold-
       ers. The ITA defines controlled companies as companies not having more
       than 50 members/shareholders and controlled (as defined under s.139) by not
       more than five persons (s.2). More than 90% of private companies registered
       in Malaysia qualify as controlled companies. In relation to the companies
       that do not qualify as controlled companies, the Malaysian authorities have
       powers to request ownership information based on their general powers to
       call for information provided in the ITA (s.81). Ownership information is
       also available to the Companies Commission of Malaysia (the Registrar) as
       described in this section, through the requirement of companies to submit
       annual returns to the Registrar. Ownership information is also available to
       financial institutions and service providers that are reporting institutions
       under the Malaysian anti-money laundering legislation, through the customer
       due diligence procedures, as further described in this report.
       68.    Persons desiring to incorporate a company in Malaysia must lodge
       the memorandum and the articles of association (if any) of the proposed com-
       pany with the Registrar together with other documentation required under the
       Companies Act (CA s.16).
       69.     The memorandum to be submitted to the Registrar upon incorpora-
       tion must include information on: the name of the company; the objects of the
       company; the liability of the members; the company’s capital structure; and
       full names, addresses and occupations of the shareholders/members (CA s.18).
       Amendments to the memorandum must be lodged with the Registrar (s.21).
       70.      Subsequent to incorporation, where a company limited by shares
       makes any allotment of its shares, the company must within one month of
       the allotment lodge with the Registrar a return of allotment of shares stating,
       inter alia, the full name and address of, and the number and class of shares
       held by each of the allottees (CA s.54(1)). If the company is public and has
       more than 500 members, the information on identification of shareholders
       need not to be provided where such companies has allotted shares: (i) for
       cash; or (ii) for a consideration other than cash if the number of persons to
       whom the shares have been allotted exceeds 500 (s.54(2)).



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      71.       Every company having share capital must lodge an annual return
      with the Registrar (CA s.165). The annual return must include a list of all
      shareholders/members of the company, their respective particulars (full name
      and address) and shareholdings (Eighth Schedule). For a public company with
      more than 500 shareholders, the return will contain a list of the 20 largest
      shareholders of each class of equity shares and their respective particulars and
      shareholdings (s.166). In addition, public companies meeting the referenced
      criteria are required to provide suitable premises for persons to inspect and take
      copies of their list of members (s.166(1)). The obligation to inform the Registrar
      of changes in shareholdings is addressed by the need to submit annual return,
      i.e. in submission of annual returns listing all shareholders/members, any
      changes in shareholders/members will be updated through this means.
      72.      Companies not having share capital are also required to lodge an
      annual return with the Registrar (CA s.165). They are not required to include
      a list of its members in the annual return but must inform the Registrar of
      the address where such a list is kept, if it is kept elsewhere than its registered
      office.
      73.      Substantial shareholders in public companies and other bodies cor-
      porate identified in section 69B of the CA are required to notify the company
      and the Securities Commission of their particulars (name, nationality and
      address) and particulars of their voting shares and their interest. A substantial
      shareholding is generally achieved by acquiring 5% of the voting rights in a
      company (CA s.69D). In addition, substantial shareholders in public compa-
      nies are required to provide information to the Securities Commission on
      their legal and beneficial ownership (1998 Securities Industry (Reporting of
      substantial shareholding) Regulations, as amended in 2001).

      Foreign companies
      74.      Foreign companies that establish a place of business in Malaysia or
      carry on business in Malaysia must register under the Companies Act (CA
      s.332(1)). The concept of foreign company includes a company, corporation,
      society, association or other body incorporated outside Malaysia and an unin-
      corporated society, association or other body which under the law of its place
      of origin may sue or be sued, or hold property in the name of the secretary or
      other officer of the body or association duly appointed for that purpose and
      which does not have its head office or principal place of business in Malaysia
      (s.4). Foreign companies with or without share capital may be registered in
      Malaysia.
      75.     Foreign controlled companies (i.e. foreign companies not having
      more than 50 members/shareholders and controlled (as defined under s.139)
      by not more than five persons (s.2)) must file information on their five major



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       shareholders as part of their annual tax returns. Foreign controlled companies
       constitute over 90% of foreign companies registered in Malaysia. In rela-
       tion to foreign companies that do not qualify as controlled companies, the
       Malaysian authorities have powers to request ownership information based
       on their general powers to call for information provided for in the ITA (s.81).
       76.     Upon registration in Malaysia, a foreign company must lodge with the
       Registrar various information, including a certified copy of the certificate of its
       incorporation or registration in its place of incorporation or origin, a certified
       copy of its charter, statute or memorandum and articles or other instrument
       constituting or defining its constitution, a list of its directors and a memoran-
       dum of appointment or power of attorney stating the names and addresses of
       one or more natural persons resident in Malaysia authorised to accept service
       of process on its behalf (CA s.332(1)). There is no express obligation to provide
       information on the ownership of the company to the Registrar.
       77.     After registration, foreign companies continue to be subject to report-
       ing requirements including notification to the Registrar of any changes in the
       memorandum or articles lodged with the Registrar, including changes in the
       directors of the foreign company and changes in the registered office of the
       company in Malaysia (CA s.335).

       Information held by companies in Malaysia
       78.    Every Malaysian company is required to maintain a register of mem-
       bers which includes the following information (CA s.158):
                names, addresses, number of identity card issued under the National
                Registration (if applicable), nationality and other relevant information
                of the members;
                date on which each member commenced and ceased to be a member;
                and
                if applicable, shares held by each member, date of every allotment of
                shares to members and number of shares in each allotment.
       79.      In addition, where a company has more than 50 members, it also has
       to maintain an index of members, containing sufficient indication to enable
       the account of each member in the register to be readily found (CA s.158(5)
       (6)). Companies are also required to keep registers of directors’ shareholdings
       (s.134).
       80.     When shares are transferred, the transferor and the transferee are
       required to execute an instrument of transfer which must be lodged with the
       company (CA s.103). The company must then issue a certificate in connection
       with the share transfer (ss.106 and 107).



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      81.      In addition to these registers, where the company is a publicly listed
      company, it is also required to keep a register of substantial shareholders (CA
      s.69L). A substantial shareholder is a legal or natural person that holds not
      less than a 5% interest in the shares of the company. Substantial shareholders
      are required to inform the company of their name, nationality and address
      (s.69E).
      82.      In principle, all the registers mentioned must be kept at the registered
      office of the company; nonetheless, they may be kept at the office within
      Malaysia where they are made up if that is a different location from the
      registered office of the company (CA s.159(1)). The company must keep the
      Registrar informed if the register and index is kept at a place other than the reg-
      istered office (s.159(2)). A company having share capital may maintain a branch
      register outside Malaysia. If it does so, a duplicate of the branch register must
      be kept in Malaysia and this is deemed a part of the principal register (s.164).
      83.    The registers must be open for inspection by members of the com-
      pany without charge and by any other person on payment of a sum not
      exceeding MYR 1 (EUR 0.23) for each inspection (CA s.160(2)).
      84.      Foreign companies with share capital are required to keep at their
      registered offices in Malaysia, or at some other place in Malaysia, a branch
      register for the purpose of registering shares of members who are resident
      in Malaysia and who apply to have the shares registered therein (CA s.342).
      No information on shareholders who are not resident in Malaysia needs to
      be kept in Malaysia. And no information needs to be kept if the shareholder
      does not apply to have his/her shares noted in the branch register. Information
      on the five major shareholders of foreign controlled companies (90% of all
      foreign companies) is nonetheless available to the Malaysian tax authorities,
      as described in paragraph 75 above. Foreign companies without share capital
      are not required to keep a branch register. However, there are only around 80
      such companies in Malaysia and ownership information for them is available
      from the Companies Registry. Information is also available on the owners
      of foreign companies (with and without share capital) due to customer due
      diligence obligations on service providers (see further below). As a result,
      information is available on most owners of foreign companies with a nexus
      to Malaysia. Malaysian authorities are also advised to monitor the very small
      remaining gap to ensure it does not in any way interfere with the effective
      exchange of information in tax matters.

      Information held by directors and officers in Malaysia
      85.      Every Malaysian company must have at least two directors who have
      their principal or only places of residence in Malaysia (CA s.122). While direc-
      tors are not directly obliged to maintain information on the owners of their



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       companies, they will necessarily have access to the company’s register of
       members. No legal provision requires that directors or officers hold informa-
       tion on the owners of the company which they serve as directors or officers.

       Information required to be held by service providers in Malaysia
       86.       The Anti-Money Laundering and Anti-Terrorism Financing Act 2001
       (AMLATFA) requires reporting institutions (as defined in the First Schedule) to
       conduct customer due diligence (CDD) including to identify the customer, his/her
       representative capacity, domicile, legal capacity and business purpose (s.16). The
       list of reporting institutions includes, inter alia, financial institutions, trust com-
       panies, company secretaries, advocates and solicitors, and certified accountants.
       87.      In addition, pursuant to the Standard Guidelines on Anti-Money
       Laundering and Counter Financing of Terrorism (AML/CFT), reporting
       institutions are required to identify the beneficial owners15 of their corporate
       customers and are required to know the ownership and control structure of
       the corporate customer (s.5.3.3).

       Nominees in Malaysia
       88.      No indication needs to be given in the share registers or information
       filed with the Registrar or the Inland Revenue Board of Malaysia (IRBM)
       when shares or other interests in companies are held by nominees on behalf
       of third parties. However, where a company’s shares are held by a nominee on
       behalf of the company’s directors, the identity of the beneficial owners needs
       to be disclosed in the report attached to balance sheets and consolidated bal-
       ance sheets prepared by the Malaysian company (CA s.169(6)).
       89.      Pursuant to the Securities Industry (Central Depositories) Act 1991
       (SICDA), every securities account opened with a central depository must be
       in the name of the beneficial owner of the deposited securities or in the name
       of an authorised nominee (SICDA s.25). The person opening the securities

15.    Pursuant to the Standard Guidelines on Anti-Money Laundering and Counter
       Financing of Terrorism, beneficial owner refers to “any natural person(s) who
       ultimately owns or controls a customer and/or the person on whose behalf a
       transaction is being conducted. It also incorporates those persons who exercise
       ultimate effective control over a legal person or arrangement. For companies – the
       person(s) who ultimately owns or controls a customer and/or the person on whose
       behalf a transaction is being conducted includes the natural person with a control-
       ling interest and the natural persons who comprise the mind and management of
       company” (Appendix). Reporting institutions under the Standard Guidelines are
       required to identify “shareholders with majority or more than 25 percent control-
       ling interest, which ever is applicable”.


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      account must make a declaration in such manner as may be specified in the
      rules of the central depository that he is the beneficial owner of the deposited
      securities or the authorised nominee. Additionally, an authorised nominee is
      obliged to provide the central depository with the name and other particulars
      of the beneficial owner of the securities deposited in the securities account or
      opened in the name of the authorised nominee. Where an authorised nominee
      opens a securities account, the nominee may only hold deposited securities
      for one beneficial owner in respect of each securities account (s.25A).
      90.      Nominees that are lawyers, certified accountants, company secretar-
      ies or financial institutions are obliged to conduct CDD on their customers
      and thus to maintain full information on the persons on whose behalf they
      hold the interest in the company (AMLATFA s.16). The Malaysian authorities
      have indicated that most professionals acting as nominees are indeed finan-
      cial institutions, lawyers, certified accountants or company secretaries.

      Conclusion
      91.      The Companies Act requires filing of information on the legal owner-
      ship and identity of companies with the Registrar. It also requires companies to
      maintain registers of their members/shareholders. Domestic and foreign com-
      panies qualifying as controlled companies are required to file information on
      their five major shareholders. In addition, financial institutions and some other
      service providers are required under anti-money laundering legislation to obtain
      information on the ownership chain for all of their customers. While nominees
      who are acting on behalf of the company’s directors and those which are law-
      yers, certified accountants, company secretaries or financial institutions must
      identify the persons for whom they act, it is possible that some persons acting as
      nominees fall outside this group and are not required to maintain information on
      the persons for whom they act. The Malaysian authorities considered that such
      group would represent a narrow category and that in any case the Registrar or
      the tax authorities would be able to request those nominees to disclose the cli-
      ents’ ownership information based on the general powers to call for information
      the authorities have under the CA and the ITA (CA s.11(a) and ITA s.81).

      Companies in the Labuan IBFC (ToR 16 A.1.1)

      Types of companies in the Labuan IBFC
      92.   The Labuan IBFC has autonomy to issue laws and regulations on
      companies. The Labuan Company Act 1990 (LCA) rules the incorporation

16.   Terms of Reference to Monitor and Review Progress towards Transparency and
      Exchange of Information.


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       and management of companies in Labuan. The LCA deals with: (i) compa-
       nies incorporated in Labuan (Labuan companies); (ii) foreign Labuan com-
       panies; and (iii) Labuan protected cell companies (Labuan PCC).
       93.      A Labuan company can be incorporated as:
                a company limited by shares;
                a company limited by guarantee; or
                an unlimited company (LCA s.14).
       94.      A Labuan company limited by shares can be privately or publicly
       owned (LCA ss.15(7), 18 and 21). The requirements to incorporate a Labuan
       company are: (i) a minimum of one subscriber to the shares of the com-
       pany; (ii) no minimum capital requirement, unless the company undertakes
       licensed activities (minimum capital of MYR 10 million (EUR 2 300 000) for
       banks and MYR 300 000 (EUR 69 000) for captive insurance companies);
       (iii) minimum of one director (s.87); and (iv) a resident secretary (s.93(1)).
       95.     A foreign Labuan company is a foreign company that has a place of
       business or is carrying on business in Labuan (LCA s.120) and is registered
       in Labuan (ss.16 and 121). The LCA provides for a very broad definition of
       the expression “carrying on business in Labuan”. This expression embraces:
       (i) carrying on business in, from or through Labuan; (ii) establishing or
       using a share transfer or share registration office in Labuan or administering,
       managing or otherwise dealing with property situated in Labuan as an agent,
       legal personal representative or trustee, whether by servants or agents or oth-
       erwise; and (iii) cases where the Minister17 has given specific notice under the
       terms described in the LCA (s.120).
       96.       A Labuan protected cell company (PCC) is a Labuan company estab-
       lished under normal company rules with the ability to segregate its assets and
       liabilities into different cells, separated from the general assets of the PCC
       (LCA s.130). A Labuan PCC may only be formed to conduct licensed activi-
       ties dealt with by the Labuan Financial Services and Securities Act 2010
       (LFSSA) and the Labuan Islamic Financial Services and Securities Act 2010
       (LIFSSA).18 The incorporation of or the conversion to a Labuan PCC requires

17.    “Minister” is defined as “the Minister for the time being charged with the
       responsibility for financing” (LCA s.2).
18.    Licensed activities under the LFSSA include the activities of Labuan Securities
       and Capital Market (excluding public fund), Labuan trust companies, Labuan
       managed trust company, Labuan banks, Labuan investment banks, Labuan
       insurance and insurance-related, Labuan financial businesses, Labuan private
       trust company, company management and exchanges. Licensed activities under
       the LIFSSA include activities of Labuan islamic securities and capital market


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      prior approval of the Labuan Financial Services Authority (LFSA) (s.130P).
      The general provisions in the LCA applicable to Labuan companies, such as
      the reporting obligations, also apply to Labuan PCCs (s.130ZC).
      97.     As of 30 June 2011, there were 8 320 Labuan companies, out of which
      8 300 were companies limited by shares, 20 companies limited by guarantee
      and there are no unlimited companies. In addition, there were 114 foreign
      Labuan companies registered in the Labuan IBFC. At that date, no Labuan
      PCCs had been registered.

      Information held by authorities in the Labuan IBFC
      98.      There is no express provision in the laws and regulations of Labuan
      that require taxpayers to submit information regarding company owner-
      ship to the tax authority. However, the Malaysian authorities confirmed that
      information on ownership regarding legal owners or ultimate owners could
      be obtained by the tax authority under section 22 of the Labuan Business
      Activity Tax Act 1990 (LBATA).
      99.     Persons desiring to incorporate a company in the Labuan IBFC must
      lodge the memorandum and the articles of association of the proposed com-
      pany with the Labuan Financial Services Authority (LFSA) together with
      other documents required under the Labuan Companies Act 1990 (LCA s.15).
      100.    The memorandum to be submitted to the LFSA upon incorporation
      must include information on the name of the company, the objects of the
      company, the liability of the members/shareholders, the company’s capital
      structure, full name and address of each member/ shareholder (LCA s.18).
      Amendments to the memorandum or the articles of association must be
      lodged with the LFSA (s.23).
      101.     Subsequent to incorporation, where a company limited by shares
      makes any allotment of its shares, the company must within one month of the
      allotment lodge with the LFSA a return of allotment of shares stating, inter
      alia, the full name and address of, and the number and class of shares held by
      each of the allottees (LCA s.43).
      102.     Every Labuan company must lodge an annual return with the LFSA
      (LCA s.109). Among the information to be provided in the annual return are
      the full name and address of the Labuan company’s shareholders (Form 27
      of the Labuan Companies Regulations 2010, issued in connection with LCA
      s.109). There is no requirement in the LCA to communicate any changes in

      (excluding public fund), Labuan Islamic banking business licensees, Labuan
      takaful and takaful-related licensees, Labuan Islamic financial busineses and
      exchanges.


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       shareholding to the LFSA at the time they occur. However, the trust com-
       pany as the resident secretary (company secretary) of the Labuan company
       must keep all records of transfer of shares and ready to be inspected by the
       Authority at any point of time (LCA s.93(3)). In addition, updated owner-
       ship information is provided every year in the annual return. Companies not
       having share capital are not required to include a list of its members in the
       annual return but merely to inform the address where such list is kept, if it is
       kept elsewhere than in its registered office (s.109(4)(5)).
       103.     Pursuant to the Labuan Business Activity Tax Act 1990 (LBATA), the
       Director General of the Inland Revenue Board (DGIR) is empowered to call
       for information from any person and disclose such information with govern-
       ments where a DTA exist (s.22). The DGIR is also granted powers to disclose
       information upon a request from any tax authority of any government or any
       territory outside Malaysia (s.22A); however his powers to call for information
       are limited to the cases where a DTA is in place.

       Foreign companies
       104.    Foreign companies that wish establish a place of business in Labuan
       or carry on business in Labuan and are not already registered under the
       Companies Act 1965 (CA) must register under the Labuan Companies Act 1990
       (LCA s.121).
       105.     In order to register as a “foreign Labuan company”, the foreign com-
       pany must lodge with the LFSA various information, including a certified
       copy of the certificate of its incorporation or registration in its place of incor-
       poration or origin, a certified copy of its charter, statute or memorandum and
       articles or other instrument constituting or defining its constitution, a list
       of its directors, a memorandum of appointment or power of attorney stating
       the name of a Labuan trust company authorised to accept service of process
       on its behalf, a statutory declaration made by an officer of the Labuan trust
       company (LCA s.121). The law does not expressly require the lodging of
       information concerning the owners/shareholders (whether legal or beneficial
       owners). Ownership information concerning Labuan foreign companies is
       available to the Labuan trust company that functions as registered office of
       the foreign company, as further analysed in this section.
       106.     A foreign Labuan company must lodge with the LFSA an annual
       return containing “the prescribed particulars and accompanied by such
       copies of documents as are required to be included in the return” (LCA
       s.129). The relevant return does not require information on the ownership of
       the foreign Labuan company (Form 40 of the Labuan Companies Regulations
       2010), however.




