Malaysia Transfer Pricing Archives

Indian Transfer Pricing Compliance Timelines for Assessment Year 2021-22

December 6, 2021

by admin with No Comment Malaysia Transfer Pricing

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Due to the hardships being faced by the taxpayer on account of COVID -19, the Central Board of Direct Taxes has revised the timelines of Transfer Pricing (TP) compliances for Assessment Year 2021-22, vide circulars No. 16 and 17 of 2021.

In the light of the above, given below is a summary of Transfer Pricing compliance dates for ease of reference.

S. No.	Nature of Compliance	Section	Rule	Form No.	Applicability	Original Due Date	Revised Due Date Due to COVID
1	Issuance of Accountant’s Report	92E	10E	3CEB	Refer Note 1	31-Oct-21[1]	31-Jan-22[2]
2	Transfer Pricing Documentation	92D	10D	NA	Refer Note 2	To be maintained on a contemporaneous basis for each assessment year before the filing of Form 3CEB[3]
3	Master File
3.a	Part A	92D(4)	10DA	3CEAA	Refer Note 3	30-Nov-21[4]	28-Feb-22[5]
3.b	Part B			3CEAA		30-Nov-21⁴	28-Feb-22⁵
3.c	Designation			3CEAB		31-Oct-21⁴	29-Jan-22⁵
4	Country-by-Country Report
4.a	Intimation	286(1)	10DB	3CEAC	Refer Note 4		In case the due date for filing falls on 30-Nov-21, then same may be furnished by 31-Dec-21[6]
4.b	County-by-Country Report	286(2)	10DB	3CEAD
4.c	Designation	286(4)	10DB	3CEAE

Note:

To be filed by every taxpayer (including non residents) who has entered into in international transaction or specified domestic transaction with its Associated Enterprise
Every taxpayer (including non residents) who has entered into an international transaction is required to maintain Transfer Pricing documentation.

In case the aggregate value of the international transaction is less than INR 1 crore, then the taxpayer is required only to maintain the details of international transactions undertaken along with the details of the benchmarking, justifying the arm’s length nature of the international transaction.

Form 3CEAA (Part A)- To be filed by every Constituent Entity[7] of an International Group[8], even if it has not undertaken an international transaction during the year;

Form 3CEAA (Part B)- To be filed by every Constituent Entity of an International group if the following conditions are satisfied:-

The consolidated revenue of the International Group during the an Accounting Year[9] exceeds INR 500 crores; and
The aggregate value of international transactions during the Accounting Year, as per the books of account, exceeds INR 50 crore; or
In respect of purchase, sale, transfer, lease or use of intangible property during the Accounting Year, as per the books of accounts, exceeds INR 10 crore

Form 3CEAB (Designation)- In case there are more than one Constituent Entities of an International Group who are required to file form 3CEAA, then any one Constituent Entity can be designated to file Form 3CEAA by filing Form 3CEAB

Form 3CEAC (Intimation)- To be filed by resident Constituent Entity which part of an International Group whose parent company is a non-resident and the group’s consolidated revenue during the preceding accounting year exceeds INR 6,400 crore. The said intimation has to be filed within 10 months from the end of the relevant Accounting Year.

Form 3CEAD (CbCR Report)- To be filed by resident parent company/ alternate reporting entity of an International Group, in case the consolidated revenue during the preceding accounting year exceeds INR 6,400 crore. To be filed 12 months from the end relevant Accounting Year.

From 3CEAE (Designation)- In case there are more than one constituent entities of a group who are required to file form 3CEAC, then any one entity of the constituent entity can be designated to file Form 3CEAC by filing Form 3CEAE.

