Transfer Pricing in Malaysia
In Malaysia, the transfer pricing laws and policies are mainly based on the Transfer Pricing Guidelines for Multinational Enterprises & Tax Administrations 2010. This is from the Organization for Economic Co-Operation & Development (OECD) and although based on it, there are some variations to the transfer pricing guidelines in Malaysia and some parts may require adherence to the Income Tax Act 1967 and Inland Revenue Board of Malaysia’s procedures in addition to domestic circumstances which may be taken into consideration.
Transfer pricing is a description of the intercompany pricing arrangements that take place for the transfer of goods, services and intangibles between the associated persons involved. Transfer pricing should ideally not be different from the prevailing market price that would be reflected in a transaction between the independent persons involved.
Recently, it was announced by the Ministry of Finance to the professional bodies in Malaysia that the effective implementation of the thin capitalization rules were further deferred until the end of December 2015. And on the 1st of January 2017, Malaysia introduced what is known as a country-by-country reporting structure requirement that was modelled on 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
Starting from the 2014 year of assessment, it became mandatory for all companies to confirm their transfer pricing documentation availability to support any related party transactions that were needed. This meant that all taxpayers who had any related party transactions were required to prepare and update their transfer pricing documentation on an annual basis in compliance with the tax return filing deadline.
All transfer pricing documentation needed to be prepared in accordance with the Transfer Pricing Guidelines 2012 and the Transfer Pricing Rules 2012.
How 3E Accounting Can Help
To avoid the risks that come with failing to comply with the Transfer Pricing Guidelines in Malaysia, it is imperative to enlist the services of an experience professional agency who will be able to guide you through all the regulatory requirements efficiently.
Our team of experienced professionals are here to assist taxpayers every step of the way to ensure all their transfer pricing requirement needs are met. To find out more about how 3E Accounting can help, get in touch with us via our website or more information or call us to set up a face to face appointment and consultation session with our affiliated transfer pricing partners.