Tax Corporate Governance Framework

The Inland Revenue Board of Malaysia (“IRB”) has issued an updated version of the Tax Corporate Governance Framework (“TCGF”), along with revised Guidelines and Frequently Asked Questions, effective 13 March 2025. The TCGF aims to encourage voluntary compliance and improve tax governance practices within organisations.

Scope of the TCGF

The framework applies to all taxes administered by the IRB, including:

Corporate Income Tax, Petroleum Income Tax, Real Property Gains Tax
Monthly Tax Deduction, Additional Monthly Deduction, Withholding Tax
Stamp Duty and Labuan Business Activity Tax
Compliance with Transfer Pricing regulations and Tax Incentive requirements

The Tax Control Framework (“TCF”)

The TCF is a systematic approach for identifying, managing, controlling, and reporting tax risks. It forms an integral part of an organisation’s broader governance and internal control system, supporting efficient, effective, and transparent tax compliance.

Objectives of the TCF

Early detection and disclosure of tax risks
Prevention and correction of tax errors
Establishment of a continuous learning and improvement cycle

Key elements of the TCGF

The IRB’s expectations align with the OECD’s six key TCF principles, which are:

Tax Strategy Established - Tax strategy must be documented and approved by the Board of Directors or senior management.
Applied Comprehensively - The TCF must cover all business transactions and be embedded in daily operations.
Responsibility Assigned - Clearly defined responsibilities for tax governance must be assigned across the organisation.
Governance Documented - Documented rules, controls, and reporting structures must exist to ensure tax compliance.
Testing Performed - Regular monitoring and independent testing of tax controls are required.
Assurance Provided - The TCF must provide assurance to stakeholders regarding the reliability of tax reporting.

Benefits of implementing TCGF

Organisations adopting the TCGF stand to gain in several areas:

Greater Certainty: Early identification and mitigation of tax risks.
Earlier Resolution of Tax Issues: Enables faster resolution due to better documentation and transparency.
Improved Transparency: Enhances credibility and supports accurate tax disclosures, particularly in cross-jurisdictional operations.

Tax Corporate Governance (“TCG”) Programme

The TCG Programme is open to all eligible organisations effective from 1 July 2024.

Organisations that fulfil the following criteria are invited to join the TCG Programme:

Large companies, public listed / Government Linked Companies / State Owned Enterprise (with turnover RM100 million and above);
Compliant taxpayers (return form submission and tax payment); and
Companies with established TCF;

However, the application excludes:

Investment holding companies; and
Dormant companies.

Upon successful assessment and verification of internal tax controls, the IRBM will issue a Confirmation Letter of Participation to the approved organisation. The time frame from the date of acceptance into the programme to the award of participation status is approximately eight (8) to twelve (12) months, with extensions permitted subject to IRBM’s approval.

The validity period of the awarded participation status is three (3) consecutive Years of Assessment, as specified in the Confirmation Letter, and is subject to the terms and conditions therein.

To ensure continued compliance with the TCGF standards, organisations are required to undergo a renewal process. A Letter of Intent must be submitted to the IRBM at least six (6) months prior to the expiry of the existing status. Renewal is contingent upon ongoing adherence to the TCGF and successful re-evaluation by the IRB.

Process for TCG Programme

Process	Details
Pre-assessment	Internal self-review using IRB’s TCF Principles & Elements checklists
Submission of documents	Submit participation form and TCF checklists to IRB (where the IRB will respond within 14 days)
Independent review	Submit full TCGF and Self-Review Report and engage a qualified independent reviewer
IRB assessment	Two-phase review (i.e. Adequacy & Effectiveness) which will be completed within 6 months of submission
Conclusion of assessment by IRB	IRB issues a Confirmation Letter of Participation upon successful assessment

Any organisations not meeting the requirements will be given 12 months to improve their TCF based on IRB’s guidance.

The TCGF complements existing compliance strategies and enhances tax governance, particularly among Large and Special Enterprises. Its adoption is encouraged to:

Promote responsible tax conduct
Facilitate risk-based compliance management by the IRB
Support sustainable and transparent business operations

The TCGF represents a shift towards proactive tax compliance and strategic engagement between taxpayers and the IRB. Organisations that invest in strong tax governance systems stand to benefit from improved certainty, reduced audit risks, and a stronger compliance profile.