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