Transfer pricing study and review
Is your business exposed to Transfer Pricing challenges?
Transfer Pricing (TP) refers to the pricing of transactions involving the sale or purchase of goods, provision of services, use of intangibles, or intercompany financing between associated persons within the same group.
Under Malaysian Transfer Pricing Rules, all related-party transactions must be conducted in accordance with the Arm’s Length Principle (ALP)—ensuring that the pricing reflects what independent parties would have agreed to under similar circumstances. The primary challenge lies in accurately determining these arm’s length prices and being prepared to justify them under scrutiny from tax authorities. Internally, businesses must also manage transfer pricing risks effectively, particularly those arising from tax planning strategies and compliance requirements.
Malaysia’s Transfer Pricing Regulations
Businesses in Malaysia are subject to strict transfer pricing compliance obligations, such as the preparation of Contemporaneous Transfer Pricing Documentation (CTPD) annually. Businesses are required to prepare CTPD in accordance with the following key requirements:
1.“full” Contemporaneous Transfer Pricing Documentation Threshold
| No | Threshold |
|---|---|
| 1 | Annual gross business income ≥ RM30 million and engages in cross-border controlled transaction ≥ RM10 million |
| 2 | Receives or provides controlled financial assistance ≥ RM50 million annually, except for financial institutions |
*A person who enters a controlled transaction but does not fall under the threshold is eligible to prepare a minimum CTPD
2.Transfer pricing Updated legislation
| No | Legislation | Implications |
|---|---|---|
| 1 | Section 113B: Failure to furnish Contemporaneous Transfer Pricing Documentation | A Penalty of between RM20,000 and RM100,000 for failure to submit CTPD |
| 2 | Section 140A(3C): Surcharge on the transfer pricing adjustments | A surcharge of up to 5% on the amount of adjustments for audits commencing on/after 1 January 2021 |
| 3 | Section 140A(3A) & (3B): The power to disregard a structure in a regulated transaction and make TP changes to a structure it deems appropriate | The Director General of Inland Revenue has the authority to adjust transfer prices when the economic substance of a related-party transaction does not align with its legal form, or when the transaction deviates from those typically carried out between independent parties under comparable conditions. |
Non-compliance with TP regulations may lead to significant tax adjustments, penalties, and reputational risks. At ECOVIS Malaysia, our TP professionals assist businesses in developing robust transfer pricing policies, preparing compliant documentation, and managing cross-border tax risks efficiently.
Our Transfer Pricing Services Include:
- Transfer Pricing Documentation Preparation
- Transfer Pricing Review
- Transfer Pricing Dispute Resolution and Mitigation