In Malaysia, transfer pricing regulations are primarily based on the Transfer Pricing Guidelines for Multinational Enterprises & Tax Administrations 2010 issued by the Organization for Economic Co-Operation & Development (OECD). While these guidelines serve as a foundation, there are certain modifications and additional requirements specified by the Income Tax Act 1967 and the Inland Revenue Board of Malaysia (IRBM), taking into account domestic circumstances.

Transfer pricing refers to the pricing arrangements between associated entities for the transfer of goods, services, and intangibles. The aim is to align these prices with market rates that would apply in transactions between unrelated parties.

Recently, the Ministry of Finance informed professional bodies in Malaysia about the postponement of the effective implementation of thin capitalization rules until the end of December 2015. Furthermore, starting from January 1, 2017, Malaysia adopted a country-by-country reporting structure, following the guidelines outlined in Action 13 of the OECD’s Action Plan on Base Erosion & Profit Shifting.

What Implications or Significance Does This New Development Mean for Transfer Pricing Laws in Malaysia

With the introduction of the country-by-country reporting system which took effect from the 1st of January 2017, multinational corporations and groups will be required to adhere to the following:

• MYR3 billion is the total consolidated group revenue required in the financial year that precedes the reporting financial year.

• The ultimate holding company must be incorporated under the Companies Act 1965 or under any written law and be a resident in Malaysia

• Constituent entities must be incorporated or registered under the Companies Act 1965, under any written laws or under the laws of a territory outside Malaysia. The entities would also need to be a resident in Malaysia

Transfer Pricing Compliance & Tax Returns

Since the 2014 year of assessment, it has been compulsory for all companies to verify the availability of their transfer pricing documentation to substantiate any related party transactions. This requirement mandates taxpayers engaged in related party transactions to annually prepare and update their transfer pricing documentation in line with the tax return filing deadline.

The preparation of transfer pricing documentation must adhere to the Transfer Pricing Guidelines 2012 and the Transfer Pricing Rules 2012.

We Will Assist You

To mitigate the risks associated with non-compliance of Transfer Pricing Guidelines in Malaysia, it is crucial to engage the services of a seasoned professional firm. Such a firm can expertly navigate through all regulatory obligations.

Our team of seasoned professionals is dedicated to guiding taxpayers through every aspect of their transfer pricing requirements. For detailed insights on how Low TH & Co can support your needs, visit our website or contact us to schedule a face-to-face consultation with our affiliated transfer pricing experts.