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      Information held by companies in the Labuan IBFC
      107.   Labuan companies are required to maintain registers of members/
      shareholders containing the following information (LCA s.105):
              names, nationalities, addresses and other relevant information of the
              members;
              dates on which each member commenced and ceased to be a member;
              and
              if applicable, shares held by each member, date of every allotment of
              shares to members and number of shares in each allotment.
      108.    Labuan protected cell companies (PCCs) are required to keep regis-
      ters of members and also indexes of the names of their shareholders (LCA
      s.130U).
      109.     When shares are transferred, the transferor and the transferee are
      required to execute an instrument of transfer and lodge this with the Labuan
      company or PCC (LCA s.80). The Labuan company/PCC must issue a share
      certificate to the purchaser (s.81).
      110.    In principle, all the registers mentioned must be kept at the company’s
      registered office in Labuan, which is to be the principal office of a Labuan
      trust company (LCA ss.106 and 85). Nonetheless, the registers may be kept
      in any other location if so authorised by the LFSA (CA s.106). The registers
      kept by a Labuan company must be open for inspection by any director,
      member or auditor of the company without charge (LCA s.94(4)). Apart from
      the authorised persons (such as officers or members of the company), other
      persons may request the LFSA to inspect the registers under specific condi-
      tions (LCA s.13(2)).
      111.     Every foreign Labuan company must have a registered office in
      Labuan, which is to be the principal office of a Labuan trust company (LCA
      s.123). There is no express provision in the LCA requiring foreign Labuan
      companies to maintain a register of members. However, this gap is filled by
      two sets of obligations. First, by the obligations in sections 121 and 124 of the
      LCA, which requires foreign companies to lodge memorandum and articles
      of association with the Registrar, as well as any changes in such documents.
      Ownership information is commonly stated in such documents. Further, it is
      mandatory that the principal office of a Labuan trust company be the registered
      office of the foreign company. The Labuan trust company being a “reporting
      institution” under the AMLATFA is required to perform customer due dili-
      gence and, therefore, to identify the owners of foreign companies.




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       Information held by directors and officers in the Labuan IBFC
       112.  Every Labuan company must have at least one director (LCA s.87(1))
       who must be:
                an officer of a Labuan trust company approved by the LFSA under
                the Labuan Financial Services and Securities Act 2010;
                a domestic company or a Labuan company wholly owned by a Labuan
                trust company; or
                an officer of a domestic company granted a license or registered
                under the Insurance Act 1963, Islamic Banking Act 1983, Takaful Act
                1984 or the Banking and Financial Institutions Act 1989 which holds
                shares in a Labuan company
       113.    While directors are not directly obliged to maintain information on
       the owners of their companies, they will necessarily have access to the com-
       pany’s register of members.

       Information held by service providers in the Labuan IBFC
       114.     The Anti-Money Laundering and Anti-Terrorism Financing Act 2001
       (AMLATFA) requires financial institutions, trust companies, company secretar-
       ies, advocates and solicitors, and certified accountants to conduct customer due
       diligence (CDD) on customers, including identification of the customer, his/her
       representative capacity, domicile, legal capacity and business purpose (s.16).
       115.    In addition, pursuant to the Standard Guidelines on Anti-money
       Laundering and Combating the Financing of Terrorism (AML/CFT), these
       reporting institutions are required to identify the beneficial owners of their
       corporate customers and are required to know the ownership and control
       structure of the corporate customer (s.5.3.3).
       116.      All Labuan companies, PCCs and Labuan foreign companies must
       at all times have registered offices at licensed Labuan trust companies (LCA
       ss.85 and 123). As Labuan trust companies are reporting institutions under
       the AMLATFA, they are required to identify and keep records of the own-
       ership (including beneficial ownership) of the companies which are their
       clients.

       Nominees in the Labuan IBFC
       117.    No indication needs to be given in the share registers or information
       filed with the LFSA when shares or other interests in Labuan companies are
       held by nominees on behalf of a third party.




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      118.     As noted above, Labuan trust companies are obliged to conduct CDD
      on their customers. When acting as nominees, Labuan trust companies are,
      therefore, required to have full information on the persons on whose behalf
      they hold the interest in the company. Similarly, nominees that are lawyers,
      certified accountants or financial institutions are obliged to conduct CDD
      on their customers and thus to maintain full information on the persons on
      whose behalf they hold the interest in the company (AMLATFA s.16).
      119.   There are no other obligations imposed to nominees to retain identity
      information on the persons for whom they act as the legal owner in Labuan.

      Conclusion
      120.     In essence, the Labuan Companies Act requires filing of informa-
      tion on the legal ownership and identity of companies with the LFSA. It also
      requires Labuan companies and PCCs to maintain registers of their members/
      shareholders. All Labuan companies, PCCs and Labuan foreign companies
      must have registered offices at licensed Labuan trust companies and these
      trust companies are required to identify and keep records of the ownership
      (including beneficial ownership) of the companies which are their clients. In
      addition, financial institutions and some other service providers are required
      under anti-money laundering legislation to obtain information on the own-
      ership chain for all of their customers. Where nominees are not lawyers or
      certified accountants or financial institutions or acting by way of business
      and are not acting on behalf of the directors of the company, information is
      not required to be available on the persons for whom they act.

      Bearer shares in Malaysia (ToR A.1.2)
      121.     Since 1966 Malaysian law has prohibited the issuance of bearer
      share warrants (CA s.57). The bearer of a bearer share issued before 15 April
      1966can surrender it and have his name entered in the register of members
      (s.57(2)).19 The Malaysian authorities confirmed that only private companies
      that existed prior to this date could issue such bearer share warrants. The
      total number of such companies is 11 164, which is around of 1% of the total
      number of companies now registered in Malaysia. It is unclear how many
      of these 11 164 companies are still in existence. Moreover, such companies
      could not issue bearer shares without imperilling their private company
      status and exposing themselves to potential sanctions, such as fines or share-
      holder actions. It is, therefore, unlikely that they would have issued such

19.   The Malaysian authorities confirmed that companies incorporated before
      29 December 1967 represent a percentage of 1.1% of the total companies operat-
      ing in Malaysia.


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       shares. Moreover, private controlled companies have to report annually to
       the tax authorities their five largest shareholders irrespective of the nature
       of shares held and are in many cases are also subject to due diligence under
       the AMLAFTA. Finally, the Malaysian authorities are not aware of any case
       where such shares exist now. In light of these considerations, the gap is not
       considered to be material. This issue will be further followed up in Malaysia’s
       Phase 2 review.
       122.    The authorities are currently drafting a new Companies Bill and is
       considering introducing a transitional provision for registration of bearer
       shares after which such shares will no longer be recognised.

       Bearer shares in the Labuan IBFC (ToR A.1.2)
       123.     While the Labuan IBFC legislation does not specifically address
       the issuance of bearer shares, the LCA, in all provisions concerning shares,
       refers to registered shares (e.g. s.43, which requires that the company submit
       details of all persons shares have been issued to). The Malaysian authorities
       confirmed that bearer shares cannot be issued in Labuan.

       Partnerships in Malaysia (ToR A.1.3)

       Types of partnerships
       124.     General partnerships are the only type of partnership currently pro-
       vided for under Malaysian law. They are governed by the Partnership Act
       1961 (PA) and defined as the relation that exists between persons carrying
       on a business20 in common with a view of profit (s.3). Every partner is jointly
       liable for all debts and obligations incurred by the general partnership (s.11).
       Partnerships are not separate legal persons and each partner is liable to tax
       on his/her share of income in the partnership. As at 1 June 2011, the number
       of registered active general partnerships was 1 282 816.




20.    Business includes every form of trade, commerce, craftsmanship, calling, profes-
       sion or other activity carried on for the purpose of gain, but does not include any
       office or employment or any charitable undertaking or any occupation specified
       in the Schedule of ROBA. The Schedule includes, inter alia, the activities of
       cultivators, fishermen, craftsmen, door-to-door salesmen that act for their own
       account and for the purpose of gaining their own livelihood, under the conditions
       described on the Schedule.


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      Information held by public authorities in Malaysia
      125.     Sections 5(1) and (2)(e) of the Registration of Businesses Act 1956
      (ROBA)21 provide that the managing partner must register the partnership
      with the Registrar, stating particulars of the partnership agreement (if any)
      and the particulars of the partners, within 30 days from the date of the com-
      mencement of the business. Under the ROBA, the identity of the partners of a
      partnership can be identified as these details are submitted during the regis-
      tration of the partnership. Under section 5(2)(f) of the ROBA 1957, the details
      of the associates of the business i.e. their full names, positions held, and dates
      of entry into the business must be included when registering a business. The
      definition of an “associate of a business” includes “(b) every person who is a
      partner in any business which is the property of a partnership”. Any changes
      on the particulars and/or information on a business must also be lodged with
      the Registrar within 30 days (s.5B).
      126.     In addition, all partnerships have to file annual tax returns with
      the IRBM, regardless of whether or not a profit or loss is derived from the
      business. Besides information relating to the apportionment of partnership
      income, they need to disclose any changes in the constitution of the partner-
      ship during the tax year and full particulars of partners in the partnership
      income tax return (as required under the Partnership Return Form related to
      subsection 86(1) of the ITA). The partnership tax return must be filed by all
      partnerships that carry on business in Malaysia or that have income, deduc-
      tions or credits for tax purposes in Malaysia.

      Information held by the partners in Malaysia
      127.    The Malaysian authorities have indicated that the managing partner
      has to keep documentation on the partnership as well as all relevant own-
      ership information in proper record, by virtue of section 5 of the ROBA.
      According to that provision any person responsible to the business is required
      to provide such other information as the Registrar may require (ROBA s.5).
      In addition, section 10 of the ROBA empowers the Registrar to obtain all

21.   The ROBA only applies to registration of business in Peninsular Malaysia (s.1(2)).
      The registration of partnerships in the States Sabah and Sarawak are regulated
      by different bodies of laws. Sole proprietorship and partnerships in Sabah are
      licensed by the State Government under the Trades Licensing Ordinance 1948
      (TLO 1948). Business in Sarawak are governed by the Businesses and Trades
      Licensing Ordinance 1955 (BPTLO 1955) and the Business Names Ordinance
      1948 (BNO 1948). The Malaysian authorities confirmed that information is avail-
      able in respect of partners and partnerships registered in Sabah and Sarawak.




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       necessary information for purposes of carrying out the provisions of that act.
       See further Part B of this report for analysis of Malaysia’s powers to access
       information.
       128.    In addition, under section 30 of the PA, the partners of a general part-
       nership are bound to render true accounts and full information of all things
       affecting the partnership to any partner or his legal representatives. Thus, the
       partners would have to keep the information regarding the identities of all
       partners. Moreover, in order to meet their obligation to file annual tax returns
       partnerships would be required to know who their partners are.

       Information held by service providers in Malaysia
       129.    Financial institutions, lawyers and certified accountants are obliged
       to conduct CDD on their customers and thus to maintain full information on
       any partnership which is a customer, including the identity of the partners
       and owners (including beneficial owners) of partners that are legal entities
       (AMLATFA s.16 and AMLATFA Standard Guidelines s.5.3.1).

       Conclusion
       130.    Overall, legal ownership and identity information is available to the
       Registrar or the IRBM in respect of all partnerships operating in Malaysia.
       In addition to this, financial institutions and some other service providers are
       required under anti-money laundering legislation to obtain information on the
       ownership chain for all of their customers.

       Partnerships in the Labuan IBFC (ToR A.1.3)

       Types of partnerships
       131.    The Labuan IBFC allows two types of partnerships which are
       regulated under the Labuan Limited Partnerships and Limited Liability
       Partnerships Act 2010 (LLPLLPA):
                limited partnerships (LPs); and
                limited liability partnerships (LLPs).
       132.   The Labuan IBFC also allows partnerships to be established under
       Shariah principles, as Islamic LPs or LLPs.
       133.    LPs consist of a minimum of two and a maximum of 50 partners
       (LLPLLPA s.4(2)). In addition, an LP must have at least one general partner,
       who is responsible for the management and liable for all debts and obligations
       incurred by the LP, and at least one a limited partner, who makes contributions



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      to the LP in currency, any other property or services (s.10(1)). A limited
      partner is not liable for the debts and obligations of the LP unless this person
      participates in the management of the LP (s.19).
      134.    LLPs are regarded as bodies corporate and have legal personality
      separate from that of their partners (s.55). The minimum number of partners
      in an LLP is two and an individual or a corporation may be a partner (s.29).
      LLPs are solely liable for their debts and obligations and their partners are not
      personally liable, directly or indirectly, by such debts and obligations (s.56).
      Every partner has authority as agents of the LLP to bind all the other partners
      in contracts with third parties that are in the ordinary course of the LLP’s
      business (s.57).
      135.    For tax purposes, LPs and LLPs, including those established under
      Shariah principles, are treated as taxable entities (LBTA ss.15 and 16). As at
      31 January 2011, there were 18 LPs and no LLPs registered in the Labuan IBFC.

      Information held by public authorities in the Labuan IBFC
      136.    The registration requirements applicable to LPs and LLPs are pro-
      vided for in sections 5 and 30 of the LLPLLPA, while the registration of
      Islamic LPs and LLPs is regulated under sections 111 and 112. All LPs and
      LLPs, including those established under Shariah principles, must be registered
      with the Labuan Financial Services Authority (LFSA) (ss.5(3) and 30(7)).
      137.     The information that must be lodged with the LFSA together with a
      certified copy of the partnership agreement includes, amongst other things:
      the name under which the partnership will be conducted; the term of its exist-
      ence; the nature of business to be undertaken; and the intended address of the
      registered office of the partnership (LLPLLPA ss.5(2) and 30(2) and forms 1
      and 10 of the LLPLLPA Regulations 2010).
      138.     Regarding ownership information, LPs are required to disclose upon
      registration the particulars for each general partner. For an individual, these
      particulars are the full name and address, nationality, identification, and resi-
      dent status. For legal entities which are partners, the required particulars are
      the place where it is incorporated and its registered or principal office. On
      registration, LLPs must inform the Registrar of the particulars of each person
      who is to be a partner and the full name and address of the person who is
      to be a “designated” partner. In addition, information on limited partners is
      provided, as a copy of the partnership agreement must be lodged with the
      LFSA. The Malaysian authorities confirmed that the partnership agreement
      discloses details of all partners including name and identity information.
      139.     The LLPLLPA also requires submission of notice on the changes in the
      particulars of the partnership agreement to the LFSA within 30 days from the date



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       of change is made (ss.6(1) and 51(1)). Among the changes to be informed to the
       LFSA are any changes of a partner in a Labuan LP or a Labuan LLP (according
       to Form 3 – Notice of Changes to Labuan Partnership Agreement and Form 16 –
       Notice of Changes to a Recognized Limited Liability Partnership Agreement).

       Foreign LLPs
       140.     In order to have a place of business or carry on a business under the
       Labuan IBFC, a foreign LLP must be first registered with the LFSA as a rec-
       ognised LLP under the LLPLLPA (s.48). As part of the registration process, a
       recognised LLP must file: a certified copy of the certificate of incorporation
       or registration in the place of origin; a certified copy of the partnership agree-
       ment; a list of partners containing their particulars; the full name and address
       of a designated partner responsible for duties and obligations of the LLP;
       and the name of the Labuan trust company that represents the LLP; amongst
       other information. Any changes to any particulars entered in the register must
       be reported to the LFSA within 30 days after the change occurred (s.50(2)).
       Similar to domestic partnerships, the requirements of registration and identi-
       fication under the LLPLLPA refer to legal ownership only.

       Information held by partnerships in the Labuan IBFC
       141.      The requirement for LPs and LLPs to keep information is provided
       for in sections 9 and 63 of the LLPLLPA, respectively. These provisions are
       also applicable to Islamic LPs and Islamic LLPs. LPs and LLPs must have a
       registered office in Labuan, which will be the principal office of a Labuan trust
       company (ss.9(1) and 63(1)). LPs and LLPs must keep at their registered office a
       register showing: (i) the particulars of each limited partner and general partner;
       (ii) the percentage of interest, number and class of units or other rights held by
       each limited partner; (iii) a copy of the partnership agreement and amendments
       thereto; and (iv) detailed information on the contributions agreed to be made
       by, actually made by or returned to each limited partner (ss.9(5) and 63(5)).

       Information held by service providers in the Labuan IBFC
       142.     Under section 50(1) of the LLPLLPA, every recognised LLP must
       have at all times a registered office in Labuan, which will be the principal
       office of a Labuan trust company. Notice of the location of the registered
       office or changes thereof must be filed with the LFSA within one month from
       the date of registration or change, as the case may be. Foreign LLPs are not
       required to keep a register of partners.
       143.    The information or documents filed at the LFSA must be amended
       within thirty days of any change in the particulars and must be available



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      for inspection and copying without charge during ordinary business hours
      at the request of a partner (LLPLLPA ss.9(6) and 63(6)). The LLPLLPA
      requires that every document required or permitted to be filed with the
      LFSA under that act is filed through a Labuan trust company (s.76(1)). As
      a reporting institution under the AMLATFA, the Labuan trust company is
      obliged to comply with the record keeping requirements under section 16 of
      the AMLATFA, which requires identification of the true owners of the trust
      company’s customers.
      144.    In addition to the Labuan trust companies, financial institutions, law-
      yers, certified accountants and company secretaries are obliged to conduct
      CDD on their customers and thus to maintain full information on any part-
      nership which is a customer, including the identity of the partners and owners
      (including beneficial owners) of partners that are legal entities (AMLATFA
      s.16).

      Conclusion
      145.    Legal ownership and identity information is either filed with the
      LFSA or required to be kept by the partnership itself in respect of all partner-
      ships operating in the Labuan IBFC. In addition to this, financial institutions
      and some other service providers are required under anti-money launder-
      ing legislation to obtain information on the ownership chain for all of their
      customers.

      Trusts in Malaysia (ToR A.1.4)

      Types of trusts in Malaysia
      146.     Trusts are recognised by and can be created under Malaysian law. In
      addition to the common law principles, there are specific statutes and statu-
      tory provisions on the law on trusts in Malaysia, notably the Trust Companies
      Act 1949 (TCA), the Trustee Act 1949 (TA), the Public Trust Corporation Act
      1995 (PTCA) and the Trustees (Incorporation) Act 1952 (TIA). The PTCA
      regulates the public trustee corporation called Amanah Raya Berhad. As a
      general rule, for any trust business conducted in Malaysia, the same legal
      and regulatory framework applies regardless of whether the settlors are resi-
      dent or non-resident, or whether assets settled in the trust are located within
      or outside Malaysia. In addition, the same legal and regulatory framework
      applies to trustees of foreign trusts.
      147.   As at 10 July 2011, there were 26 trust companies registered under
      the TCA, 36 839 active trusts and 32 849 closed trusts registered under the
      PTCA.



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       148.     A trustee of a Malaysian trust can be a natural person or corporate
       entity, and does not have to be a resident of Malaysia. The types of trusts cre-
       ated under the laws of Malaysia may be categorised as:
                express trusts; and
                unit trusts.
       149.    An express trust is a trust created under the common law where the
       provisions of the trust manifest the certainty of intention, subject matter, and
       objects. Evidence in writing is required for a declaration of trust in respect
       of any immovable property or a disposition of an equitable interest. Private
       trusts do not need to be publicly registered in Malaysia.
       150.     151.        Unit trusts are essentially a means for investment in a port-
       folio of securities and are therefore regulated by the Securities Commission
       (SC). The trustee of a unit trust must obtain prior approval from the SC
       (Capital Markets & Services Act 2007 (CMSA) s.289). An approved trustee
       must be a public trustee or a public trust resident in Malaysia. It must also
       meet certain minimum financial and operational requirements (as specified
       in Chapter 4 of the Guidelines on Unit Trust Funds).

       Establishment of trusts in Malaysia
       152.     In Malaysia, in addition to individuals acting as trustees/administra-
       tors of trusts on a non-professional basis, trust business may be carried out by
       the following persons:
                trust companies;
                financial institutions, insurance companies and securities companies;
                trust service providers; and
                corporations (other than trust companies)in specific cases.
       153.     A trust company in Malaysia must be incorporated as a public com-
       pany (CA s.16) before it can be registered as a trust company. The require-
       ments to register as a trust company are set in the TCA and include, inter
       alia, minimum authorised and paid-up capital and the limitation of company’s
       object to trust-related activities (ss.3 and 8). In summary, any trust company
       whose objects fall under section 8 of the TCA may apply to the Registrar to
       be registered as a trust company. As at 1 June 2011, there were 26 trust com-
       panies registered in Malaysia.
       154.    Trust service providers include all those persons providing trust
       services. It is recognised in Malaysia that lawyers, accountants, company
       secretaries, banks and insurance companies provide such services by virtue



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      of their professions/nature of business, whereby trust services are offered
      in the ordinary course of their business. They are generally not required to
      be licensed to provide trust services as they are overseen by their respective
      professional bodies or regulatory agency. They are also subject to the AML/
      CFT regulations and required to undertake due diligence on their customers.
      However, Malaysian’s laws do not provide for any restrictions on who can
      provide trust services and in theory, at least, an individual/company who is
      not a lawyer, accountant, company secretary, bank or insurance company
      could still act as a trustee by way of business. The Malaysian authorities
      are of the opinion that this group of trustees would constitute a very narrow
      category and would probably not be acting by way of business. Further, the
      Malaysian authorities consider that they would still need to deal with a bank
      or lawyer as trust related matters entail legal arrangements as well as being
      subject to the Trustee Act and common law obligations.
      155.     Corporations can act as trustees in Malaysia in specific situations. A
      corporation that is a public company under the CA or under the laws of any
      other country (and has been authorised by the Malaysian SC to act as trustee)
      can act as a trustee for: (i) holding debentures (CA s.74); (ii) acting in an
      interest scheme (timeshare scheme, land banking scheme, golf clubs scheme
      and any other schemes regulated by CCM) (s.87); or (iii) if so appointed by a
      Malaysian court (PTCA s.12).

