Updated Guidelines to the TCG Framework and FAQs

Updated Guidelines to the Tax Corporate Governance (TCG) Framework and Frequently Asked Questions (FAQs)

As highlighted in an earlier tax alert, the IRB had published on its website the new TCG Framework and the Guidelines to the TCG Framework (Guidelines) dated 11 April 2022 (see Tax Alert No. 8/2022). The TCG Framework provides an overview of the IRB’s expectations on the application of TCG principles within an organizational setting. Broadly, the TCG encompasses the rules, relationships, systems and processes under which authority is exercised and controlled within an organization in relation to tax matters. The Guidelines were issued to supplement the TCG Framework.

Following the above, the IRB has published on its website the updated Guidelines and an FAQs document, dated 27 July 2022.

Some of the key changes to the Guidelines are outlined below. 

• The updated Guidelines clarify that an organization that has been awarded participation status and intends to renew its participation status must inform the IRB accordingly within 12 months before the status expires.
• The updated Guidelines elaborate on the TCG review process by an organization, an independent reviewer, and the IRB respectively.

Some of the key points in the FAQs document are outlined below. 

• Items 4 to 6 

The FAQs clarify that the TCG programme will be implemented in two phases.

First phase (pilot project):

-      It began in June 2022 and is expected to end in June 2024

-      Selected organizations will receive an invitation from the IRB to participate in the TCG programme. Other interested organizations (who are not invited to participate) may contact the IRB via tcg@hasil.gov.my to convey their interest or obtain further information on the TCG programme. 

Second phase (post-pilot)

-       The TCG programme will be open to all organizations in the second phase

• Item 9

There is no fee charged to participate in the TCG programme.

• Item 14

Expenses incurred to implement the TCG are capital in nature and will not be tax-deductible under Section 33(1) of the ITA.

• Item 15

Organizations that do not participate in the TCG programme will not be targeted for an audit. Cases selected for tax audit purposes will be based on risk assessments and the existing tax audit framework.

• Item 16

Requests to withdraw from the TCG programme are to be made in writing. The IRB will assess the reasons for the withdrawal and factor this into the taxpayer’s compliance risk profile.

• Item 20

Organizations that are under investigation by the IRB may participate in the TCG programme only after the relevant issues are resolved. A grace period may apply.

• Items 24 and 25
  

Organizations are required to publish their tax policy and/or tax strategy on any medium that is publicly accessible (e.g., website and annual report). Failure to do so will not result in any penalties, but may impact the IRB’s review and assessment of the organization’s TCG.