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.
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 firstname.lastname@example.org or email@example.com.
[/et_pb_text][/et_pb_column][et_pb_column type=”1_5″ _builder_version=”4.8.2″ _module_preset=”default”][/et_pb_column][/et_pb_row][et_pb_row _builder_version=”4.8.2″ _module_preset=”default”][et_pb_column type=”4_4″ _builder_version=”4.8.2″ _module_preset=”default”][/et_pb_column][/et_pb_row][et_pb_row column_structure=”2_3,1_3″ use_custom_gutter=”on” gutter_width=”1″ _builder_version=”4.8.2″ background_color=”#FFFFFF” custom_margin=”-125px|auto|26px|auto|false|false” custom_margin_tablet=”||0px|” custom_margin_phone=”” custom_margin_last_edited=”on|tablet” custom_padding=”||48px||false|false” scroll_vertical_motion_enable=”on” scroll_vertical_motion=”0|50|50|100|0|0|-1″ motion_trigger_start=”top” border_radii=”on|10px|10px|10px|10px” border_width_top=”10px” border_color_top=”#bba486″ box_shadow_style=”preset3″ box_shadow_color=”rgba(187,164,134,0.5)” locked=”off” background__hover_enabled=”on|hover” background_color__hover=”#FFFFFF” background_enable_color__hover=”on”][et_pb_column type=”2_3″ _builder_version=”3.25″ custom_padding=”|||” parallax__hover=”off” parallax_method__hover=”on” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.8.2″ _module_preset=”default” text_font=”Trirong||||||||” text_text_color=”#424242″ text_font_size=”16px” custom_margin=”24px|||||” animation_style=”slide” animation_direction=”top” hover_enabled=”0″ sticky_enabled=”0″]
For any assistance and further information on the above
penalty provisions please contact us on firstname.lastname@example.org
or you can Book an Appointment with us!