      Information held by government authorities in Malaysia
      156.     Malaysia’s regulatory framework does not provide for a central
      registry for trusts, but targets the major avenues of trust formation and trust
      administration in Malaysia through the application of AML/CFT regulations
      and guidelines on trust intermediaries such as trust companies, financial
      institutions and certain service providers. As a general rule, a trust deed is
      not required to be registered with any public body in Malaysia.
      157.     However, a deed, which provides for the appointment of a company
      as trustee for or representative of the holders of interests issued (or proposed
      to be issued) by a company, is subject to the approval of the Registrar (CA
      s.86). In these cases, the deed (or a copy of the deed) must be lodged with
      the Registrar. In addition, for unit trust funds, the trust deed must be lodged
      with the Malaysian Securities Commission. In this regard, pursuant to sec-
      tion 259(2) of the Capital Markets and Services Act, any person issuing,
      offering for subscription or purchase, or making an invitation to subscribe
      for or purchase, any debenture must deliver a copy of the trust deed to the
      Securities Commission together with other information or documents as the
      Securities Commission may specify.




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       Information to be provided to the tax authorities
       158.    In Malaysia, a trustee is required to file a return every year with
       respect to the income of a domestic or foreign trust accruing in, derived
       from or received in Malaysia. The return must disclose the trustees’ names
       and addresses, whether they are resident in Malaysia, and the location of the
       administration of the trust. Particulars of all the beneficiaries must also be
       provided, including their names, addresses, the basis of entitlement and their
       respective share of income. No information on the identity of the settlor is
       required to be provided in the tax return. Such information could be obtained
       by the tax authority upon requesting the trust deed or in the course of audits/
       investigations, however. This issue will be further assessed as part of the
       Phase 2 review.

       Information held by trustees and service providers in Malaysia
       159.     Under common law, for a trust to be valid, the trust needs to meet
       the three certainties: the certainty of intention, the certainty of subject matter
       and the certainty of object. This means that a trust is only valid if evidenced
       by a clear intention on behalf of the settlor to create a trust, clarity as to the
       assets that constitute the trust property and identifiable beneficiaries. A writ-
       ten declaration of trust may not exist or not identify the settlor on the face of
       the document. However, trustees have a duty of care to act in accordance with
       the wishes of the settlor. As a matter of good practice trustees keep sufficient
       records to enable them to perform their duties22.
       160.     Under the AMLATFA, and the AML/CFT Regulation, guidelines and
       instructions, Malaysian trust companies, financial institutions, lawyers, certi-
       fied accountants and company secretaries acting as trustees or administrators
       of trusts or arranging for another person to act as a trustee/administrator are
       required to conduct CDD on their customers and must therefore identify the
       settlors, trustees and all beneficiaries of trusts for which they work for (s.16).
       These obligations apply equally to financial institutions and AMLATFA
       reporting institutions acting for foreign trusts. Section 16 of the AMLATFA
       requires reporting institutions to conduct CDD including to verify, by reli-
       able means, among others, the identity, representative capacity, domicile,
       legal capacity, occupation or business purpose of that person as well as other
       identifying information on that person, through the use of documents such
       as constituent document and any other official or private document when
       establishing or conducting business relations particularly when opening new

22.    The Malaysian cases Metramac Corporation Sdn Bhd v Fawziah Holdings Sdn
       Bhd; Tan Sri Halim Saad & Che Abdul Daim Hj Zainuddin (Interveners) Federal
       Court [2007] 4 CLJ make reference to the case of Knight v Knight [1840] 49 ER
       68, where Lord Langdale MR laid down the law governing certainty of trust.


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      accounts, entering into fiduciary relationship, performing any cash transac-
      tion exceeding such amount as the competent authority may specify etc. The
      person in the context of the above mentioned provision includes any person
      who is a nominee, agent, beneficiary or principal in relation to a transaction.
      The reporting institutions are subject to the obligation to conduct ongoing due
      diligence and must ensure the information is updated.
      161.     Individuals not acting by way of business are not subject to obliga-
      tions under the AML/CFT Regulation, guidelines and instructions but are
      subject to common law obligations to maintain information on the trust. The
      scope of the common law obligations will be followed up in Phase 2 Peer
      Review.
      162.    In addition, whenever a trustee or administrator of a trust conducts
      financial activities for the trust using a financial institution or one of the ser-
      vice providers mentioned above, the financial institution or service provider
      must identify the beneficial owners of the money/assets involved (AMLATFA
      s.16).
      163.    In summary, the following trustees are required to have information
      available on the identity of settlors and beneficiaries of trusts:
              trustees that are trust companies registered under the Trust Companies
              Act 1949;
              trustees that are financial institutions, insurance companies and secu-
              rities companies that are subject to the AMLATFA;
              trustees that are service providers that qualify as reporting institu-
              tions under the AMLATFA, such as registered accountants, advo-
              cates and solicitors;
              trustees that are corporations in relation to the securities that they
              hold pursuant to the Capital Markets and Services Act;
              trustees that are Labuan trust companies (as further analysed in this
              report);
              the public trustee (known as Amanah Raya Berhad) as defined in the
              PTCA is a reporting institution under the AMLATFA;
              unit trust schemes managed by a management company (reporting
              institution under the AMLATFA); and
              trusts where the trustees are incorporated under the Trustees (Incor-
              poration) Act. The trustees incorporated under the TIA are those
              appointed by anybody or association of persons established for any
              religious, educational, literary, scientific, social or charitable purpose
              (s.2 TIA).



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       164.     Notwithstanding the above, Malaysian laws impose no restrictions
       on who can provide trust services. Therefore, an individual or legal entity
       which does not qualify as a reporting institution under the AMLATFA – ie,
       not an accountant, lawyer, company secretary, insurance company or bank
       – or to the other cases listed above could still act as a trustee by way of busi-
       ness. Such individuals and legal entities, as well as those who act as trustees
       other than by way of business are not subject to obligations under the AML/
       CFT Regulation, guidelines and instructions and, therefore, are not required
       to conduct CDD on their customers. Those individuals and legal entities are
       subject to common law obligations to maintain information on the trust.

       Conclusion
       165.     In essence, identity and ownership information is available in respect
       of trusts administered by trust companies and other service providers that
       qualify as reporting institutions under the AMLATFA. Malaysia’s regulatory
       framework targets the major avenues of trust formation and administration
       by regulated trust intermediaries. It is possible, however, that individuals and
       legal entities not subject to the AMLATFA act as trustees. Those trustees
       would only be subject to common law obligations concerning the collec-
       tion of information on the ownership of settlors and beneficiaries of trusts.
       Although the Malaysian authorities estimate that these trustees would con-
       stitute a very narrow category, there is a risk that appropriate information on
       the settlors and beneficiaries of the trusts for which they act is not properly
       kept in Malaysia.

       Trusts in the Labuan IBFC (ToR A.1.4)

       Types of trusts in the Labuan IBFC
       166.    The Labuan Trusts Act 1996 (LTA) is the central piece of legislation
       governing trusts in the Labuan IBFC. Pursuant to the LTA, there are five
       types of trusts that can be created in the Labuan IBFC:
                purpose trusts (s.11A);
                charitable trusts (s.11B);
                Labuan special trusts (Part IVA);
                Labuan spendthrift/protected trusts (s.11E); and
                Labuan Islamic trust.
       167.     A purpose trust is a trust established under the framework of the LTA
       for a particular purpose or purposes, charitable or not.



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      168.      A charitable trust is created for charitable purposes whether or not
      it is to be carried out in Malaysia and whether it benefits the community in
      Malaysia or elsewhere. A trust is considered charitable if it fulfils one of the
      purposes specific in the LTA (which includes, inter alia, the relief or eradica-
      tion of poverty; the advancement of education; or the promotion of art, sci-
      ence and religion).
      169.     The Labuan special trust is a trust that enable owners of a Labuan
      company or a Labuan limited liability partnership to establish a trust to
      specifically hold shares or partnership interests in a Labuan company or a
      Labuan limited liability partnership, irrespective of the financial benefits of
      holding them, without any legal duty to intervene in the management of the
      company. The trustee’s primary duty is to retain the shares or interests and
      this duty takes precedence over the duty to preserve or enhance the value of
      the trust fund.
      170.     The Labuan spendthrift/protected trust is a trust under which the
      interest of the beneficiary is subject to: (i) termination; (ii) a restriction on
      alienation or disposal; or (iii) subject to diminution or termination in the
      event of the beneficiary becoming insolvent or any of his property becoming
      liable to seizure or to sequestration for the benefit of his creditors.
      171.     A trust can also be established based on Shariah principles (Labuan
      Islamic Financial Services and Securities Act 2010 – LIFSSA, ss.105(1) and
      106). Labuan Islamic trusts are also subject to the LTA (LIFSSA s.105(2)).
      In this regard, the act facilitates the creation of trusts that correspond with
      various traditional forms of Islamic trusts. These include Islamic charitable
      trusts and Islamic special trusts similar in purpose to those described above.
      An Islamic trust may continue in perpetuity.

      Establishment of trusts in the Labuan IBFC
      172.     In the Labuan IBFC, trust business is carried on by a Labuan trust
      company. Although any person can act as a trustee of a trust in the Labuan
      IBFC (provided that the person is named as a trustee in the trust instrument),
      at least one of the trustees must be a Labuan trust company (LTA s.26). If
      there is only one trustee, the trustee must be a Labuan trust company.

      Information held by government authorities in the Labuan IBFC

      Registration of trusts
      173.   The registration of trusts in the Labuan IBFC is not mandatory.
      However a trust validly created, whether in the Labuan IBFC, elsewhere in
      Malaysia or abroad, may be registered with the Labuan Financial Services



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       Authority (LFSA) by the trustee (LTA s.12(1)(2)). No information concerning
       the identity of the settlor and the beneficiaries is required by the LFSA. The
       information to be provided upon registration of the trust is limited to: (i) the
       name of the trust; (ii) the date of its creation; (iii) the name and address of the
       trust company acting as trustee; (iv) the address of the registered office of the
       Labuan trust company; and (v) the proper law of the trust (s.12(3)).

       Information to be provided to the tax authorities
       174.    Trustees are required to file a return (statutory declaration) with the
       LFSA. However, the return does not require that any identity or ownership
       information of the settlor or the beneficiaries be provided. It only requires a
       statement that the settlor and the beneficiaries are not citizens or permanent
       residents of Malaysia (LBATA s.10 and Form 6 – Statutory Declaration).

       Information held by trustees and service providers in the Labuan IBFC
       175.     Under AML/CFT Regulation, trust companies are required to carry
       out CDD to obtain identity information on the settlors, trustees and benefi-
       ciaries of trusts they work for. Labuan trust companies are also required to
       keep documentation relating to trust business services, including account
       files and business correspondence (AMLATFA s.17).
       176.     Under the AMLATFA, and the AML/CFT Regulation, guidelines and
       instructions, Malaysian trust companies, financial institutions, lawyers, certi-
       fied accountants and company secretaries acting as trustees or administrators
       of trusts or arranging for another person to act as a trustee/administrator are
       required to conduct CDD on their customers and must therefore identify the
       settlors, trustees and all beneficiaries of trusts for which they work (s.16). In
       addition, whenever a trustee or administrator of a trust conducts financial
       activities for the trust using a financial institution or one of the service provid-
       ers mentioned above, the financial institution or service provider must identify
       the beneficial owners of the money/assets involved. These obligations apply
       equally to financial institutions and service providers acting for foreign trusts.

       Conclusion
       177.    Overall, legal ownership and identity information is available to the
       LFSA in respect of all trusts in the Labuan IBFC due to the requirement of
       having a Labuan trust company as a trustee. The Labuan trust company is
       required to be the or one of the trustees and that such trust companies are
       subject to AMLATFA obligations. This is complemented by common law
       obligations on all trustees to maintain information concerning trusts. In
       addition to this, financial institutions and some other service providers are



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      required under anti-money laundering legislation to obtain information on the
      ownership chain for all of their customers.

      Foundations in Malaysia (ToR A.1.5) and other entities
      178.    There are no legislative or common law principles which provide for
      the establishment or regulation of foundations under Malaysian law. While
      there are entities in Malaysia that are called foundations, they take the form
      of other recognised entities, e.g. companies limited by guarantee. As at
      10 June 2011, there were 1 626 companies limited by a guarantee called foun-
      dations in Malaysia. The availability of ownership information for companies
      limited by guarantee is discussed in Part A.1.1 of this report.
      179.    Malaysia’s non-profit organisation (NPO) sector includes societies,
      associations, clubs, organisations, companies limited by guarantee (CLBGs)
      and foundations. The statutes dealing with the establishment and regulation
      of NPOs in Malaysia are the Societies Act 1966 (SA) and the Companies Act
      1965 (CA). The constitutional form may be either a registered society under
      the oversight of the Registrar of Societies (ROS) or a registered CLBG also
      under the oversight of the Registrar. NPOs which are registered with the
      Registrar or ROS are taxable entities under the ITA but they may apply for
      tax-exempt status provided they meet certain criteria and are either estab-
      lished for charitable purposes or established exclusively for the purposes of
      religious worship or the advancement of religion.
      180.      All societies created under the oversight of the ROS are NPOs. Every
      calendar year, societies are required to lodge with the ROS, inter alia, the rules
      of the society and any amendments to such rules, the address of the society or
      of its place of business and the society accounts (SA s.14). Upon request of the
      ROS, societies must provide complete lists of their members (s.14).

      Foundations in the Labuan IBFC (ToR A.1.5)
      181.    Foundations can be established in the Labuan IBFC under the Labuan
      Foundations Act 2010 (LFA s.4) or based on Shariah principles under the
      Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA s.107).
      The LFA also deals with the possibility of foundations established under the
      laws of another country changing their domicile to Labuan (LFA s.23). All
      Labuan foundations must have Labuan trust companies secretaries (s.41).
      182.    The main purpose or object of a Labuan foundation is the manage-
      ment of its property (LFA s.7(1)) and it may also have any other purpose or
      object which is not unlawful, immoral or contrary to any public policy in
      Malaysia. Its purpose or object may be charitable or non-charitable.
      183.    As at 10 June, there were 12 foundations registered with the LFSA.


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       Information held by government authorities in the Labuan IBFC
       184.     Labuan foundations must be registered with the LFSA (LFA s.14).
       To register a foundation, the foundation secretary must lodge documentation
       with the LFSA, including: (i) a statement signed by the secretary containing
       particulars extracted from the charter (such as name, purpose and object of
       the foundation and address of its registered office) and a copy of the charter;
       and (ii) a list containing the names and addresses of the officers of the foun-
       dation (Fourth Schedule).
       185.   In case of change of particulars of registration, the secretary of the
       Labuan foundation must submit a notice of change within 30 days after the
       change (LFA s.17(1)).
       186.    In addition, Labuan foundations are required to file tax returns
       (LBATA s.10). However, no ownership information is required to be provided
       in such return (Forms 5 and 6 – Statutory Declarations).

       Information held by foundations in the Labuan IBFC
       187.     The LFA requires a Labuan foundation to keep at its registered office
       in Labuan, accurate copies of its constituent documents and all documents
       and instruments filed or lodged with LFSA (LFA s.45(1)). The constituent
       documents are the charter and articles of a Labuan foundation (s.2(1)). The
       charter of the foundation must contain relevant information on the identity of
       founders and beneficiaries, including: (i) the name and address of its founder
       and, where the founder is a body corporate, its place of incorporation and
       its registered or principal office or place of business; and (ii) identity of the
       beneficiaries or the identification of the class of persons which will benefit
       from the foundation or a statement that the foundation is to benefit the public
       at large (LFA, First Schedule). The referenced requirements also applies
       to Labuan Islamic foundations (Labuan Islamic Financial Services and
       Securities Act s.107(2)).

       Information held by service providers in the Labuan IBFC
       188.    The LFA requires the appointment of a Labuan trust company in
       Labuan as the secretary of the Labuan foundation. The Labuan trust com-
       pany is required under the AMLATFA (s.16), and the AML/CFT Regulation,
       guidelines and instructions, to carry out CDD, identifying its clients and the
       beneficial owners of its client. The AMLATFA also required obliged entities
       to ascertain the business structure of their customers. Thus, the Labuan trust
       company which is the secretary for the foundation is obliged to identify the
       founders, foundation council members and beneficiaries under the AML/CFT
       law and regulation.



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      189.    In addition, financial institutions, lawyers, certified accountants and
      company secretaries are required to conduct CDD on their customers and
      must therefore identify the foundation members, foundation council members
      and beneficiaries of the foundations which are their customers (s.16).

      Conclusion
      190.     Overall, legal ownership and identity information is available in
      respect of all foundations in the Labuan IBFC. Foundations must keep docu-
      ments at their registered offices, including their charters, which detail the
      founders and beneficiaries. Compulsory registration with the LFSA requires
      identification of the foundation council members. In addition, a foundation
      must have a Labuan trust company as its secretary and the Labuan trust com-
      pany is obliged under AML/CFT legislation to identify the founders, founda-
      tion council members and beneficiaries. Financial institutions and some other
      service providers are also required under AML/CFT legislation to conduct
      full CDD on foundations which are their customers.

      Enforcement provisions to ensure availability of information in
      Malaysia (ToR A.1.6)
      191.     Jurisdictions should have in place effective enforcement provisions
      to ensure the availability of ownership and identity information, one possibil-
      ity among others being sufficiently strong compulsory powers to access the
      information. This subsection of the report assesses whether the provisions
      requiring the availability of information with the public authorities or within
      the entities reviewed in Part A.1 of this report are enforceable and failures are
      punishable. Questions linked to access are dealt with in Part B.

      Companies, partnerships and trusts laws in Malaysia
      192.    Malaysian laws provide for detailed penalties for non-compliance
      with key obligations to maintain ownership and identity information.
      193.     Companies face penalties for failure to lodge the prescribed returns
      with the CCM or to keep any of the prescribed registers. Persons who fail to
      lodge the return of allotment are liable on conviction to a fine of MYR 1 000
      (EUR 230) and to a default penalty of MYR 250 (EUR 58) (CA s.54). For fail-
      ure to lodge the annual return, the company and every officer of the company
      who is in default is guilty of an offence and liable on conviction to a fine of
      MYR 1 000 (EUR 230) and also to a default penalty (s.141(7)).
      194.     Failure to maintain the register or index of members on convic-
      tion triggers a fine of MYR 2 000 (EUR 460) and also a default penalty
      (CA s.158). For failure to comply with requirements to keep the register of


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       substantial shareholdings, companies are liable on conviction to a fine of
       MYR 5 000 (EUR 1 150) and also a default penalty of MYR 500 (EUR 115)
       (s.69L(4)). Substantial shareholders who fail to notify the company of their
       interest or of the change or the cease of their interest are liable on conviction
       to a fine not exceeding MYR 1 million (EUR 230 000) and a default penalty
       of MYR 50 000 (EUR 11 500) (s.69M).
       195.     The Companies Act also provides specific penalties applicable to
       foreign companies failing to lodge any of the prescribed returns or to keep
       the branch register at their registered office in Malaysia. In such cases, the
       company and every officer of the company who is in default and every agent
       of the company who knowingly and wilfully authorises or permits the default
       is guilty of an offence and liable on conviction to a fine of MYR 1 000
       (EUR 230) and also to a default penalty (s.349). The same penalty applies if a
       foreign company fails to lodge with the Registry the particular of any changes
       or alterations made in relation to its agent or agents or the name or address of
       any agent within one month (or within such further period as the Registrar in
       special circumstances apply) (s.335).
       196.     Partnerships that fail to comply with the obligation to report any change
       in the particulars registered to the Registrar within 30 days after the change
       commit an offence. Offenders are liable on conviction to a fine not exceeding
       MYR 10 000 (EUR 2 300) or to imprisonment for a term not exceeding one year
       or to both (ROBA s.12(A)).
       197.    Penalties for trustees-administrators not complying with record keep-
       ing and reporting obligations for trusts may be summarised as follows:
                failure to lodge with the CCM an annual statement of the liabilities of
                the company to the public in its trustee capacity, its list of members
                and a summary report is subject to a fine of MYR 50 (EUR 12) for
                every day during which the default continue (TCA ss.30 and 21); and
                failure to lodge with the CCM its annual return and its particulars
                (general requirement to any company including companies that act
                as trustees-administrators) result in a fine of to a fine of MYR 2 000
                (EUR 460) (CA s.165).