[1] Section 92E read with sections 92F and 139 of the Income-tax Act, 1961 (the Act)

[2] Cir No. 17 issued by the CBDT on 9 Sep 2021

[3] Section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 (the Rules)

[4] Rule 10DA of the Rules

[5] Cir No. 17/2021 issued by the CBDT on 9 Sep 2021

[6] Cir No. 16/2021 issued by the CBDT on 29 Aug 2021

[7] Constituent Entity means,—

(i) any separate entity of an international group that is included in the consolidated financial statement of the said group for financial reporting purposes, or may be so included for the said purpose, if the equity share of any entity of the international group were to be listed on a stock exchange;

(ii) any such entity that is excluded from the consolidated financial statement of the international group solely on the basis of size or materiality; or

(iii) any permanent establishment of any separate business entity of the international group included in sub-clause (i) or sub-clause (ii), if such business unit prepares a separate financial statement for such permanent establishment for financial reporting, regulatory, tax reporting or internal management control purposes (Ref Section 286 of the Act)

[8] International Group means any group that includes,—

(i) two or more enterprises which are resident of different countries or territories; or

(ii) an enterprise, being a resident of one country or territory, which carries on any business through a permanent establishment in other countries or territories (Ref Section 286 of the Act)

[9] Accounting Year means,—

(i) a previous year, in a case where the parent entity is resident in India; or

(ii) an annual accounting period, with respect to which the parent entity of the International Group prepares its financial statements under any law for the time being in force or the applicable accounting standards of the country or territory of which such entity is resident, in any other case.

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For any assistance on Transfer Pricing and further information
on the above please contact us on info@hexatp.com
or you can Book an Appointment with us!

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Malaysian Transfer Pricing Audit Framework

August 14, 2021

by admin with No Comment Malaysia Transfer Pricing

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The Inland Revenue Board Malaysia (“IRBM”) issued Transfer Pricing Audit Framework 2019, effective from 15 December 2019, which replaced the Transfer Pricing Audit Framework dated 1 April 2013.

This Transfer Pricing Audit Framework is issued by IRBM to ensure that the transfer pricing audit is carried out in a fair, transparent and impartial manner. This outlines the rights and responsibilities of audit officers, taxpayers and tax agents in respect of a transfer pricing audit. Generally, this framework aims to:

assist audit officer to perform his duties more efficiently and effectively; and
assist taxpayer to fulfil his responsibilities.

What is a Transfer Pricing Audit?

A Transfer Pricing audit is a review of taxpayer’s business records and financial affairs to ascertain the application of the rules on controlled transactions. The examination is to ensure that transfer pricing rules are being applied in accordance with the methods and manners provided in the Act, Rules and the Transfer Pricing Guidelines 2012, as well as to comply with the IRBM’s administrative requirements on the types of records and documentations to be maintained. It also serves to ensure that the arm’s length principle is being adopted, and the fair share of tax is being reported, calculated and paid in accordance with the tax laws and regulations. IRBM carries out two (2) types of transfer pricing audits, namely

Transfer pricing desk audit-A desk audit is conducted at the IRBM’s office. It involves enforcement of compliance on transfer pricing issues or adjustments in income and taxes that can be resolved by correspondence. Taxpayer may be called for an interview at the IRBM’s office if further information is needed.

Transfer pricing field audit– A field audit is carried out either at the taxpayer’s premises, the IRBM’s office or any places the taxpayer and IRBM have agreed upon.

Years of assessment covered

A tax audit is carried out comprehensively covering between three (3) to six (6) years of assessment depending on the transfer pricing issues which have been determined. However, the years of assessment covered to raise the assessment may be extended to seven (7) prior years of assessment depending on the audit issues found

Selection Of Cases

The primary basis for a transfer pricing audit case selection is based on the amount of controlled transactions made by the company with the significant transaction value before any other risk analysis is performed.

The right and duties of the taxpayer and the manner of conducting the Transfer Pricing audit is also provided in detail in the Transfer Pricing Audit Framework.

Concluding remarks

The Malaysian Finance Act 2020 introduced, several legislative changes to the Malaysian Income Tax Act 1967 in respect of transfer pricing. Particularly, the time to submit the documentation has been reduced to 14 days and a penalty provision has been introduced.

Effective 1 January 2021, taxpayers who fail to furnish the Transfer Pricing Documentation upon the IRBM’s request will be subject to a fine ranging from RM 20,000 to RM 100,000 and / or imprisonment upto six months. The IRBM has also revised the Transfer Pricing Guidelines 2012 to reduce the time given to taxpayers to furnish their Transfer Pricing Documentation from 30 days to 14 days. Thus substantially reducing the time given to file the Transfer Pricing Documentation.

