Recently, the Inland Revenue Board of Malaysia (IRBM) issued the
Restriction on Deductibility of Interest Rules (ESR) which are
intended to prevent base erosion through the use of excessive
interest expense or any payments which are economically equivalent
to interest via controlled financial assistance.
The ESR addresses the following main points:
Timing
- The ESR came into effect on July 1,
2019 under Section 140C of the Income Tax Act. As such, companies
with a financial year beginning July 1, 2019 are the first to be
impacted by the ESR.
Who is Affected
- The ESR applies to a party having
annual expenses from any cross-border financial assistance granted
in a controlled transaction in excess of MYR 500,000.