       Specific penalties for professional service providers in Malaysia
       198.     Any person who commits an offence to the AMLATFA shall on
       conviction, be liable to a fine not exceeding MYR 250 000 (EUR 57 500).
       This penalty would apply, for instance, for reporting institution failing to
       conduct CDD. In addition, an officer of a reporting institution who fails to
       take all reasonable steps to ensure the reporting institution’s compliance with
       its reporting obligations shall be on conviction liable to a fine not exceeding



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      MYR 100 000 (EUR 23 000) or to imprisonment for a term not exceeding six
      months or to both, and, in the case of a continuing offence, to a further fine
      not exceeding MYR 1 000 (EUR 230) for each day during which the offence
      continues after conviction (s.22). Moreover, a general penalty is provided for
      under section 86 and applicable if no penalty is expressly provided for the
      offence under the AMLATFA.

      Failure to comply with tax law reporting obligations in Malaysia
      199.     Failure to furnish a tax return in accordance with the requirements estab-
      lished by the ITA constitutes an offence under section 112 of the ITA and offend-
      ers are liable to a fine of not less than MYR 100 (EUR 23) and not more than
      MYR 2 000 (EUR 460) or to imprisonment not exceeding 6 months or to both.

      Conclusion
      200.    Relevant laws applicable in Malaysia – in particular the Companies
      Act 1965, the Trust Companies Act 1949 and the Anti-Money Laundering and
      Anti-Terrorism Financing Act 2001 – contain enforcement provisions to ensure
      the availability of information. Some offences are subject to significant fines
      and imprisonment. The effectiveness of the enforcement provisions which are
      in place in Malaysia will be considered as part of the Phase 2 Peer Review.

      Enforcement provisions to ensure availability of information in the
      Labuan IBFC (ToR A.1.6)
      201.     The laws applicable in the Labuan IBFC also provide for detailed
      penalties for non-compliance with key obligations to maintain ownership and
      identity information.
      202. Companies face penalties for failure to lodge the prescribed returns
      with the LFSA or to keep any of the prescribed registers. In case of failure
      to lodge the return of allotment, offenders are liable on conviction to a fine
      of MYR 10 000 (EUR 2 300) and also to a default penalty (LCA s.43(2)).
      For failure to lodge the annual return, the company and every officer of the
      company who is in default is guilty of an offence and liable on conviction to
      a fine of MYR 10 000 (EUR 2 300) and also to a default penalty (s.109(6)).
      Failure to maintain the register of members triggers conviction to a fine of
      MYR 10 000 (EUR 2 300) and also to a default penalty (LCA s.105(3)).
      203.    The Labuan Companies Act also provides for specific penalties appli-
      cable to foreign companies failing to lodge the annual return and prescribed
      documents. In such cases, the company who is in default is guilty of an
      offence and liable on conviction to a fine a fine not exceeding MYR 10 000
      (EUR 2 300) (LCA s.142(2)). In addition, the foreign Labuan company and


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       every officer of the company who failed to inform the location of registered
       office and any change thereof within one month is guilty of an offence and
       liable on conviction to a fine a fine of MYR 10 000 (EUR 2 300) and also to
       a default penalty (s.123).
       204. Partnerships that fail to comply with the obligation to report any
       change in the particulars registered to LFSA within 30 days after the change
       commit an offence. Offenders are liable on conviction to a penalty as speci-
       fied by the LFSA (LLPLLPA s.6). The LLPLLPA provides for a general pen-
       alty corresponding to a fine not exceeding MYR 500 (EUR 115) to be applied
       when no penalty is expressly provided (s.77).
       205.    Labuan trustees are liable on conviction to a fine of MYR 10 000
       (EUR 2 300) in case of non-compliance with record keeping and reporting
       obligations as specified below (LTA s.12):
                failure to notify the LFSA with regard to changes in the particulars of
                the registered Labuan trust within one month of the change;
                failure to notify the LFSA with regard to the termination of the trust
                in the prescribed form within one month of the termination; and
                failure to notify the LFSA in the prescribed form as to whether the
                trust is still in existence and whether he is still the trustee thereof not
                later than one month after every anniversary of the registration of the
                trust in Labuan.
       206. With respect to Labuan foundations, the LFA requires that the sec-
       retary of the Labuan foundation to file a notice of change of particulars of
       registration signed by an officer of the Labuan foundation within 30 days
       after the change (s.17(1)). The secretary and every officer who is in default
       of this section shall be liable to an administrative penalty in an amount not
       exceeding MYR 500 (EUR 115) for each day of non-compliance and such
       amount shall in total exceed MYR 10 000 (EUR 2 300) (s.78(3)). Similarly,
       the referenced penalties apply to Labuan Islamic foundations (Labuan Islamic
       Financial Services and Securities Act s.107(2)).

       Specific penalties for professional service providers in the Labuan
       IBFC
       207.    The penalty described in paragraph 197 above, applicable to the fail-
       ure to conduct CDD, also applies to reporting entities in the Labuan IBFC.

       Failure to comply with tax law reporting obligations in the Labuan IBFC
       208. Failure to file a statutory declaration or a return of profits (LBATA
       ss.22 and 22A) constitutes an offence under section 23 of the LBATA and


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      liable to a fine not exceeding MYR 1 000 000 (EUR 230 000) or to impris-
      onment for a term not exceeding two years or to both. The referenced fine
      applies to all Labuan entities, including companies, partnerships, trusts and
      foundations (LBATA Schedule).

      Conclusion
      209.     Relevant laws applicable in the Labuan IBFC – in particular the
      Labuan Companies Act 1990, the Labuan Limited Partnerships and Limited
      Liability Partnerships Act 2010, the Labuan Trusts Act 1996, the Labuan
      Foundations Act 2010, the Labuan Business Activity Tax Act 1990 and the
      Anti-Money Laundering and Anti-Terrorism Financing Act 2001 – contain
      enforcement provisions to ensure the availability of information. The effec-
      tiveness of the enforcement provisions which are in place in the Labuan IBFC
      will be considered as part of the Phase 2 Peer Review.

               Determination and factors underlying recommendations

                                   Phase 1 determination
      The element is in place, but certain aspects of the legal implementation
      of the element need improvement.
               Factors underlying
               recommendations                              Recommendations
      Not all nominees are required to have       An obligation should be established
      information available on the persons        for all nominees to maintain relevant
      for whom they act.                          ownership and identity information
                                                  where they act as the legal owner on
                                                  behalf of any other person.
      Not all trustees are required to have       An obligation should be established to
      information available on the identity of    maintain information in all cases in rela-
      settlors and beneficiaries of trusts.       tion to settlors, trustees and beneficiar-
                                                  ies of trusts with a trustee in Malaysia.


A.2. Accounting records
       Jurisdictions should ensure that reliable accounting records are kept for all
       relevant entities and arrangements.

      210.      A condition for exchange of information for tax purposes to be effec-
      tive, is that reliable information, foreseeably relevant to the tax requirements
      of a requesting jurisdiction is available, or can be made available, in a timely
      manner. This requires clear rules regarding the maintenance of accounting
      records.



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       General requirements in Malaysia (ToR A.2.1)

       Relevant entities’ governing laws in Malaysia
       211.     The Companies Act (CA) requires every company to keep (s.167(1)):
                such accounting and other records as will sufficiently explain the
                transactions and financial position of the company and enable
                true and fair profit and loss accounts and balance-sheets and
                any documents required to be attached thereto to be prepared
                from time to time and shall cause those records to be kept in
                such manner as to enable them to be conveniently and properly
                audited.
       212.    This means companies in Malaysia are required to maintain account-
       ing records which: (i) correctly explain all transactions; (ii) enable the finan-
       cial position of the company to be determined with reasonable accuracy at
       any time; and (iii) allow financial statements to be prepared. In addition,
       all companies are required to have their financial statements laid before the
       company at the annual general meeting (CA s.169(1) to (3)). The directors of
       the company are responsible for ensuring:
                that the financial statements comply with the approve accounting
                standards (s.166A(3)); and
                unless the company is exempt from the audit requirements, that the
                financial statements are audited (sec.169(4)).
       213.     Exempt private companies are required to lay their balance sheets and
       profit and loss statements before the company at their annual general meet-
       ings. Exempt private companies are not required to file audited accounts with
       the Registrar. Notwithstanding the above, the relevant accounting standards
       continue to apply to such entities (CA s.165A). Exempt private companies that
       meet certain requirements are not required to lodge their balance sheet and
       profit and loss account annually with the CCM (Eighth Schedule).
       214.     A foreign company carrying on business in Malaysia is required to
       lodge a copy of its balance sheet with the Registrar within two months of its
       annual general meeting along with a duly audited statement showing: assets
       used in and liabilities arising out of its operations in Malaysia as at the date
       on which its balance sheet was made up, and a duly audited profit and loss
       account (CA s.336). The Registrar may waive the foreign company from the
       obligation to lodge the accounting statements in the cases described in the CA
       (s.336(5))23.The foreign company is still required to prepare and maintain such

23.    Section 336(5) establishes a waiver in following cases the (i) it would be impracti-
       cal to comply with this obligation having regard to the nature of the company’s


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      accounting statements (s.336(5) and s.336A), however. The Registrar may ask
      for further details every time he is of the opinion that the balance sheet and
      the other documents prepared according to the law applicable to the foreign
      company in the place of its incorporation or origin do not sufficiently disclose
      the company’s financial position (s.336(2)). When a foreign company is not
      required by the law of the place of its incorporation or origin to prepare a bal-
      ance sheet, it must prepare and lodge with the Registrar such documents as if
      it were a public company incorporated in Malaysia (s.336(4)).
      215.     Under the Partnership Act (s.30), partners of a general partnership
      are bound “to render true accounts and full information of all things affecting
      the partnership to any partner or his legal representatives”. Partners are also
      required to account to the firm for any benefit derived by him without the
      consent of the other partners from any transaction concerning the partner-
      ship, or from any use by him of the partnership property, name or business
      connection (s.31(1)). The PA does not provide guidance on which accounting
      records are to be prepared.
      216.    Malaysian laws explicitly provide for the maintenance of accounting
      records by private trusts and unit trusts. With regard to private trusts, the
      Trustee (Incorporation) Act requires that trustees of any body or association
      of persons incorporated pursuant to that Act regularly enter or cause to be
      entered full and true accounts of all money received and paid respectively
      on account of such body or association (TIA s.15). As for unit trusts, under
      Chapter 11 of the Guidelines on Unit Trust Funds, the trustee must make
      available, inter alia, the following document at the principal place of business
      for inspection by investors and unit holders at all times: (i) the deed and the
      supplementary deed of the fund; (ii) the latest annual report and the interim
      report of the fund; (iii) the audited accounts of the management company and
      the fund for the last five financial years or from the date of incorporation/
      commencement if less than 5 years; and (iv) the latest audited accounts of the
      management company and the fund for the current financial year (s.11.36).

      Tax law in Malaysia
      217.    The Malaysian Income Tax Act requires every person carrying on
      a business to keep sufficient records to enable that income or loss from
      that business be readily ascertained (s.82(1)(a)). The Malaysian authorities
      confirmed that records are kept in relation to all arrangements and entities
      that carry on a business in Malaysia. However, there are no requirements

      operations in Malaysia; (ii) it would be of no real value having regard to the
      amount involved; (iii) it would involve expense unduly out of proportion to its
      value; or (iv) it would be misleading or harmful to the business of the company
      or to any company which is deemed to be related to the company.


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       in the ITA to keep accounting records and underlying documentation: (i) if
       a company does not carry on business in Malaysia, does not remit income
       to Malaysia and is not in receipt of Malaysian source income; and (ii) in
       the case of a trust with a Malaysian trustee which does not carry on busi-
       ness in Malaysia, does not remit income to Malaysia and is not in receipt
       of Malaysian source income. In relation to accounting records, however,
       Malaysian companies and trustees remain subject to the obligations to keep
       accounting records established at the CA and TIA respectively.
       218.     Records required to be kept in relation to all arrangements and enti-
       ties that carry on a business in Malaysia include (s.82(9)):
                books of account recording receipts or payments or income and
                expenditure;
                invoices, vouchers, receipts, and such other documents as in the opin-
                ion of the Director General are necessary to verify the entries in any
                books of account; and
                any other records as may be specified by the director general.
       219.    If the person’s gross receipts from his business in the preceding cal-
       endar year exceeded MYR 150 000 (EUR 49 200) from the sale of goods, or
       MYR 100 000 (EUR 32 800) from the performance of services, he is further
       required to issue a printed receipt serially numbered for every sum received
       in respect of goods sold or services performed in the course of or in connec-
       tion with the business and he has to retain a duplicate of every such receipt
       (ITA s.82(1)(b)). However, where a machine is used for recording sales, a
       receipt may be dispensed with if the Director General is satisfied that such
       machine automatically records all sales made and the total of all sales made
       in each day is transferred at the end of the day to a record of sales (s.82(2)).

       Conclusion
       220.      General tax obligations complement commercial law obligations
       and, taken together, result in all relevant entities that carry on a business
       in Malaysia being required to maintain accounting records which: (i) cor-
       rectly explain all transactions; (ii) enable the financial position of the entity
       or arrangement to be determined with reasonable accuracy at any time; and
       (iii) allow financial statements to be prepared.

       Underlying documentation in Malaysia (ToR A.2.2)
       221.   Malaysia’s commercial laws impose an obligation to retain under-
       lying documentation, such as invoices, contracts, etc. In particular, the
       Companies Act expressly imposes an obligation that accounting records be



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      maintained reflecting details of all sums of money received and expended,
      all sales and purchases and other transactions, and the assets and liabilities of
      the company. Accounting records include “invoices, receipts, orders for pay-
      ment of money, bills of exchange, cheques, promissory notes, vouchers and
      other documents of prime entry and also includes such working papers and
      other documents as are necessary to explain the methods and calculations by
      which accounts are made up” (CA s.4(1)). In addition, Malaysian companies
      are required to keep documentation sufficient to explain “the transactions
      and financial position of the company and enable true and fair profit and
      loss accounts and balance sheets and any documents required to be attached
      thereto to be prepared from time to time, and shall cause those records to
      be kept in such manner as to enable them to be conveniently and properly
      audited” (s.167(1)).
      222. More specific requirements to keep records and underlying docu-
      mentation can be found in the tax law, under sections 82 and 82A of the ITA
      (see above, para.216). The Malaysia authorities confirmed that such require-
      ments apply to all relevant entities and arrangements – including companies,
      partnerships, trusts and foreign entities, as long as they carry on a business
      in Malaysia. No requirements to maintain underlying documentation exist in
      the ITA: (i) if a Malaysian company does not carry on business in Malaysia,
      does not remit income to Malaysia and is not in receipt of Malaysian source
      income; and (ii) in the case of a trust with a Malaysian trustee which does not
      carry on business in Malaysia, does not remit income to Malaysia and is not
      in receipt of Malaysian source income. In the case of Malaysian companies,
      the requirements concerning underlying documentation established under the
      CA address the situations not covered by the ITA, as analysed above.

      The 5-year retention standard in Malaysia (ToR A.2.3)
      223.     The accounting and other records to be kept by a company under
      section 167 of the Companies Act are required to be retained by the company
      for “seven years after the completion of the transactions or operations to
      which they refer” (s.167(2)). This mandatory document retention period also
      applies to all accounting records obtained in the course of any trust business
      conducted in Malaysia, and hence covers private trusts and unit trusts. These
      obligations apply equally to foreign businesses and trustees working for for-
      eign trusts (s.336A(3)).
      224.     For tax purposes, the ITA requires the retention of accounting records
      for a period of seven years from the end of the year which the income relates
      to (s.82).
      225.   Based on the obligations imposed by the ITA, most entities and
      arrangements in Malaysia are subject to requirements to keep accounting



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       records, including underlying documentation, for the minimum period
       required by the standards (five years). The exception is a trust with a
       Malaysian trustee which does not carry on business in Malaysia, does not
       remit income to Malaysia and is not in receipt of Malaysian source income.

       General requirements in the Labuan IBFC (ToR A.2.1)

       Relevant entities’ governing laws in the Labuan IBFC
       226.     The Labuan Companies Act requires every company to keep such
       accounting and other records as will sufficiently explain the transactions and
       financial position of the company (s.110(1)). The LCA also requires compa-
       nies to make appropriate accounting entries within 90 days of the completion
       of the transactions to which they relate (s.110(2)).
       227.      The LCA does not require that Labuan company accounts are audited,
       unless: (i) other laws in Labuan in respect of financial services so require;
       (ii) the company’s articles so provide; or (iii) the company makes a offer for
       subscription or purchase of securities as detailed in section 113. There is no
       specific requirement that the financial statements comply with approved
       accounting standards.
       228.   The directors of a Labuan company are responsible for ensuring that
       (LCA s.111):
                the audited accounts or unaudited accounts, as the case may be, of
                the company are laid at a meeting of members not more than nine
                months after the date to which the accounts are made up; and
                an annual certificate from a director is lodged with the Authority
                within 30 days of the accounts being laid before the company at a
                meeting of members stating that he has considered the accounts and
                certifying, with or without qualifications: (i) that those accounts
                show that the company was solvent at the date they were made up;
                (ii) that he is unaware of any circumstances which may render those
                accounts untrue; (iii) that no circumstances have occurred since the
                date to which those accounts were made up which would render the
                company insolvent.
       229.    The accounting requirements in the LCA apply to all Labuan companies,
       including foreign companies and Labuan PCCs (s.110 combined with s.2(1)).
       230.    Under the LLPLLPA (s.70), limited partnerships and limited liability
       partnerships must keep such accounting and other records as are sufficient to
       explain their transactions and disclose with reasonable accuracy at any time
       the partnerships’ financial position. The LLPLLPA does not provide guid-
       ance on which accounting records are to be prepared. Every general partner


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      or designated partner, as the case may be, is responsible for ensuring that
      appropriate entries are made in the accounting and other records of the part-
      nership within 60 days of the completion of the transactions to which they
      relate. Unless otherwise required in the partnership agreement, partnerships’
      accounts are not required to be audited (s.70(4)).
      231.     The Labuan Trusts Act (LTA) requires trustees to keep accurate
      accounts and records of their trusteeship and to render an account of such
      trusteeship as required by the terms of the trust or by an order of a court
      (s.30(4)). In addition, the Labuan Financial Services and Securities Act
      explicitly requires that a Labuan trust company acting as the resident trustee
      keeps proper accounting and other records in Labuan that will sufficiently
      explain its transactions and financial position (s.175(1)). The requirements
      described above also apply to Labuan Islamic trusts (Labuan Islamic
      Financial Services and Securities Act s.105(2)).
      232.     With respect to Labuan foundations, the Labuan Foundations Act
      provides similar requirements concerning the keeping of accurate accounts
      and records as the Labuan Trusts Act (LFA s.59). In addition, the Labuan
      trust office which acts as the secretary of a Labuan foundation (LFA s.41)
      is required to keep proper accounting and other records as detailed in the
      LFSSA (s.175). The same requirements apply to Labuan Islamic foundations
      (Labuan Islamic Financial Services and Securities Act s.107(2)).

      Tax law
      233.    The Labuan Business Activity Tax Act does not expressly require
      that companies, partnerships, trusts or foundations keep accounting records.
      Companies carrying out trading activity in Labuan are implicitly required to
      prepare accounts, as the chargeable profits of a Labuan entity carrying on a
      Labuan trading activity is the net profits as reflected in the audited accounts
      in respect of such Labuan trading activity (s.4(2)).