How can Hexa TP help

As a result of the introduction of the penalty for failure to furnish Transfer Pricing Documentation taxpayers should expect increased transfer pricing audit activity and intensified scrutiny on intercompany transactions. Now with the revised guidelines the time to submit the Transfer Pricing Documentation has been further reduced to 14 days from 30 days. In this regard, corporates may have to ensure Transfer Pricing Documentation compliance with a robust transfer pricing policies and documentation to withstand audit and scrutiny.

We have a multi-faceted team of transfer pricing practitioners who are able to provide strategic advice and assistance in respect of the following:

Transfer Pricing Support– we are professionals with over 15 years individually and 50 years cumulative experience in Global Transfer pricing practices. We can help you & your client servicing teams to understand the nuances of transfer pricing compliance and benchmarking practices.
Transfer Pricing Planning – we are well positioned to support you in developing a sustainable planning and formulation of transfer pricing policies for your clients;
Transfer Pricing Documentation Preparation and Defence – we are capable to assist you with the requisite Transfer Pricing Documentation that is compliant and defensible; and
Transfer Pricing Audit Support – in times of audit, we are well placed to support you and your team.
We render assistance in reviewing any ‘Existing Transfer Pricing Policy’

For any assistance and further information on the above Transfer Pricing Audit or penalty provisions please contact us on md@hexatp.com or bg@hexatp.com.

For any assistance and further information on the above
penalty provisions please contact us on info@hexatp.com
or you can Book an Appointment with us!

Malaysian Transfer Pricing Documentation requirements

March 22, 2021

by admin with No Comment Malaysia Transfer Pricing

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Malaysian Transfer Pricing Documentation requirements are consistent with the requirements underAction 13 of the OECD Base Erosion and Profit Shifting (“BEPS”) Plan.

Documentation requirements

The following are required to be prepared:

– Master file: Provides an overview of the multinational group’s business, value drivers, intangibles, financing arrangements, and supply chain. The master file is only required if (i) the Group is headquartered in Malaysia and has consolidated revenue exceeding RM3 billion; and / or (ii) the Group is required to prepare a master file in any other location.

– Local file: Local transfer pricing documentation which substantiates the arm’s length nature of intercompany transactions.

– Country-by-country report (“CBCR”): The Income Tax (Country-by-Country Reporting) Rules 2016 apply to the following:

– The total consolidated group revenue in the financial year preceding the first reporting financial year is at least RM3 Billion; and

– any of the constituent entities – i) is an ultimate holding entity which is incorporated, registered or established or deemed to be incorporated, registered
or established under the Companies Act 2016 [Act 777], or under any written law and resident in Malaysia; ii) is incorporated, registered or established or deemed to be incorporated, registered or established under the Companies Act 2016 , or under any written law or under the laws of a territory outside Malaysia and
resident in Malaysia; iii) is a surrogate holding entity which is incorporated, registered or established or deemed to be incorporated, registered or established
under the Companies Act 2016 , or under any written law and resident in Malaysia; or iv) is a permanent establishment in Malaysia.

Local Transfer Pricing Documentation

Local transfer pricing documentation should be in place by the time of filing of the tax return (seven months after the Financial Year end). However, it does not need to be submitted along with the annual income tax return. The documentation must be made available to the IRB within 14 days upon request from the Malaysian Inland Revenue Board. It is required to keep the documentation in
the administration for a period of 7 years.

The Transfer pricing documentation should include records and documents describing:

– The structure of the organization.

– The nature of the business or industry and market conditions in which the company
operates.

– The description of the controlled transactions.

– The business strategies, assumptions and pricing policies of the corporates and their controlled transactions.

– Functions and risk analysis of the uncontrolled transaction.

– Selection and application of the transfer pricing method.

– Documents used in developing the transfer pricing analysis.

– Comparability analysis.

– Any other information, data or document considered relevant by the person to determine an arm’s-length price.

All relevant documentation must be provided in Bahasa Malaysia or English.

How can HexaTP help

As a result of the introduction of the penalty for failure to furnish TPD as well as the power to impose a surcharge on any transfer pricing adjustment made, taxpayers should expect increased transfer pricing audit activity and intensified scrutiny on intercompany transactions. In this regard, corporates may have to ensure TPD compliance with a robust transfer pricing policies and documentation to withstand audit and scrutiny.

