AMCHAM Briefing: Pillar 2 and Malaysia’s Tax Incentive Landscape

On 5 January 2026, the U.S. Department of the Treasury issued a statement announcing an agreement to exempt U.S.-headquartered companies from certain aspects of the OECD Pillar Two global tax framework.

In response to these developments, AMCHAM organized a virtual briefing on 24 February featuring expert speakers from Ernst & Young and Wong & Partners to unpack the implications of Pillar Two, the 5 January Side-by-Side (SbS) agreement, and the evolving considerations for Malaysia and U.S.-parented multinational enterprises (MNEs).

Krystal Ng and Anlynn Ng of Wong & Partners opened the session with an overview of Pillar Two globally and in Malaysia, highlighting the global minimum effective tax rate (ETR) of 15% faced by MNEs and how Malaysia has aligned with this framework by introducing the Qualified Domestic Minimum Top-Up Tax (QDMTT). A detailed overview was also given on the SbS agreement, which is an OECD response designed to preserve the effectiveness of the Substance-Based Tax Incentives Safe Harbour (SBTI). Under the New Incentive Framework (NIF), the Investment Tax Allowance (ITA), being capital expenditure-based, has a stronger likelihood of qualifying as a Qualified Tax Incentives (QTI) and benefiting from SBTI protection.

Speakers from Ernst & Young, Lauren Tanenbaum, Bas Sijmons, and Cliff Tegel, provided further insights into the Pillar Two SbS package, qualification criteria for the Safe Harbor, key implementation timelines, and strategic considerations for MNEs. For US-headquartered multinationals, this is a major advantage, as starting in 2026, they can opt into the safe harbor, which stops other countries from imposing extra top-up taxes on their worldwide profits. This fits well with US rules like Global Intangible Low-Taxed Income (GILTI) and foreign tax credits, unlike non-US parent companies that remain vulnerable to those foreign top-up taxes.

We thank all our speakers for delivering an informative session and for addressing members’ questions.