      Conclusion
      234.     Commercial and regulatory law obligations, taken together, result in
      all relevant entities in Labuan being required to maintain accounting records
      which: (i) correctly explain all transactions; (ii) enable the financial position
      of the entity or arrangement to be determined with reasonable accuracy at
      any time; and (iii) allow financial statements to be prepared.

      Underlying documentation (ToR A.2.2)
      235.     Labuan’s commercial and tax laws do not expressly impose an obliga-
      tion to retain underlying documentation, such as invoices, contracts, etc.


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       The 5-year retention standard (ToR A.2.3)
       236.     Accounting records in the Labuan IBFC are required to be kept
       for a minimum period that is compliant with the standards. More specifi-
       cally, section 13(9) of the Labuan Company Act provides that all accounting
       records must be kept by the company for at least six years.24 The exact period
       depends on the type of record.
       237.    The Labuan laws on partnership, trusts and foundations do not pro-
       vide for a minimum retention period for accounting records and underlying
       documentation. However, sections 82(1) and 82(2) of the LFSSA require
       Labuan trust companies to maintain all records as may be required under the
       law for a period of not less than 6 years from the date of closure of an account
       or the date when the transaction has been completed or terminated.
       238.    Overall, relevant entities in the Labuan IBFC are subject to require-
       ments to keep accounting records for the minimum period required by the
       standards (five years). There are no express provisions in the laws regulat-
       ing the Labuan IBFC requiring the maintenance and retention of underlying
       documentation, however.




24.    Return of allotment of shares for cash should be filed for not less than six years; any
       annual return or balance sheet that should be lodged for not less than seven years or
       any document creating or evidencing a charge or the complete or partial satisfaction
       of a charge where a memorandum of satisfaction of the charge has been registered
       for not less than seven years; any other document (other than the M&As or any other
       document affecting them) which has been lodged, filed or registered for not less
       than fifteen years. Any document lodged, filed or registered that relates to a Labuan
       company or a foreign Labuan company that has been dissolved or has ceased to be
       registered is to be kept for at least fifteen years. In addition, the approved auditor
       shall retain for seven years a copy of the accounts to which his certificate relates
       (s.111(2B) LCA). Further, s.82(1) and s.82(2) of the LFSSA require the Labuan trust
       company to maintain all records as may be required under the law for a period of
       not less than 6 years from the date of closure of an account or the date when the
       transaction has been completed or terminated.


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               Determination and factors underlying recommendations

                                   Phase 1 determination
      The element is in place, but certain aspects of the legal implementation
      of the element need improvement.
               Factors underlying
               recommendations                              Recommendations
      There is no express requirement on          There should be an express
      (i) entities in the Labuan IBFC, and        requirement for all relevant entities
      (ii) certain trusts that do not carry       and arrangements to keep accounting
      on business in Malaysia and do not          records and underlying documentation
      derive or receive income in Malaysia,       for a minimum five year period.
      to keep underlying documentation.


A.3. Banking information
       Banking information should be available for all account-holders.


      Record-keeping requirements in Malaysia and in the Labuan IBFC
      (ToR A.3.1)
      239.    Banks and other financial institutions defined as “reporting institu-
      tions” under First Schedule of the AMLATFA are obliged to keep records,
      centralise information and retain records. Licensed banks under the LFSSA
      and LIFSSA which provide Labuan financial services as defined in the
      LFSAA are also reporting institutions under AMLATFA.
      240.    Section 13 of the AMLATFA requires reporting institutions to keep
      records of all transactions involving domestic currency or any foreign cur-
      rency exceeding such amount as the competent authority may specify. The
      record of the transactions is to include:
              the identity and address of the person in whose name the transaction
              is conducted;
              the identity and address of the beneficiary or the person on whose
              behalf the transaction is conducted, where applicable;
              the identity of the accounts affected by the transaction, if any;
              the type of transaction involved, such as deposit, withdrawal,
              exchange of currency, cheque cashing, purchase of cashier’s cheques
              or money orders or other payment or transfer by, through, or to such
              reporting institution;




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                the identity of the reporting institution where the transaction occurred;
                and
                the date, time and amount of the transaction.
       241.     Further, section 16 of the AMLATFA requires the reporting institu-
       tions to identify their customers, obtaining information inter alia with respect
       to the customer’s representative capacity, domicile, legal capacity, occupation
       or business purpose.
       242.     The Standard Guidelines on AML/CFT requires the reporting
       institutions to keep records relevant to the accounts and transactions, which
       include the periodic account statements and account opening documents.
       Subparagraph 6.1.1 of the Standard Guidelines states as follows: “The report-
       ing institution should keep the relevant records including any material busi-
       ness correspondences and documents relating to transactions, in particular,
       those obtained during customer due diligence procedures, for at least six
       years after the transaction has been completed or after the business relations
       with the customer have ended.”
       243.    In addition, section 3 of the AMLATFA defines “transaction”
       as “… include an arrangement to open an account involving two or more
       person and any related transaction between any of the persons concerned and
       another”.
       244. Under the AMLATFA, reporting institutions are required to main-
       tain records for a period of not less than 5 years from the date an account
       has been closed or the date the transaction has been completed or terminated
       (AMLATFA s.17). Reporting institutions are also required to maintain
       records to enable the reconstruction of any transaction in excess of such
       amount as the competent authority may specify, for a period of not less than
       5 years from the date the transaction has been completed or terminated (s.17).

                  Determination and factors underlying recommendations

                                      Phase 1 determination
       The element is in place.




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B. Access to information



Overview

       245.    A variety of information may be needed in a tax enquiry and jurisdic-
       tions should have the authority to obtain all such information. This includes
       information held by banks and other financial institutions as well as infor-
       mation concerning the ownership of companies or the identity of interest
       holders in other persons or entities, such as partnerships and trusts, as well
       as accounting information in respect of all such entities. This section of the
       report examines whether Malaysia’s legal and regulatory framework gives to
       the authorities access powers that cover the right types of persons and infor-
       mation and whether rights and safeguards would be compatible with effective
       exchange of information.
       246. Malaysia’s competent authority has broad powers to obtain any rel-
       evant information from any person who holds the information and has meas-
       ures to compel the production of such information. The ability of Malaysia’s
       competent authority to obtain information for international exchange of
       information (EOI) in tax matters is derived from its general access powers
       under the Income Tax Act, coupled with some secondary rules on exchange of
       information. No domestic interest requirement exists for Malaysia’s compe-
       tent authority to exercise its information gathering powers. These powers are
       exercised by issuance of a notice requesting the production of the informa-
       tion, and non-compliance can be sanctioned with significant penalties. This
       power covers access to identity, ownership and accounting information.
       247.     In relation to the Labuan IBFC, a separate specific law (Labuan
       Business Activity Tax Act)gives the competent authority the ability to obtain
       and provide requested information. The power to exchange information applies
       irrespective of how a request is made, e.g. under a DTC or a tax information
       exchange agreement (TIEA). As a result, information which is already avail-
       able to the competent authoritiy can be exchanged under all EOI instruments,
       including TIEAs. However, the competent authority’s power to call for provi-
       sion of information in relation to entities in the Labuan IBFC can currently



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      only be exercised where an EOI request is made under a DTC. As Malaysia
      currently has no TIEAs, this gap in its ability to obtain information for TIEA
      purposes in the Labuan IBFC is not materially significant. It has, however,
      recently begun to negotiate TIEAs and is in the process of amending its legisla-
      tion to ensure that information can be obtained for the purposes of replying to
      a request under a TIEA with the aim to have this legislation in place quickly
      before a TIEA is in force.
      248.    Malaysia is only able to access bank information to answer an
      exchange of information request received pursuant to a double taxation con-
      vention (DTC) containing an equivalent of Article 26(5) of the OECD Model
      Tax Convention. Only these DTCs containing this explicit provision are con-
      sidered to override domestic secrecy laws.
      249.     Malaysia does not have the power to obtain and provide information
      that is held outside Malaysia, even if such information is in the control of
      a person within its territorial jurisdiction. This gap in the Malaysian legal
      framework is mitigated by the fact that Malaysian laws require that most
      relevant ownership and accounting information is kept in Malaysia.

B.1. Competent Authority’s ability to obtain and provide information

 Competent authorities should have the power to obtain and provide information that is the
 subject of a request under an exchange of information arrangement from any person within
 their territorial jurisdiction who is in possession or control of such information (irrespective
 of any legal obligation on such person to maintain the secrecy of the information).


      250.    The competent authority for exchanging information in Malaysia
      is the Minister of Finance or his authorised representative. The Minister
      of Finance has authorised via letter the following persons, inter alia, as its
      representatives: the Director of the Department of International Taxation of
      the Inland Revenue Board of Malaysia and the Director General of the Inland
      Revenue Board of Malaysia (DGIR). Based on their authorisation, they are
      the competent authority for both EOI requests received from treaty partners
      and Malaysian requests sent to treaty partners.
      251.    The Income Tax Act (ITA) contains provisions on access powers
      available in Malaysia and the Labuan Business Activity Tax Act 1990 contains
      provisions delegating access powers in the Labuan IBFC to the DGIR.
      252.    The Income Tax Act (ITA) contains provisions on access powers but
      does not expressly provide that these may be used to collect information for
      EOI purposes. However, section 132 which gives DTCs the force of law pro-
      vides in subsection (4) that “in addition to provisions for relief from double



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       taxation, other provisions relating to tax under this Act or to foreign tax of the
       territory to which the arrangements relate” are given effect under this section.
       A provision with similar effects is contained in section132A with regard to
       TIEAs. The ITA gives tax authorities information gathering powers “for the
       purposes of this Act”. Therefore, the competent authority can use the normal
       access powers available to the Inland Revenue Board of Malaysia in order to
       obtain information requested by a foreign authority under a DTC or TIEA.
       253.     Pursuant to the ITA, the DGIR is granted powers to call for produc-
       tion of specific returns and books (s.78); call persons for the delivery of their
       bank account statements (s.79); access buildings and documents (s.80); and
       call for information for the purposes of the ITA (s.81).
       254.     Section 81 of the ITA provides that:
                81. The Director General may require any person to give orally
                or may by notice under his hand require any person to give in
                writing within a time specified in the notice all such informa-
                tion or particulars as may be demanded of him by the Director
                General for the purposes of this Act and which may be in the
                possession of that person:
                Provided that, where that person is a public officer or an officer
                in the employment of a local authority or statutory authority, he
                shall not by virtue of this section be obliged to disclose any par-
                ticulars as to which he is under a statutory obligation to observe
                secrecy.
       255.     With regard to the powers granted under section 81 of the ITA, the
       ITA is complemented by the Income Tax (Request for Information) Rules
       2011 (the “Rules”) which expressly provide the Inland Revenue Board of
       Malaysia (its DGIR or delegated officers) with the power to use its powers
       under Section 81 to answer an EOI request made pursuant to a DTC.
       According to the Malaysian authorities, the Rules are intended mainly to
       address access to bank information and only refer to section 81, so that the
       DGIR does not need to exhaust all other measures to obtain such information
       before obtaining it directly from the bank, as this would affect the timeliness
       of the response to requests for information. The access powers provided for
       in the other sections can still be exercised by the DGIR pursuant to the ITA
       even though they are not mentioned in the Rules. The Rules do not address
       requests made pursuant to TIEAs, as the competent authorities’ powers to
       access information in connection to TIEAs and the relevant EOI procedure
       are already specified in great detail in the TIEAs themselves.




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      256.     As far as the Labuan IBFC is concerned, section 22 of the Labuan
      Business Activity Tax Act 1990 (LBATA)25 empowers the Director General of
      the Inland Revenue Board to call for information for EOI purposes. Section 22
      does not allow the DGIR to call for information for the purpose of replying
      to a request made pursuant to a TIEA, although the DGIR has powers to
      exchange information which is already in the possession of the tax authorities
      under any kind of EOI arrangement, including TIEAs. This would include tax
      return and accounting information submitted by companies in Labuan that are
      liable to tax. There are no policy impediments in Malaysia to the conclusion of
      TIEAs. In fact, Malaysia and Bermuda have recently concluded TIEA negotia-
      tions. As a result, Malaysia is now in the process of amending its legislation
      to allow it to obtain information, which might not otherwise be available to its
      tax authorities, in respect of the Labuan IBFC pursuant to TIEAs. The new
      legislation is scheduled for parliamentary discussions in October 2011.

      Ownership and identity information (ToR B.1.1), and Accounting
      records (ToR B.1.2)
      257.     The DGIR is granted powers under section 81 of the ITA to call any
      person to provide, orally or in writing, information that may be required for
      the purposes of the ITA. However, those powers contain a restriction: the
      DGIR is not able to access information that is in the hands of public offic-
      ers if they have a statutory obligation to observe secrecy in relation to such
      information (s.81, last sentence).
      258.    As a result of this provision, the DGIR may not be able to access, for
      example, certain ownership information held by the Registrar. Based on the
      CA, the Registrar is also prohibited by the Companies Act from divulging
      or communicating any information acquired in an inspection to any person
      (except for the purposes of the CA or in the course of a criminal procedure)
      (CA, s.7(B)(4)). In any case, the DGIR can access such information directly
      from the relevant persons, as noted previously in Part A of this report.26

25.   Section 22: “For the purpose of this Act, the Director General may by notice in writ-
      ing require any person to furnish such information or particulars as may be required
      by him or for compliance with any double taxation arrangements entered into by the
      Government of Malaysia; (2) Where any person, without reasonable excuse, fails to
      comply with the notice mentioned in subsection (1), he shall be guilty of an offence
      and shall, on conviction, be liable to a fine not exceeding one million ringgit.”
26.   The Malaysian authorities confirmed that all information contained in documents
      filed or lodged with the Registrar, and certificate of incorporation or any certificate
      filed under the CA are available to the DGIR. However, information acquired by the
      Registrar pursuant to sections 7B, 7C and 7D cannot be disclosed to the DGIR. The
      scope of these sections may cover any object, article, material, or other documents


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       259.     With specific regard to EOI requests, pursuant to section 3(3) of the
       Income Tax (Request for Information) Rules 2011 (the Rules), the DGIR, upon
       receipt of an EOI request, may, by notice under section 81 of the ITA, require
       the person referred to in the request to provide the information as requested
       by the foreign competent authority within the time specified in the notice.
       260.     This wording largely copies the one of section 81 of the ITA, pursuant
       to which the Director General may require any person to give orally, or may
       by notice27 require any person to give in writing within a time specified in the
       notice, all such information or particulars for the purposes of the Income Tax
       Act and which may be in the possession of that person. The Rules refer only
       to written notices, while section 81 also provide for the possibility to require
       a person to give information orally. The Rules set specific conditions for the
       competent authority to consider an EOI request, before making use of its infor-
       mation gathering powers. The requesting authority must state in the request
       the following information: (a) identity of the person under examination or
       investigation; (b) the period for which the information is requested; (c) a state-
       ment of the information sought including the details and form as the competent
       authority wishes to receive the information from the Director General; (d) the
       tax purpose for which the information is requested; (e) the grounds for believ-
       ing that the information requested is in the possession or control of a person
       within the jurisdiction of Malaysia; (f) to the extent known, the name and
       address of any person believed to be in possession of the requested information;
       (g) a statement that the request is inconformity with the law and administra-
       tive practices of the territory of the competent authority, that if the request was
       within the jurisdiction of the territory of the competent authority, then the com-
       petent authority would be able to obtain the information pursuant to the laws
       of its own territory or in accordance with the normal course of administrative
       practice and is in conformity with the double taxation arrangement; and (h) a
       statement that the competent authority has pursued all means available in its
       own territory to obtain the information, except those that would give rise to dis-
       proportionate difficulties. These requirements are consistent with the standard
       and follow the guidance provided by the OECD Model TIEA, in particular with
       regard to the identity of taxpayers and the holders of information.

       disclosed to the Registrar. The Malaysia Central Bank, the competent authority
       under the AMLATFA, is also prohibited from disclosing information to the DGIR
       for purposes other than the ones described in the AMLATFA. As such, the Central
       Bank can only disclose information which relates to the investigation of the offences
       listed under the Second Schedule of AMLATFA which are under IRBM’s purview.
       However, IRBM is authorized to obtain the necessary information directly from the
       “reporting institutions” listed in the First Schedule of the AMLATFA.
27.    Notices may be served personally or by ordinary or registered post, pursuant to
       section 145 of the ITA.


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70 – COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION

      261.     In sum, the DGIR can require “all information”, including ownership,
      identity and accounting information. It also appear that he/she can require
      information from any person, meaning the taxpayer or a third party, provided
      the person possesses the requested information and was identified in the EOI
      request. Persons in control of the information on the other hand are not covered.
      As a result, Malaysia does not have the power to obtain and provide informa-
      tion held outside of Malaysia, even if such information is in the control of a
      person within its territorial jurisdiction. The size of this gap is small as most of
      Malaysia’s laws require that information is kept within Malaysia. For example,
      the Companies Act requires share registers and accounting records be kept in
      Malaysia. Similarly, the Labuan Companies Act and the LFSSA require owner-
      ship information and accounting records to be kept in the Labuan IBFC. The
      Income Tax Act also requires accounting records of Malaysian businesses to
      be kept in Malaysia. The Malaysian authorities are in the process of submit-
      ting legislation for parliamentary approval in order to empower its competent
      authority to access information controlled by persons in Malaysia. This legisla-
      tion is expected to be tabled in parliament in October 2011.
      262.    With respect to the Labuan IBFC, the LBATA seems to provide
      broader powers to the DGIR to meet its obligations under the DTCs than the
      ITA does in respect to the rest of Malaysia. Section 22 of the LBATA empow-
      ers the DGIR to require any person to furnish any information or particulars
      that may be required by the DGIR or may be required for the compliance with
      any DTC, by means of a notice in writing.
      263.    No further regulations have been issued in relation to any specific
      procedures the DGIR will follow when reviewing an EOI request connected
      to the Labuan IBFC. The Malaysian authorities confirmed that section 22
      of the LBATA will be applied in accordance with the international stand-
      ard. The implementation of section 22 of the LBATA will be assessed in
      Malaysia’s Phase 2 review.

      Banking information (ToR B.1.1)
      264. The Malaysian authorities have advised that the power to call for
      bank information (ITA ss.79 and 81) cannot be exercised absent a provision in
      the relevant international agreement akin to Article 26(5) of the OECD Model
      Tax Convention, which specifically notes that the parties to the agreement
      have agreed, for the purposes of EOI, to lift domestic secrecy provisions (see
      also Part C.1 of this report).
      265.    Access to bank information is specifically dealt with in section 79 of
      the ITA. Pursuant to this section, the DGIR has powers to call for statements
      of bank accounts and other information from bank account holders.




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       266.      In addition, section 81 combined with the Rules gives the DGIR the
       power to go directly to the bank to request information in order to respond to an
       intervention request for information in accordance with a DTC provision akin
       to Article 26(5) of the OECD Model Tax Convention. As a general rule, after
       receiving a request for information from the foreign competent authority, the
       DGIR will request the information from the account holder concerned and if it
       fails to obtain it, the DGIR will subsequently ask the information directly from
       the bank (Rules s.4(2)). However, section 4(3) of the Rules grants discretionary
       powers to the DGIR to request information directly from a bank without having
       to request it from the account holder first (see discussion under Part B.2 below).
       267.     In order for banks to co-operate with the DGIR’s requests under the
       Rules, the Central Bank issued the Circular on the Disclosure of Customer
       Information to the Inland Revenue Board of Malaysia of 29 July 2011 (the
       Circular). Since, in Malaysia, banks are required by law28 to disclose information
       only based on an authorisation in writing from the Central Bank, the Central
       Bank, by means of the Circular, has granted a “blanket authorisation”, in which
       it authorises licensed banks, Islamic banks and other prescribed financial insti-
       tutions to disclose bank information to the DGIR, provided that the request con-
       tains certain information. As required under section 6.1 of the Circular, in order
       to disclose information, the bank must receive a notice in writing issued by the
       Internal Revenue Board of Malaysia (IRBM) pursuant to section 81 of the ITA
       that contains the identity information of the account holder under examination or
       investigation. In addition, the Circular provides that, as a general rule, the bank
       must receive a statement from the IRBM confirming that the account holder has
       failed to comply with the IRBM’s request within the timeline specified (s.6.3).
       In such a case, the bank is required to notify its customer of the information and
       documents it has furnished to the IRBM. As an exception to this requirement,
       section 6.4 of the Circular provides that, when the request is of urgent nature or
       in the case where prior notification to the customer is likely to undermine the
       actions of the IRBM, the IRBM will not make a prior request to the account
       holder and the bank is not required to notify such customer of the information
       or documents that have been furnished to the IRBM.
       268.     In conclusion, the requirements for accessing bank information under
       a DTC which contains a provision akin to Article 26(5) of the OECD Model
       Tax Convention, as provided in the Rules and in the Circular are in accord-
       ance with the international standard, including with respect to the identifica-
       tion of the taxpayer (see paragraph 260). However, the Malaysian authorities
       can currently only exercise these powers to access bank information for
       requests received under 18 signed agreements (10 of which are force).