We have a multi-faceted team of transfer pricing practitioners who are able to provide strategic advice and assistance in respect of the following:

– Transfer Pricing Training: We are professionals with over 15 years individually and 50 years cumulative experience in Global Transfer pricing practices. We can help you train your client servicing teams to understand the nuances of transfer pricing compliance and
benchmarking practices.

– Transfer Pricing Planning: We are well positioned to support you in developing a sustainable planning and formulation of transfer pricing policies for your clients;

– TPD Preparation and Defence: We are capable to assist you with the requisite TPD that is compliant and defensible; and;

– Transfer Pricing Audit Support: in times of audit, we are well placed to support you and your team.

For any assistance on Transfer Pricing and further information
on the above please contact us on info@hexatp.com
or you can Book an Appointment with us!

Recent Amendments and Penalty provisions in the Malaysian Transfer Pricing

March 22, 2021

by admin with No Comment Malaysia Transfer Pricing

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The Malaysian Finance Act 2020 introduced, several legislative changes to the Malaysian Income Tax Act 1967 (“IT Act”) in respect of transfer pricing. Particularly, the time to submit the documentation has been reduced to 14 days and a penalty provision has been introduced.

Effective 1 January 2021, taxpayers who fail to furnish the transfer pricing documentation (“TPD”) upon the Malaysian Inland Revenue Board’s (“IRBM’s”) request will be subject to a fine ranging from RM 20,000 to RM 100,000 and / or imprisonment upto six months. The IRBM has also revised the Transfer Pricing Guidelines 2012 to reduce the time given to taxpayers to furnish their TPD from 30 days to 14 days.

Key Takeaways

With the recent introduction of the penalty provisions, strict enforcement measures have been adopted by the IRBM against the backdrop of increasing tax and transfer pricing audit activity. In light of the short time frame of 14 days to furnish TPD, taxpayers will need to be aware that it is important to prepare contemporaneous TPD well in time. Further, the companies that already have a TPD, it might be prudent to review them and ensure that they are aligned with the IRBM’s requirements and that
their transfer pricing policies are defensible in the event of an audit.

Introduction of the Penalty

Introduction of a penalty for the failure to furnish TPD upon the IRBM’s request as per section 113B of the IT Act. The taxpayers are not required to file their TPD along with their annual income tax returns filing. The taxpayers have to furnish their TPD for any year of assessment upon the IRBM’s request. With the introduction of the TPD Penalty, any taxpayer who fails to furnish their TPD to the IRBM within the 14 days period may be liable to a fine ranging from RM 20,000 to RM 100,000 and/or imprisonment upto six months.

The applicable time frames to submit the TPD requested is currently as follows:

For transfer pricing audit cases commenced before 1 January 2021	Within 30 days from the date of the IRBM’s written notice of request
For transfer pricing audit cases commenced on or after 1 January 2021	Within 14 days from the date of the IRBM’s written notice of request

The introduction of the TPD Penalty is significant as it provides the IRBM with the power to penalise a taxpayer without having to undergo the whole audit process, given that the taxpayer may be penalised solely for not being able to furnish TPD for the relevant year of assessment in time.

Imposition of Surcharge

Introduction of a provision which allows the Director General of Inland Revenue (DGIR) to impose a surcharge not exceeding 5% on any transfer pricing adjustment made, regardless of whether the adjustment resulted in any additional tax payable (section 140A(3C) of the IT Act).

Insertion of provisions legislating the existing authority for the DGIR to disregard and make adjustments to any structure adopted in a controlled transaction so the transaction may be carried out at arm’s length, having regard to economic and commercial reality (sections 140A(3A) and 140A(3B) of the IT Act).

How can HexaTP help

We have a multi-faceted team of transfer pricing practitioners who are able to provide strategic advice and assistance in respect of the following:

– Transfer Pricing Planning: We are well positioned to support you in developing a sustainable planning and formulation of transfer pricing policies for your clients;

– TPD Preparation and Defence: We are capable to assist you with the requisite TPD that is compliant and defensible; and;

– Transfer Pricing Audit Support: in times of audit, we are well placed to support you and your team.

For any assistance and further information on the above
penalty provisions please contact us on info@hexatp.com
or you can Book an Appointment with us!

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