28.    See the Banking and Financial Institution Act 1989 (s. 99(1)(i)), the Islamic Bank
       Act 1983 (s.34(3)) and the Development and Financial Institutions Act (s. 120(1)(k)).


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72 – COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION

      269.    With respect to the Labuan IBFC, the DGIR has powers to directly
      request information from Labuan banks, financial institutions and any other
      person, as long as such information is required for compliance with a DTC
      (LBATA s.22). However, as stated above, if the DTC lacks a provision similar
      to Article 26(5), the Malaysian authorities cannot access and exchange bank
      information. In addition, the DGIR is not empowered to call for information
      where an EOI request is made pursuant to a TIEA, although, as already indi-
      cated, Malaysia has not yet concluded any TIEAs.

      Use of information gathering measures absent domestic tax interest
      (ToR B.1.3)
      270.     The concept of a “domestic tax interest” describes a situation where a
      contracting party can only provide information to another contracting party if
      it has an interest in the requested information for its own tax purposes. There
      is no domestic tax interest in Malaysia (including the Labuan IBFC) to obtain
      and provide information to a contracting party.
      271.    The ITA contains provisions on access powers which may also be
      used to collect information for EOI purposes. Section 132(4) provides that
      “in addition to provisions for relief from double taxation, other provisions
      relating to tax under this Act or to foreign tax of the territory to which the
      arrangements relate” are given effect under this section. A provision with
      similar effects is contained in section132A with regard to TIEAs. The ITA
      gives tax authorities information gathering powers “for the purposes of this
      Act”. Therefore, the competent authority can use the normal access powers
      available to the Inland Revenue Board of Malaysia in order to obtain informa-
      tion requested by a foreign authority under a DTC or TIEA.

      Compulsory powers (ToR B.1.4)

      Sanctions for non-disclosure
      272.     The Rules provide that any person to whom a notice is issued who,
      without reasonable excuse, fails to comply with the notice commits an
      offence under section 120 of the ITA. In turn, section 120 provides that any
      person who, without reasonable excuse, fails to comply with a notice given
      under sections 78, 79, 80(3) and 81, may be guilty of an offence and, on con-
      viction, be liable to a fine between MYR 200 (EUR 46) and 2 000 (EUR 460)
      and/or to imprisonment up to six months.
      273.    In addition, where a person has been convicted of such an offence,
      a subordinate court may make a further order that the person must comply
      with the relevant provision of the ITA under which the offence has been



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       committed within 30 days, or such other period as the court deems fit, from
       the date the order is made.
       274.    In the Labuan IBFC, breach of the disclosure obligation in section 22
       of the LBATA is an offence punishable by a fine of up to MYR 1 000 000
       (EUR 230 000).

       Search and seizure
       275.    Section 80 of the ITA on the power of access to buildings and docu-
       ments provides that the DGIR has at all times “full and free access to all
       lands, buildings and places and to all books, documents, objects, articles,
       materials and things” and may search these places and inspect, copy and
       make extracts from any of these documents, for the purposes of the ITA.
       276.     The DGIR may also seize the above-mentioned documents and
       objects (“take possession of” them) where their inspection, etc. cannot rea-
       sonably be undertaken and where there is a risk that they would be destroyed
       or interfered with, or they may be needed as evidence in any legal proceed-
       ings instituted under or in connection with the ITA.
       277.     The DGIR can use these powers without the need for a court order. The
       official exercising the right of access or seizure of section 80 must hold a war-
       rant from the DGIR which identifies the official and his/her office (ITA s.137).
       278.    Any person who obstructs or refuses to permit entry to an authorised
       officer acting pursuant to section 80 into any land, building or place has
       committed the offence of obstruction, which is punishable by a fine between
       MYR 1 000 (EUR 230) and MYR 10 000 (EUR 2 300) and/or by imprison-
       ment of up to one year (ITA s.116).29
       279.    With respect to the Labuan IBFC, the LBATA does not grant the
       DGIR powers to search premises or documents and/or to seizure documents
       or object. Powers of entry, search and seizure with respect to premises or doc-
       uments of Labuan financial institutions or related corporations are granted to

29.    Not responding to an information request constitutes the tax offence of obstruction
       punishable by a fine between MYR 1 000 and 10 000 and/or by imprisonment up to
       one year, pursuant to section 116 of the ITA. This also applies generally to any person
       who obstructs the Director General or an authorised officer in the exercise of their
       functions under the ITA. This sanction is also specifically applicable to any person
       who refuses to produce any book or other document in his/her custody or under
       his/her control on being required to do so by the Director General or an authorised
       officer, who fails to provide reasonable facilities or assistance or both to the Director
       General or an authorised officer in the exercise of their powers, or who refuses to
       answer any question relating to any of those purposes lawfully asked of him/her.


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      the Labuan Financial Services Authority (LFSA) (Labuan Financial Services
      Authority Act s.28E). The Malaysian authorities confirmed that the LFSA
      may proceed with search and seizure on the request of the DGIR. This issue
      will be further reviewed in Malaysia’s Phase 2 review.

      Secrecy provisions (ToR B.1.5)
      280.    Malaysia has a number of secrecy and confidentiality provisions in
      various pieces of legislation, primarily for the financial institutions. These
      provisions are generally lifted for exchange of information purposes.

      Bank secrecy
      281.     Licensed banks, Islamic banks and prescribed institutions are pro-
      hibited from disclosing any information relating to the affairs or account
      of a customer to any person (Banking and Financial Institutions Act 1989
      (BAFIA) s.97; Islamic Banking Act 1983 (IBA) s.34(3); and Development
      Financial Institutions Act 2002 (DFIA) s.119(2)). These secrecy provisions
      exist to protect the interests of the banks’ customers. A person who contra-
      venes these provisions is liable to imprisonment for up to three years and/
      or a fine up to MYR 3 000 000 (EUR 690 000) (BAFIA s.103 and Fourth
      Schedule), imprisonment for up to three years and/or fine up to MYR 40 000
      (EUR 9 200) (IBA s.34(5)) or imprisonment for up to six months and/or fine
      up to MYR 500 000 (EUR 115 000) (DFIA s.107).
      282.     Exceptions exist, including for the purposes of any criminal pro-
      ceedings or where such a disclosure is authorised in writing by the Central
      Bank.30 To allow the competent authority to have access to bank information,
      the Central Bank has given a blanket authorisation via a circular to the banks
      to disclose bank information to the DGIR where the disclosure of the bank
      information to the requesting party is “required by the Inland Revenue Board
      of Malaysia (IRBM) under section 81 of the Income Tax Act 1967 (ITA) for
      purposes of facilitating exchange of information pursuant to arrangements
      having effect under sections 132 and 132A of the ITA” (please see Part B.1.1
      of this report). Not complying with a request from the tax authorities is pun-
      ished as any breach of section 81 of the ITA (see above).
      283.    In the Labuan IBFC, bank confidentiality is also protected by the
      Labuan Financial Services and Securities Act 2010 (s.178) and by the Labuan
      Islamic Financial Services and Securities Act 2010 (s.139). A person who
      contravenes secrecy is liable to imprisonment for up to three years and/or
      a fine up to MYR 1 000 000 (EUR 230 000). Among the exceptions to this

30.   Exceptions to secrecy are found in BAFIA ss.98 to 99(1); IBA ss.34(3) and 34(4)
      and DFIA s.120.


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       prohibition on disclosure of bank information are any lawfully disclosure
       required by the DGIR (under LBATA s.22) or by the LFSA (under LFSAA
       s.28B).

       Professional secrecy
       284.      The international standard recognises that a requested State may decline
       to disclose information relating to confidential communications between attor-
       neys, solicitors or other admitted legal representatives in their role as such and
       their clients to the extent that the communications are protected from disclosure
       under domestic law (Commentary 19.3 to the OECD Model Tax Convention).
       However, the scope of protection afforded to such confidential communications
       should be narrowly defined. Such protection does not attach to documents or
       record delivered to an attorney, solicitor or other admitted legal representative
       in an attempt to protect such documents or records from disclosure required by
       law. Also, information on the identity of a person such as a director or beneficial
       owner of a company is typically not protected as confidential communication.
       285.    Two sections of the Evidence Act 1950 relate to legal professional
       privilege. First, section 126 expressly provides that where information is cov-
       ered by legal professional privilege, such information may not be disclosed
       unless the privilege is waived by the client:
                No advocate shall at any time be permitted, unless with his cli-
                ent’s express consent, to disclose any communication made to
                him in the course and for the purpose of his employment as such
                advocate by or on behalf of his client, or to state the contents or
                condition of any document with which he has become acquainted
                in the course and for the purpose of his professional employment,
                or to disclose any advice given by him to his client in the course
                and for the purpose of such employment.
       286.   Section 127 of the Evidence Act provides the same privilege to any
       communication of the client with interpreters and the clerks and servants of
       advocates.
       287.     The Malaysian authorities have indicated that the information gather-
       ing powers of the DGIR cannot be exercised in order to obtain information
       subject to the legal professional privilege described in sections 126 and 127.
       The language of section 126 appears to cover not only the provision of legal
       advice and communication related to legal proceedings, but any communica-
       tion connected to the attorney’s employment. The Malaysian authorities have
       confirmed, however, that section 126 applies only to legal advice provided by
       advocates and not to other activities attorneys might conduct such as company
       formation etc. In this sense, the authorities confirmed that the legal privilege
       is not so wide as to restrict access to information in case a lawyer acts, for


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      instance, as a nominee shareholder, a trustee, a settlor, a company director or
      under a power of attorney to represent a company in its business affairs. The
      interpretation given to section 126 and any impact on exchange of information
      in practice will be further reviewed in Malaysia’s Phase 2 review.
      288.     Section 119 of the Evidence Act, on confidential communications
      with legal advisers, further provides: “No one shall be compelled to disclose
      to the court any confidential communication which has taken place between
      him and his legal professional adviser unless he offers himself as a witness”.
      Section 119 could cover persons of legal training but not admitted to prac-
      tice law, but only where there is a court matter and only covers confidential
      communications between the legal professional adviser and his client. In this
      specific context, the privilege is in line with the international standards.

                Determination and factors underlying recommendations

                                    Phase 1 determination
      The element is in place, but certain aspects of the legal implementation
      of the element need improvement.
                Factors underlying
                recommendations                               Recommendations
      While most laws specifically require          Malaysia should ensure that it has the
      that information is kept within Malaysia,     power to access information sought
      Malaysian authorities do not have the         under its EOI instruments which is
      power to obtain and provide informa-          controlled by persons in Malaysia,
      tion held outside of Malaysia, even if        even if it is located extra-territorially.
      such information is in the control of a
      person within its territorial jurisdiction.
      Restrictions on access to bank infor-         In respect of EOI requests made
      mation provided for by Malaysia’s             pursuant to its EOI agreements,
      domestic legislation is currently over-       Malaysia should ensure that its
      ridden in respect of only 18 of the 71        competent authority has access to
      signed DTCs (10 of which are in force).       bank information.
      Although the competent authority can          Before entering into any TIEAs, Malaysia
      exchange any information already in           should ensure that its competent author-
      its possession, it does not currently         ity has the power to obtain and provide
      have powers to access information in          information that is the subject of a
      the Labuan IBFC in order to respond           request under a TIEA from any person
      to an EOI request made pursuant to            within its territorial jurisdiction who is in
      a TIEA.                                       possession or control of such informa-
                                                    tion, including from financial institutions.




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B.2. Notification requirements and rights and safeguards
 The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the
 requested jurisdiction should be compatible with effective exchange of information.

       Not unduly prevent or delay exchange of information (ToR B.2.1)
       289.     Rights and safeguards should not unduly prevent or delay effective
       exchange of information. For instance, notification rules should permit excep-
       tions from prior notification (e.g. in cases in which the information request is
       of a very urgent nature or the notification is likely to undermine the chance
       of success of the investigation conducted by the requesting jurisdiction).
       290.    As a general rule, neither section 81 of the ITA nor the Rules require
       that the taxpayer be notified before information concerning him/her is
       provided to a requesting jurisdiction. In addition, where the Malaysian tax
       authorities must use their information gathering powers, there is no require-
       ment that the taxpayer concerned be notified of the exercise of such a power.
       291.   The Malaysian authorities indicate that there are no notification
       requirements in regard to seeking information for exchange of information
       purposes in the Labuan IBFC.
       292.     As a general rule, as provided for by section 4(2) of the Rules, the
       Malaysian tax authorities cannot go to the bank directly, without having
       first requested the information from the taxpayer concerned (and failed to
       obtain it; see above Part B.1.1 on bank information). This amounts to a noti-
       fication requirement. This is confirmed by section 6.3 of the Central Bank
       Circular. However, section 4(3) of the Rules (combined with section 6.4 of the
       Central Bank Circular) goes on to provide an exception to this requirement.
       Accordingly, the Malaysian competent authority may request information
       directly from a bank without having to request information from the account
       holder first. Section 4(3) does not specifically list the conditions or cases for
       its application. Therefore, the Malaysian tax authorities have discretionary
       powers allowing that the prior request to the taxpayer can be waived (e.g. when
       the information request is of a very urgent nature, or, where requesting infor-
       mation directly from the person would likely undermine the chance of success
       of the investigation conducted by the requesting jurisdiction). The practical
       application of this discretion will be considered in Malaysia’s Phase 2 review.
       293.     In addition, in order to co-operate with the DGIR/IRBM, as a general
       rule, the bank must receive a statement from the IRBM confirming that the
       account holder has failed to comply with the IRBM’s request within the timeline
       specified (s.6.3). In such a case, the bank is required to notify its customer of the
       information and documents it has furnished to the IRBM. As an exception to
       this requirement, section 6.4 of the Circular provides that, when the request is



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      of urgent nature or in the case where prior notification to the customer is likely
      to undermine the actions of the IRBM, the IRBM will not make a prior request
      to the account holder and the bank is not required to notify such customer of the
      information or documents that have been furnished to the IRBM.
      294.   The notification requirements and exceptions to notification are in
      accordance with the international standard.
      295.    The Malaysian authorities have indicated that there are no other
      appeal rights available in Malaysia, including the Labuan IBFC, that could
      prevent or delay exchange of information.

                Determination and factors underlying recommendations

                                   Phase 1 determination
      The element is in place.




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C. Exchanging information



Overview

       296.     Jurisdictions generally cannot exchange information for tax purposes
       unless they have a legal basis or mechanism for doing so. A jurisdiction’s
       practical capacity to effectively exchange information relies both on having
       adequate mechanisms in place as well as an adequate institutional frame-
       work. In Malaysia, the legal authority to exchange information derives from
       bilateral mechanisms (double taxation conventions) or domestic law. This sec-
       tion of the report examines whether Malaysia has a network of information
       exchange that would allow it to achieve effective exchange of information in
       practice.
       297.    Malaysia has a large treaty network of 71 exchange of information
       instruments which include most of its main trading partners. Since 2009,
       when it committed to the standards for transparency and exchange of infor-
       mation in tax matters, Malaysia has signed 18 DTCs/protocols to existing
       DTCs, all of which fully conform to the standard, and 10 of which are in
       force. A further 9 agreements have been initialled and 15 agreements are
       under various stages of negotiation.
       298.     The Malaysian domestic legislation allows the exchange of bank
       information only where the exchange of information instrument applied
       contains a specific provision to this effect. Considering that none of the EOI
       instruments that Malaysia had signed before its commitment to the standards
       in April 2009 contained such a provision, these do not meet the standard. All
       the instruments signed by Malaysia since that time contain a full exchange of
       information provision, including wording akin to Article 26(5) of the OECD
       Model Tax Convention. In addition, Malaysia embarked in an ambitious
       programme of negotiation of protocols to its treaties to bring them to the
       standard.
       299.   When negotiating protocols to existing DTCs, Malaysia should also
       upgrade the EOI provision of the few treaties that do not allow exchange of
       information in respect of all persons.



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      300.     Other aspects of Malaysia’s EOI provisions meet the standard. There
      is no distinction drawn in Malaysia’s DTCs between civil and criminal mat-
      ters as far as taxation is concerned, and no dual criminality condition applies.
      There are no restrictions in the EOI provisions in Malaysia’s DTCs that would
      prevent Malaysia from providing information in a specific form, as long as
      this is consistent with its own administrative practices.
      301.      All EOI articles in Malaysia’s DTCs have confidentiality provisions and its
      domestic legislation also contains relevant confidentiality provisions. In addition,
      all of Malaysia’s DTCs ensure that the parties are not obliged to provide informa-
      tion that would disclose any trade, business, industrial, commercial or professional
      secret or information the disclosure of which would be contrary to public policy.
      302.     Finally, there appear to be no legal restrictions on the ability of
      Malaysia’s competent authority to respond to requests within 90 days of
      receipt by providing the information requested or by providing an update on
      the status of the request.


C.1. Exchange of information mechanisms
 Exchange of information mechanisms should allow for effective exchange of information.


      303.     Malaysia has signed 71 agreements which provide for the exchange of
      information upon request. All of these are DTCs. While Malaysia has not yet
      signed any tax information exchange agreements (TIEAs), the introduction
      of section 132A of the ITA in February 2011 enables the government to enter
      into TIEAs with any foreign jurisdiction.
      304.     Malaysian laws do not provide for automatic exchange of informa-
      tion. However, in the process of audit or investigation work, information that
      is likely of benefit to its treaty partners is exchanged spontaneously.

      Foreseeably relevant standard (ToR C.1.1)
      305.     The international standard for exchange of information envisages
      information exchange upon request to the widest possible extent. Nevertheless
      it does not allow “fishing expeditions,” i.e. speculative requests for informa-
      tion that have no apparent nexus to an open inquiry or investigation. The bal-
      ance between these two competing considerations is reflected in the standard
      of “foreseeable relevance” which is included in Article 26(1) of the OECD
      Model Tax Convention set out below:
              The competent authorities of the Contracting States shall exchange
              such information as is foreseeably relevant for carrying out the



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                provisions of this Convention or to the administration or enforce-
                ment of the domestic laws concerning taxes of every kind and
                description imposed on behalf of the Contracting States, or of their
                political subdivisions or local authorities, insofar as the taxation
                thereunder is not contrary to the Convention. The exchange of
                information is not restricted by Articles 1 and 2.
       306.    Malaysia’s network of DTCs generally follows the OECD Model Tax
       Convention. The agreements signed or revised after 2009 contain a specific
       reference to the exchange of information that is “foreseeably relevant” to the
       administration or enforcement of the tax laws of the Contracting States. Older
       DTCs generally use the term “necessary” in lieu of “foreseeably relevant”.
       The phrase “as is necessary” is recognised in the commentary to Article 26
       of the OECD Model Taxation Convention to allow for the same scope of
       exchange as does the term “foreseeably relevant”.31 The Malaysian authorities
       have confirmed that they follow this interpretation when applying DTCs.
       307.     Malaysia’s DTCs with Denmark, New Zealand, Norway and Pakistan
       provide for the exchange of information “which the authorities have at their
       disposal in the normal course of administration as is necessary for carrying
       out this Convention, in particular for the prevention of fraud, and for the
       administration of statutory provisions against legal avoidance concerning
       taxes covered by the Convention”. As such, it might appear that exchange is
       restricted to information already held by the tax authorities (i.e. it excludes
       information that the Malaysian tax authorities do not already hold). However,
       the Malaysian authorities have indicated that they will use their access
       powers to obtain information requested under these four agreements.
       308.    The DTCs with Austria, Bangladesh, Switzerland, the USSR
       (Russia)32, and the UAE limit the exchange of information to that necessary
       for carrying out the provisions of the convention, not allowing for exchange
       of information for the administration or enforcement of the domestic laws of
       the Contracting States. As no obligations arise to exchange information for
       the implementation of domestic laws, these agreements are not consistent
       with the international standard.




31.    The word “necessary” in Article 26(1) of the 2003 OECD Model Taxation
       Convention was replaced by the phrase “foreseeably relevant” in the 2005 ver-
       sion. The commentary to Article 26 recognises that the term “necessary” allows
       for the same scope of exchange as does the term “foreseeably relevant”.
32.    The agreement signed with the Union of Soviet Socialist Republics in 1987 is in
       force with respect to the Russian Federation.


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     In respect of all persons (ToR C.1.2)
     309.     For exchange of information to be effective it is necessary that a
     jurisdiction’s obligation to provide information is not restricted by the resi-
     dence or nationality of the person to whom the information relates or by the
     residence or nationality of the person in possession or control of the infor-
     mation requested. For this reason the international standard for exchange
     of information envisages that exchange of information mechanisms must
     provide for exchange of information with respect to all persons.
     310.    Treaties concluded with Austria, Bangladesh, the USSR (Russia),
     and the UAE limit information exchange to residents and are in any case not
     applicable for the administration or enforcement of the domestic laws. None of
     the other information exchange mechanisms restrict the scope of information
     exchange to just some persons, (e.g. residents of one of the jurisdictions), or
     precludes the application of the provisions in respect of certain type of entities.
     311.    The protocols to the treaties with Indonesia, Germany and South
     Africa (not yet in force) mention that the benefits of these agreements
     shall not be available in respect of the carrying on of any offshore busi-
     ness activities under the Labuan Offshore Business Activity Tax Act 1990.
     Labuan entities are only excluded from “benefits” of the agreement, for
     example with respect to reduced withholding tax rates. Similarly, treaties
     with Luxembourg, the Netherlands, Japan and the Seychelles stipulate that
     the provision on exemption or reduction of tax shall not apply to persons
     carrying on offshore business activity under the Labuan Offshore Business
     Activity Tax Act 1990. Since information exchange is not considered to be a
     “treaty benefit” in Malaysia, Labuan entities are not as a result of this provi-
     sion excluded from the scope of EOI under these DTCs.
     312.    Of concern however, is the treaty with Chile that completely excludes
     certain entities from the scope of application. The provisions of this agree-
     ment do not apply to persons carrying on offshore business activities under
     the Labuan Offshore Business Activity Tax Act 1990.
     313.    The Income Tax (Request for Information) Rules 2011 notes in sec-
     tion 3(1) that a foreign competent authority can request from the Director
     General of Inland Revenue information related to “a person to whom the
     double tax arrangement entered into relates”. The Malaysian authorities have
     confirmed that this allows for exchange of information with respect to all
     persons covered in the relevant EOI agreement.

     Obligation to exchange all types of information (ToR C.1.3)
     314.    Jurisdictions cannot engage in effective exchange of information
     if they cannot exchange information held by financial institutions, and



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       nominees or persons acting in an agency or fiduciary capacity. Both the
       OECD Model Tax Convention and the OECD Model TIEA, which are the
       authoritative sources of the standards, stipulate that bank secrecy cannot form
       the basis for declining a request to provide information and that a request
       for information cannot be declined solely because the information is held by
       nominees or persons acting in an agency or fiduciary capacity or because the
       information relates to an ownership interest.
       315.     Up until Malaysia committed to the standard in 2009, none of its DTCs
       contained the wording of Article 26(5) of the OECD Model Tax Convention.
       Since then, all the 18 treaties and protocols that Malaysia has signed incorpo-
       rate this wording, 10 of which are in force.33 This updating process is key, since
       Malaysia cannot exchange bank information absent this provision in a treaty
       (see below) and Malaysia should continue to bring all other treaties in line with
       the international standard.

       Bank information
       316.     As noted above, Article 26(5) of the OECD Model Tax Convention
       states that a contracting state may not decline to supply information solely
       because the information is held by a bank or other financial institution. Ten of
       Malaysia’s DTCs or protocols contain such a provision (as well as eight trea-
       ties or protocols signed but not yet in force).
       317.    However, the absence of this paragraph does not automatically
       create restrictions on exchange of bank information. The Commentary to
       Article 26(5) indicates that while paragraph 5, added to the OECD Model
       Tax Convention in 2005, represents a change in the structure of the Article,
       it should not be interpreted as suggesting that the previous version of the
       Article did not authorise the exchange of such information.
       318.     The Malaysian authorities state that it has been their policy not to
       exchange bank information absent a provision equivalent to Article 26(5)
       in their treaties. Therefore most of Malaysia’s DTCs are not to the standard.
       Malaysia is re-negotiating a number of DTCs in order to include such a provi-
       sion and meet the standard. Malaysia is strongly encouraged to take all steps
       necessary to bring these protocols or new agreements into force and update
       the other instruments as soon as possible.




33.    The ten DTCs and protocols in force are those with Australia, Brunei, Germany,
       Laos, San Marino, France, Ireland, Japan, the Netherlands and the United
       Kingdom. The other instruments signed but not yet in force are those with Bahrain,
       Belgium, Kuwait, Qatar, Senegal, the Seychelles, South Africa and Turkey.


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      Absence of domestic tax interest (ToR C.1.4)
      319.      The concept of “domestic tax interest” describes a situation where a
      contracting party can only provide information to another contracting party
      if it has an interest in the requested information for its own tax purposes. An
      inability to provide information based on a domestic tax interest requirement
      is not consistent with the international standard. Contracting parties must use
      their information gathering measures even though invoked solely to obtain
      and provide information to the other contracting party.
      320.    All 18 DTCs/protocols signed by Malaysia since 2009, 10 of which
      are currently in force, contain wording akin to Article 26(4) of the OECD
      Model Tax Convention, specifically requiring that the contracting parties
      use their information-gathering powers to exchange the required information
      without any reference to a domestic tax interest.
      321.    Most of Malaysia’s DTCs do not contain such a provision. However,
      the absence of a similar provision does not in principle create restrictions
      on exchange of information provided there is no domestic tax interest
      impediment to exchange information in the case of either contracting party.34
      Malaysia interprets these treaties and its domestic laws in such a way that no
      domestic tax interest applies (see subsection B.1.3 above).
      322.    Notwithstanding the above, a domestic tax interest requirement
      may also exist in some of Malaysia’s partner jurisdictions. In such cases, the
      absence of a specific provision requiring exchange of information unlimited
      by domestic tax interest will serve as a limitation on the exchange of informa-
      tion which can occur under the relevant agreement. It is recommended that
      Malaysia continues its program of renegotiation of DTCs including to incor-
      porate wording in line with Article 26(4) of the OECD Model Tax Convention.

      Absence of dual criminality principles (ToR C.1.5)
      323.    The principle of dual criminality provides that assistance can only be
      provided if the conduct being investigated (and giving rise to an information
      request) would constitute a crime under the laws of the requested country if

34.   Paragraph 19.6 of the commentary to Article 26(4) states “Paragraph 4 was added
      in 2005 to deal explicitly with the obligation to exchange information in situations
      where the requested information is not needed by the requested State for domestic
      tax purposes. Prior to the addition of paragraph 4 this obligation was not expressly
      stated in the Article, but was clearly evidenced by the practices followed by
      member countries which showed that, when collecting information requested by a
      treaty partner, Contracting States often use the special examining or investigative
      powers provided by their laws for purposes of levying their domestic taxes even
      though they do not themselves need the information for these purposes.”


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       it had occurred in the requested country. In order to be effective, exchange of
       information should not be constrained by the application of dual criminality
       principle.
       324.    None of the information exchange mechanisms established by Malaysia
       apply the dual criminality principle to restrict exchange of information.

       Exchange of information in both civil and criminal tax matters
       (ToR C.1.6)
       325.    Information exchange may be requested both for tax administration
       purposes and for tax prosecution purposes. The international standard is not
       limited to information exchange in criminal tax matters but extends to infor-
       mation requested for tax administration purposes (also referred to as “civil
       tax matters”).
       326.    The information exchange mechanisms concluded by Malaysia pro-
       vide for the exchange of information for both criminal and civil matters. In
       addition, the Malaysian authorities also confirmed that Malaysia does not
       differentiate between civil and criminal tax matters under its laws. As such,
       Malaysia can exchange information for both civil and criminal matters in all
       its EOI instruments.

       Provide information in specific form requested (ToR C.1.7)
       327.     According to the Global Forum’s Terms of Reference, exchange of
       information mechanisms should allow for the provision of information in
       specific form requested (including depositions of witnesses and production
       of authenticated copies of original documents) to the extent possible under a
       jurisdiction’s domestic laws and practice.
       328.    There are no restrictions in the information exchange mechanisms
       concluded by Malaysia that might prevent it from providing information in
       the form requested, as long as this form is consistent with its administrative
       practices.

       In force (ToR C.1.8)
       329.   Exchange of information cannot take place unless a jurisdiction has
       information exchange mechanisms in force. Where exchanges of information
       agreements have been signed the international standard requires that jurisdic-
       tions must take all steps necessary to bring them into force expeditiously.
       330.   Malaysia has information exchange agreements with 71 jurisdictions.
       Only 10 agreements complying with the international standard are currently



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      in force35 and 8 others are awaiting ratification-36 (5 of which have already
      been ratified by Malaysia and are waiting the ratification by the other party).
      331.     Since the commitment to the standard by Malaysia in April 2009, the
      average time period between the signature and the entry into force of the new
      DTCs and protocols is one year.37 Among the eight instruments that have not
      yet entered into force, five were ratified by Malaysia and are awaiting rati-
      fication by the other party, and the three others were signed less than a year
      ago.
      332.     On a procedural point, even though Federal Parliament has the power
      to implement treaties domestically, treaty-making power is exclusively vested
      in the Federal Government composed of the Yang di-Pertuan Agong and the
      Cabinet headed by the Prime Minister. According to the Malaysian practice,
      it is the Prime Minister himself or the Foreign Minister, or any Cabinet
      Minister specially authorised to do so, who usually signs and ratifies interna-
      tional treaties.
      333.     It is important for Malaysia to continue ensuring expeditious entry
      into force of newly signed agreements, so that it will have a network of infor-
      mation exchange mechanisms which complies with the international standard
      as soon as possible.

      Be given effect through domestic law (ToR C.1.9)
      334.    In order for information exchange to be effective, the contracting par-
      ties have to take the necessary measures to comply with their commitments.
      335.    All of Malaysia’s agreements which have been signed and ratified by
      both parties are in effect in Malaysia. According to sections 132 and 132A of
      the ITA, double taxation conventions (DTCs) and tax information exchange
      agreements (TIEAs) prevail over all domestic laws.
      336.     However, as discussed in Part B.1 of this report and above, there are
      limitations in the access to information by the Malaysian authorities.




35.   With Australia, Brunei, France, Germany, Ireland, Japan, Laos, the Netherlands,
      San Marino and the United Kingdom.
36.   With Bahrain, Belgium, Kuwait, Qatar, Senegal, the Seychelles, South Africa,
      and Turkey.
37.   In the 1990s and beginning of the 2000s it sometimes took Malaysia’s DTCs a
      much longer time to enter into force, e.g. with jurisdictions like Iran, Myanmar,
      Sudan or the Kyrgyz Republic.


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                  Determination and factors underlying recommendations

                                      Phase 1 determination
       The element is in place, but certain aspects of the legal implementation
       of the element need improvement.
                  Factors underlying
                  recommendations                               Recommendations
       As a result of limitations with respect       Malaysia should ensure that all its
       to access to information, in particular       agreements provide for exchange of
       bank information, only 18 of Malaysia’s       information to the standard.
       71 signed agreements provide for
       effective exchange of information to the
       standard. Of these 18 agreements, 10
       are in force.


C.2. Exchange of information mechanisms with all relevant partners
        The jurisdictions’ network of information exchange mechanisms should cover
        all relevant partners.

       337.    Ultimately, the international standard requires that jurisdictions
       exchange information with all relevant partners, meaning those partners
       who are interested in entering into an information exchange arrangement.
       Agreements cannot be concluded only with counterparties without economic
       significance. If it appears that a jurisdiction is refusing to enter into agree-
       ments or negotiations with partners, in particular ones that have a reasonable
       expectation of requiring information from that jurisdiction in order to prop-
       erly administer and enforce its tax laws it may indicate a lack of commitment
       to implement the standards.
       338.    Malaysia has a solid history of exchange of information in tax mat-
       ters. The first conventions in this regard were signed with Denmark and
       Norway in 1970. Malaysia possesses a broad network of 71 information
       exchange agreements. Since making its commitment to the international
       standard in transparency in 2009, Malaysia has entered into 5 new treaties38
       and 13 new protocols.39




38.    With Brunei, Germany, Laos, San Marino and Senegal.
39.    With Australia, Bahrain, Belgium, France, Ireland, Japan, Kuwait, the Netherlands,
       Qatar, the Seychelles, South Africa, Turkey and the United Kingdom.


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     339.    Malaysia’s network of signed agreements comprises:
             all 4 of its bordering countries (1 of these is to the international
             standard);
             4 of its 5 major trading partners (1 of these is to the international
             standard);
             24 of the 34 OECD member countries (9 of these are to the interna-
             tional standard); and
             41 of the 100 other members of the Global Forum (15 of these are to
             the international standard).
     340.    A program of negotiations is underway in order to bring older
     agreements in line with the standard and to establish new agreements. The
     Malaysian authorities advise that, in addition to the already signed agree-
     ments, 9 DTCs/protocols have been initialled and a further 15 DTCs/
     Protocols/TIEAs allowing for international exchange of information are under
     negotiation. In addition, Malaysia has also proposed to all its top 19 trading
     partners to sign/update DTCs. The introduction of section 132A to the ITA in
     February 2011 enables the Government to enter into TIEAs with any foreign
     country. Malaysia has indicated thatTIEA negotiations have been concluded
     with Bermuda and the TIEA will be signed soon. Finally, no indication has
     been received that Malaysia has ever declined to enter into an EOI agreement
     when requested to do so.
     341.     While most of Malaysia’s treaties are not yet in line with the inter-
     national standard, the extensive work done by the jurisdiction to bring its
     network of agreements completely in line with the international standard
     should be acknowledged. That work must be continued and concluded so that
     Malaysia can exchange information in line with the international standard
     with all its partners.

               Determination and factors underlying recommendations

                                  Phase 1 determination
      The element is in place, but certain aspects of the legal implementation
      of the element need improvement.
              Factors underlying
              recommendations                              Recommendations
      Malaysia can exchange information          Malaysia should update and develop
      in accordance with the standard with       its EOI network to ensure it has
      10 EOI partners and has ratified an        agreements (regardless of their form)
      additional 5 DTCs/protocols to the         for exchange of information with all
      standard.                                  relevant partners.




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                                   COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 89



C.3. Confidentiality
        The jurisdictions’ mechanisms for exchange of information should have adequate
        provisions to ensure the confidentiality of information received.

       Information received: disclosure, use, and safeguards (ToR C.3.1)
       342.     Governments would not engage in information exchange without the
       assurance that the information provided would only be used for the purposes
       permitted under the exchange mechanism and that its confidentiality would
       be preserved. Information exchange instruments must therefore contain
       confidentiality provisions that spell out specifically to whom the information
       can be disclosed and the purposes for which the information can be used. In
       addition to the protections afforded by the confidentiality provisions of infor-
       mation exchange instruments countries with tax systems generally impose
       strict confidentiality requirements on information collected for tax purposes.
       343.     All treaties signed by Malaysia, contain provisions akin to Article 26(2)
       of the OECD Model Tax Convention aimed at keeping confidential all informa-
       tion received from the treaty partner. Moreover this information cannot be used
       for other purposes than those expressly mentioned in the incoming request.
       344. By virtue of section 138(1) of the Income Tax Act 1967 (ITA), any
       information received by the Director General of the Inland Revenue Board
       (DGIR) must be treated as confidential. Thus, any unauthorised disclosure of
       such information will amount to a breach of confidentiality and any official
       who contravenes this provision will be subject to criminal prosecution under
       section 117 of the ITA, which carries a fine of not exceeding MYR 4 000
       (EUR 920) or imprisonment for a term not exceeding one year, or to both.
       However, any information received by the DGIR can be disclosed in judicial
       proceedings involving the ITA or other tax law or with the written author-
       ity of the Minister, legal or natural person or partnership to whose affairs it
       relates (ITA ss.138(2) and 138(3)).
       345.     In the Labuan IBFC, section 20 of the LBATA provides for a confi-
       dentiality duty. Section 22A lifts this confidentiality duty to allow tax offi-
       cials to answer EOI requests related to the Labuan IBFC.

       All other information exchanged (ToR C.3.2)
       346.    The confidentiality provisions in Malaysia’s exchange of information
       agreements and domestic law do not draw a distinction between information
       received in response to requests and information forming part of the requests
       themselves. As such, these provisions apply equally to all requests for such
       information, background documents to such requests, and any other docu-
       ment reflecting such information, including communications between the



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90 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

      requesting and requested jurisdictions and communications within the tax
      authorities of either jurisdiction.

               Determination and factors underlying recommendations

                                   Phase 1 determination
      The element is in place.


C.4. Rights and safeguards of taxpayers and third parties
       The exchange of information mechanisms should respect the rights and
       safeguards of taxpayers and third parties.

      Exceptions to requirement to provide information (ToR C.4.1)
      347.     The international standard allows requested parties not to supply
      information in response to a request in certain identified situations where an
      issue of trade, business or other secret may arise.
      348.     All the information exchange arrangements which Malaysia has
      signed ensure that the parties concerned will not be required to supply infor-
      mation that would involve disclosure of an industrial or commercial secret,
      information that might be subject to attorney-client privilege or information
      the disclosure of which would be contrary to public policy (ordre public). All
      treaties, with the exception of those with New Zealand and Pakistan, also
      ensure the parties concerned will not be required to supply information that
      would involve disclosure of professional secrets.
      349.    In respect of trade secrets, based on the judicial pronouncements
      laid down by the courts, it has been held that trade secrets are confidential in
      nature. Thus, the DGIR may decline to exchange information on this basis.
      350.     An information request can also be declined where the requested
      information would disclose confidential communications protected by legal
      professional privilege. However, communications between a client and his/her
      lawyer or other admitted legal representative are, generally, only privileged to
      the extent that, the lawyer or other legal representative acts in his/her capac-
      ity as an advocate or other legal representative.40 Where legal professional
      privilege is more broadly defined it does not provide valid grounds on which
      to decline a request for EOI. To the extent, therefore, that a lawyer acts as a
      nominee shareholder, a trustee, a settlor, a company director or under a power
      of attorney to represent a company in its business affairs, EOI resulting from

40.   Paragraph 19.3 of the commentary to the OECD Model Tax Convention and
      paragraphs 84 to 90 of the commentary to the OECD Model TIEA.


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                                   COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 91



       and relating to any such activity cannot be declined because of the legal pro-
       fessional privilege rule.
       351.    Legal professional privilege is covered under the limb of “profes-
       sional secrets” in the DTCs. Considering the provisions of Article 3(2) of the
       respective tax treaties, for application of the tax treaties by Malaysia, this
       term will derive its meaning from the one it has under the domestic laws of
       Malaysia. As discussed previously (see Part B.1 of this report), the scope of
       the legal privilege in Malaysia is in line with the international standards.

                  Determination and factors underlying recommendations

                                      Phase 1 determination
       The element is in place.
                  Factors underlying
                  recommendations                               Recommendations
       Two of Malaysia’s treaties do not        Malaysia should bring these
       ensure the parties concerned will not    agreements up to the standard.
       be required to supply information that
       would involve disclosure of professional
       secrets.

C.5. Timeliness of responses to requests for information
        The jurisdiction should provide information under its network of agreements
        in a timely manner.

       Responses within 90 days (ToR C.5.1)
       352.     In order for exchange of information to be effective it needs to be pro-
       vided in a timeframe which allows tax authorities to apply the information to
       the relevant cases. If a response is provided but only after a significant lapse
       of time the information may no longer be of use to the requesting authorities.
       This is particularly important in the context of international co-operation
       as cases in this area must be of sufficient importance to warrant making a
       request.
       353.     There are no specific legal or regulatory requirements in place which
       would prevent Malaysia responding to a request for information by provid-
       ing the information requested or providing a status update within 90 days
       of receipt of the request. In practice, the officers dealing with EOI keep a
       register to monitor every case for the purpose of meeting the time frames
       specified in the OECD Model TIEA. As regards the actual timeliness for
       responses to requests for information, the assessment team is not in a position




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92 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

     to evaluate whether this element is in place, as it involves issues of practice
     that are dealt with in the Phase 2 review.

     Organisational process and resources (ToR C.5.2)
     354.    The Minister of Finance is empowered to make provisions, by Order
     (by way of notification in the Government Gazette), for “affording relief
     from double taxation” and “exchange of information foreseeable relevant to
     the administration or assessment or collection or enforcement of the taxes
     under the ITA or other taxes of every kind under any written law and any
     foreign tax …” (ITA ss.132 and 132A). The Director of the Department of
     International Taxation is the competent authority for international exchange
     of information in tax matters.
     355.   A review of Malaysia’ organisational process and resources will be
     conducted in the context of its Phase 2 review.

     Absence of restrictive conditions on exchange of information
     (ToR C.5.3)
     356.    Exchange of information assistance should not be subject to unrea-
     sonable, disproportionate, or unduly restrictive conditions.
     357.     There are no laws or regulatory practices in Malaysia that impose
     restrictive conditions on exchange of information.

               Determination and factors underlying recommendations

                                  Phase 1 determination
      The assessment team is not in a position to evaluate whether this element
      is in place, as it involves issues of practice that are dealt with in the
      Phase 2 review.




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                   SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS – 93




             Summary of Determinations and Factors
                Underlying Recommendations


                                     Factors underlying
      Determination                  recommendations                      Recommendations
 Jurisdictions should ensure that ownership and identity information for all relevant entities
 and arrangements is available to their competent authorities. (ToR A.1)
 The element is in             Not all nominees are required         An obligation should be
 place, but certain            to have information available         established for all nominees
 aspects of the legal          on the persons for whom they          to maintain relevant
 implementation of             act.                                  ownership and identity
 the element need                                                    information where they act as
 improvement.                                                        the legal owner on behalf of
                                                                     any other person.
                               Not all trustees are required         An obligation should be
                               to have information available         established to maintain
                               on the identity of settlors and       information in all cases in
                               beneficiaries of trusts.              relation to settlors, trustees
                                                                     and beneficiaries of trusts
                                                                     with a trustee in Malaysia.
 Jurisdictions should ensure that reliable accounting records are kept for all relevant entities
 and arrangements. (ToR A.2)
 The element is in             There is no express                   There should be an express
 place, but certain            requirement on (i) entities           requirement for all relevant
 aspects of the legal          in the Labuan IBFC, and               entities and arrangements to
 implementation of             (ii) certain trusts that do not       keep accounting records and
 the element need              carry on business in Malaysia         underlying documentation for
 improvement.                  and do not derive or receive          a minimum five year period.
                               income in Malaysia, to keep
                               underlying documentation.
 Banking information should be available for all account-holders. (ToR A.3)
 The element is in place.




PEER REVIEW REPORT – PHASE 1: LEGAL AND REGULATORY FRAMEWORK – MALAYSIA © OECD 2011
94 – SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS

                                   Factors underlying
     Determination                 recommendations                      Recommendations
Competent authorities should have the power to obtain and provide information that is the
subject of a request under an exchange of information arrangement from any person within
their territorial jurisdiction who is in possession or control of such information (irrespective
of any legal obligation on such person to maintain the secrecy of the information). (ToR B.1)
The element is in            While most laws specifically         Malaysia should ensure that
place, but certain           require that information is kept     it has the power to access
aspects of the legal         within Malaysia, Malaysian           information sought under
implementation of            authorities do not have the          its EOI instruments which
the element need             power to obtain and provide          is controlled by persons in
improvement.                 information held outside             Malaysia, even if it is located
                             of Malaysia, even if such            extra-territorially.
                             information is in the control of
                             a person within its territorial
                             jurisdiction.
                             Restrictions on access to bank       In respect of EOI requests
                             information provided for by          made pursuant to its EOI
                             Malaysia’s domestic legislation      agreements, Malaysia should
                             is currently overridden in           ensure that its competent
                             respect of only 18 of the 71         authority has access to bank
                             signed DTCs (10 of which are         information.
                             in force).
                             Although the competent               Before entering into any
                             authority can exchange               TIEAs, Malaysia should
                             any information already in           ensure that its competent
                             its possession, it does not          authority has the power
                             currently have powers to             to obtain and provide
                             access information in the            information that is the subject
                             Labuan IBFC in order to              of a request under a TIEA
                             respond to an EOI request            from any person within its
                             made pursuant to a TIEA.             territorial jurisdiction who is in
                                                                  possession or control of such
                                                                  information, including from
                                                                  financial institutions.
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the
requested jurisdiction should be compatible with effective exchange of information.
(ToR B.2)
The element is in place. .                                  .




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                   SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS – 95



                                     Factors underlying
      Determination                  recommendations                      Recommendations
 Exchange of information mechanisms should allow for effective exchange of information.
 (ToR C.1)
 The element is in             As a result of limitations with       Malaysia should ensure that
 place, but certain            respect to access to informa-         all its agreements provide for
 aspects of the legal          tion, in particular bank informa-     exchange of information to the
 implementation of             tion, only 18 of Malaysia’s 71        standard.
 the element need              signed agreements provide for
 improvement.                  effective exchange of informa-
                               tion to the standard. Of these
                               18 agreements, 10 are in force.
 The jurisdictions’ network of information exchange mechanisms should cover all relevant
 partners. (ToR C.2)
 The element is in             Malaysia can exchange                 Malaysia should update and
 place, but certain            information in accordance             develop its EOI network to
 aspects of the legal          with the standard with 10 EOI         ensure it has agreements
 implementation of             partners and has ratified an          (regardless of their form) for
 the element need              additional 5 DTCs/protocols to        exchange of information with
 improvement.                  the standard.                         all relevant partners.
 The jurisdictions’ mechanisms for exchange of information should have adequate provisions
 to ensure the confidentiality of information received. (ToR C.3)
 The element is in place.
 The exchange of information mechanisms should respect the rights and safeguards of
 taxpayers and third parties. (ToR C.4)
 The element is in place. Two of Malaysia’s treaties                 Malaysia should bring
                          do not ensure the parties                  these agreements up to the
                          concerned will not be required             standard.
                          to supply information that
                          would involve disclosure of
                          professional secrets.
 The jurisdiction should provide information under its network of agreements in a timely
 manner. (ToR C.5)
 The assessment team
 is not in a position to
 evaluate whether this
 element is in place, as
 it involves issues of
 practice that are dealt
 with in the Phase 2
 review.




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                                                                                      ANNEXES – 97




      Annex 1: Jurisdiction’s Response to the Review Report 41


           Malaysia would like to express its sincere appreciation to the assessment
       team for its excellent work in evaluating Malaysia’s legal and regulatory
       framework for this Phase 1 peer review report.
            We believe that this report clearly demonstrates Malaysia’s commitment
       to the international standards of transparency and exchange of information.
            Malaysia will give due consideration to the recommendations made in the
       report. In particular, we have already started the legislative process of amend-
       ing the Labuan Business Activity Tax Act and the Income Tax Act to provide
       for the exchange of information under a TIEA and to empower the Director
       General of Inland Revenue Board to access information in the control of a
       person within the jurisdiction of Malaysia. These amendments will be tabled
       in the coming 2012 Budget Proposals scheduled on 7 October 2011.
           In addition, we will introduce a transitional provision for registration of
       bearer shares after which such shares will no longer be recognized.
           As regards the remaining recommendations, Malaysia will now begin the
       process of examining the best way to implement them.
           Malaysia would also like to take this opportunity to reiterate Malaysia’s
       commitment to comply with the international standards for transparency and
       the exchange of tax information with our treaty partners. We also acknowl-
       edge the findings of the report and will continue to be committed to the
       review process.




41.    This Annex presents the jurisdiction’s response to the review report and shall not
       be deemed to represent the Global Forum’s views.


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98 – ANNEXES




     Annex 2: List of all Exchange-of-Information Mechanisms
                              in Force


                                      Type of
             Jurisdiction          arrangement             Date signed             Date in force
                                 Double taxation            24-01-1994               21-08-1995
1     Albania
                                convention (DTC)
2     Argentina                         DTC                 03-10-1997              09-02-2001
                                        DTC                 20-08-1980                  1981
3     Australia
                                      Protocol              24-02-2010              08-08-2011
4     Austria                           DTC                 20-09-1989              20-09-1990
                                        DTC                 14-06-1999               31-07-2000
5     Bahrain
                                      Protocol              14-10-2010             Not yet in force
6     Bangladesh                        DTC                 19-04-1983                  1984
                                        DTC                 24-10-1973                  1977
7     Belgium
                                      Protocol              18-12-2009             Not yet in force
8     Bosnia and                        DTC                 21-06-2007             Not yet in force
      Herzegovina
9     Brunei                            DTC                05-08-2009                17-06-2010
10    Canada                            DTC                 16-10-1976               18-12-1980
11    Chile                             DTC                03-09-2004               25-08-2008
12    China                             DTC                 23-11-1985              14-09-1986
13    Croatia                           DTC                 18-02-2002               15-07-2004
14    Czech Republic                    DTC                 08-03-1996               31-03-1997
15    Denmark                           DTC                 04-12-1970               04-06-1971
16    Egypt                             DTC                 14-04-1997              09-07-2002
17    Fiji                              DTC                 19-12-1995               30-07-1997
18    Finland                           DTC                 28-03-1984               23-02-1986




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                                                                                           ANNEXES – 99



                                       Type of
             Jurisdiction           arrangement              Date signed              Date in force
                                         DTC                 24-04-1975                 23-07-1976
 19   France
                                       Protocol               12-11-2009                01-12-2010
                                         DTC                 08-04-1977                 11-02-1979
 20 Germany
                                       New DTC               23-02-2010                 21-12-2010
 21   Hungary                            DTC                 22-05-1989                26-10-1992
 22 India                                DTC                 14-05-2001                14-08-2003
 23 Indonesia                            DTC                 12-09-1991                11-08-1992
 24   Iran                               DTC                  11-11-1992               15-04-2005
                                         DTC                  28-11-1998               10-09-1999
 25 Ireland
                                       Protocol              16-12-2009                15-02-2011
 26 Italy                                DTC                 28-01-1984                18-04-1986
                                         DTC                 19-02-1999                 31-12-1999
 27 Japan
                                       Protocol              10-02-2010                 01-12-2010
 28 Jordan                               DTC                 02-10-1994                29-05-2000
 29 Kazakhstan                           DTC                 26-06-2006                20-05-2010
                                         DTC                 05-02-2003                29-05-2007
 30 Kuwait
                                       Protocol              25-01-2010               Not yet in force
 31   Kyrgyz Republic                    DTC                  17-11-2000               26-12-2006
 32 Laos                                 DTC                 03-06-2010                23-02-2011
 33 Lebanon                              DTC                 20-01-2003                 10-11-2004
 34 Luxembourg                           DTC                  21-11-2002               29-12-2004
 35 Malta                                DTC                 03-10-1995                01-09-2000
 36 Mauritius                            DTC                 23-08-1992                19-08-1993
 37   Mongolia                           DTC                 27-07-1995                 07-11-1996
 38 Morocco                              DTC                 02-07-2001                29-12-2006
 39 Myanmar                              DTC                 09-03-1998                21-07-2008
 40 Namibia                              DTC                 28-07-1998                13-12-2004
                                         DTC                 07-03-1988                02-02-1989
 41   Netherlands
                                       Protocol              04-12-2009                19-10-2010
 42   New Zealand                        DTC                 19-03-1976                02-09-1976
 43 Norway                               DTC                  23-12-1970               09-09-1971
 44 Pakistan                             DTC                 29-05-1982                 09-11-1982




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100 – ANNEXES

                                     Type of
         Jurisdiction             arrangement             Date signed             Date in force
45 Papua New Guinea                    DTC                 20-05-1993               11-06-1999
46 Philippines                         DTC                 27-04-1982               27-07-1984
47   Poland                            DTC                 16-09-1977               15-12-1978
                                       DTC                 03-07-2008              28-01-2009
48 Qatar
                                     Protocol              16-02-2011            Not yet in force
49 Romania                             DTC                 26-11-1982               07-04-1984
50 Russia (USSR)                       DTC                 31-07-1987               04-07-1988
52   San Marino                        DTC                 19-11-2009               28-12-2010
51   Saudi Arabia                      DTC                 31-01-2006               01-07-2007
53 Senegal                             DTC                 17-02-2010            Not yet in force
                                       DTC                 03-12-2003              10-07-2006
54 Seychelles
                                     Protocol              22-12-2009            Not yet in force
55 Singapore                           DTC                 05-10-2004              13-02-2006
                                       DTC                 26-07-2005              06-07-2006
57 South Africa
                                     Protocol              05-04-2011            Not yet in force
58 South Korea                         DTC                 20-04-1982               13-12-1982
56 Spain                               DTC                24-05-2006                28-12-2007
59 Sri Lanka                           DTC                 16-09-1997              13-08-1998
60 Sudan                               DTC                 07-10-1993               18-12-2002
61   Sweden                            DTC                 12-03-2002              28-01-2005
62 Syria                               DTC                 26-02-2007              31-08-2007
63 Thailand                            DTC                 29-03-1982               02-02-1983
                                       DTC                 27-09-1994               28-01-1997
64 Turkey
                                     Protocol              17-02-2010            Not yet in force
65 Turkmenistan                        DTC                 19-11-2008              06-10-2009
66 United Arab Emirates                DTC                 28-11-1995              18-09-1996
                                       DTC                 10-12-1996              18-05-1998
67 United Kingdom
                                     Protocol              22-09-2009               28-12-2010
68 Uzbekistan                          DTC                 06-10-1997              10-08-1999
69 Venezuela                           DTC                28-08-2006               08-01-2008
70   Vietnam                           DTC                 07-09-1995              13-08-1996
71   Zimbabwe                          DTC                 28-04-1994            Not yet in force




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                                                                                      ANNEXES – 101




                    Annex 3: List of all Laws, Regulations
                       and Other Relevant Material


           Federal Constitution
           Civil Law Act 1956
           Criminal Procedure Code

Commercial legislation

           Companies Act 1965
           Legal Profession Act 1976
           Labuan Companies Act 1990
           Labuan Limited Partnerships and Limited Liability Partnerships Act 2010
           Labuan Business Activity Tax Act 1990
           Partnership Act 1961
           Registration of Businesses Act 1956
           Societies Act 1966
           Trust Companies Act 1949
           Trustees (Incorporation) Act 1952
           Trustees Act 1949
           Labuan Companies Regulations 1990
           Labuan Foundations Regulations 2010
           Labuan Limited Partnerships and Limited Liability Partnerships 2010
           Labuan Trusts Regulations 2010
           Guidelines on Allowing a Person to be Appointed or to Act as a Trustee
               Under Subsection 69(2) of The Securities Commission Act 1993
           Guidelines on Unit Trust Funds
           Guidelines on the Minimum Contents Requirements for Trust Deeds




PEER REVIEW REPORT – PHASE 1: LEGAL AND REGULATORY FRAMEWORK – MALAYSIA © OECD 2011
102 – ANNEXES

Tax legislation

         Blanket Authorisation – Disclosure of Customer Information to DGIRB
         Income Tax Act 1967
         Income Tax (Request for Information) Rules 2009
         Income Tax (Request for Information) Rules 2011

Anti money laundering legislation

         Anti-Money Laundering and Anti-Terrorist Financing Act 2001
         Anti-Money Laundering and Counter Financing of Terrorism (AML/
            CFT)-Standard Guidelines
         Anti-Money Laundering and Counter Financing of Terrorism (AML/
            CFT) Sectoral Guidelines 1
         Anti-Money Laundering and Counter Financing of Terrorism (AML/
            CFT) Sectoral Guidelines 2
         Anti-Money Laundering and Counter Financing of Terrorism (AML/
            CFT) Sectoral Guidelines 3
         Anti-Money Laundering and Counter Financing of Terrorism (AML/
            CFT) Sectoral Guidelines 6
         Labuan AML/CFT – Standard Guidelines
         Labuan AML/CFT Sectoral Guidelines 1
         Labuan AML/CFT Sectoral Guidelines 2
         Labuan AML/CFT Sectoral Guidelines 3
         Guidelines on Prevention of Money Laundering & Terrorism Financing
            For Capital Market Intermediaries

Financial legislation

         Accountants Act 1967
         Banking and Financial Institutions Act 1989
         Capital Markets and Services Act 2007
         Capital Markets and Services (Amendment) Act 2010
         Development Financial Institutions Act 2002
         Insurance Act 1996


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                                                                                      ANNEXES – 103



           Islamic Banking Act 1983
            Kootu Funds (Prohibition) Act 1971
           Labuan Financial Services and Securities Act 2010
           Labuan Islamic Financial Services and Securities Act 2010
           Labuan Foundations Act 2010
           Labuan Trusts Act 1996
           Labuan Financial Services Authority Act 1996
           Money-Changing Act 1998
           Promotion of Investments Act 1986
           Payment Systems Act 2003
           Securities Commission Act 1993
           Securities Commission (Amendment) Act 1995
           Securities Commission (Amendment) Act 1998
           Securities Commission (Amendment) Act 2000
           Securities Commission (Amendment) Act 2003
           Securities Commission (Amendment) Act 2007
           Securities Commission (Amendment) Act 2010
           Takaful Act 1984
           Securities Industry (Central Depositories) Act 1991
           Securities Industry (Central Depositories) (Amendment) Act 1996
           Securities Industry (Central Depositories) (Amendment) Act 1998
           Securities Industry (Central Depositories) (Amendment) Act 1998
           Securities Industry (Central Depositories) (Amendment) Act 2000
           Securities Industry (Central Depositories) (Amendment) Act 2003

Other legislation

           Evidence Act 1950
            Exchange Control Act 1953
           High Court Order 39
           High Court Order 66




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for Tax Purposes
PEER REVIEWS, PHASE 1: MALAYSIA
The Global Forum on Transparency and Exchange of Information for Tax Purposes is the
multilateral framework within which work in the area of tax transparency and exchange of
information is carried out by over 100 jurisdictions which participate in the work of the Global
Forum on an equal footing.
The Global Forum is charged with in-depth monitoring and peer review of the implementation
of the standards of transparency and exchange of information for tax purposes. These
standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of
Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax
Convention on Income and on Capital and its commentary as updated in 2004, which has
been incorporated in the UN Model Tax Convention.
The standards provide for international exchange on request of foreseeably relevant
information for the administration or enforcement of the domestic tax laws of a requesting
party. “Fishing expeditions” are not authorised, but all foreseeably relevant information must
be provided, including bank information and information held by fiduciaries, regardless of the
existence of a domestic tax interest or the application of a dual criminality standard.
All members of the Global Forum, as well as jurisdictions identified by the Global Forum as
relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1
reviews assess the quality of a jurisdiction’s legal and regulatory framework for the exchange
of information, while Phase 2 reviews look at the practical implementation of that framework.
Some Global Forum members are undergoing combined – Phase 1 plus Phase 2 – reviews.
The ultimate goal is to help jurisdictions to effectively implement the international standards
of transparency and exchange of information for tax purposes.
All review reports are published once approved by the Global Forum and they thus represent
agreed Global Forum reports.
For more information on the work of the Global Forum on Transparency and Exchange of
Information for Tax Purposes, and for copies of the published review reports, please visit
www.oecd.org/tax/transparency and www.eoi-tax.org.




 Please cite this publication as:
 OECD (2011), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer
 Reviews: Malaysia 2011: Phase 1: Legal and Regulatory Framework, OECD Publishing.
 http://dx.doi.org/10.1787/9789264126657-en
 This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical
 databases. Visit www.oecd-ilibrary.org, and do not hesitate to contact us for more information.




                                                    ISBN 978-92-64-12664-0
                                                             23 2011 57 1 P       -:HSTCQE=VW[[YU:

				
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Description: The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 100 jurisdictions which participate in the work of the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the standards of transparency and exchange of information for tax purposes.  These standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004, which has been incorporated in the UN Model Tax Convention.  The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. “Fishing expeditions” are not authorised, but all foreseeably relevant information must be provided, including bank information and information held by fiduciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard. All members of the Global Forum, as well as jurisdictions identified by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdiction’s legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework.  Some Global Forum members are undergoing combined – Phase 1 plus Phase 2 – reviews. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once approved by the Global Forum and they thus represent agreed
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