{"id":8569,"date":"2023-11-08T15:09:02","date_gmt":"2023-11-08T07:09:02","guid":{"rendered":"https:\/\/www.boardroomlimited.com\/my\/?p=8569"},"modified":"2024-10-09T13:47:26","modified_gmt":"2024-10-09T05:47:26","slug":"transfer-pricing-malaysia","status":"publish","type":"post","link":"https:\/\/www.boardroomlimited.com\/my\/2023\/11\/08\/transfer-pricing-malaysia\/","title":{"rendered":"How to navigate transfer pricing in Malaysia: a guide for companies"},"content":{"rendered":"

[vc_row full_width=”stretch_row” css_animation=”fadeInLeft” el_class=”business-insights-content”][vc_column][vc_row_inner][vc_column_inner][vc_column_text el_class=”m-b-30″]For companies operating across multiple geographies in Asia, regulatory compliance stands as a strategic cornerstone for companies pursuing successful and sustainable growth. Therefore, keeping up to date with the local regulations in each region you operate is important. This includes learning about the transfer pricing rules as they apply to intercompany transactions.<\/p>\n

In this article, we consult Cheong Woon Chee, Head of Tax Services for BoardRoom Malaysia, for an overview of transfer pricing in Malaysia, recent updates to reporting requirements and what businesses can do to ensure strong compliance.[\/vc_column_text][vc_custom_heading text=”What transfer pricing is” use_theme_fonts=”yes” el_class=”m-b-20″][vc_separator color=”custom” align=”align_left” border_width=”3″ el_width=”10″ accent_color=”#4f9e45″ el_class=”m-b-20″][vc_column_text el_class=”m-t-20″]Transfer pricing is the setting of prices for the transfer of goods, services and intellectual property between associated parties.<\/p>\n

In Malaysia, associated parties include entities within a multinational enterprise group, such as subsidiary companies and branches.<\/p>\n

\u201cThese are parties who control one another or are under the common control of another party, either directly or indirectly,\u201d Woon Chee says. Transfers between these entities are referred to as related party transactions.<\/p>\n

\u201cTransfer pricing exists because every country has a different tax rate,\u201d Woon Chee explains. \u201cFor example, in Malaysia, our corporate tax rate is 24%, but in Singapore it\u2019s 17%. Considering this huge difference, companies can use transfer pricing to save on tax.\u201d<\/p>\n

In addition, transfer pricing can support transparent transactions between related parties. However, a potential drawback of this transparency is that it may cause conflict internally.<\/p>\n

\u201cIf the price is higher or lower than the market price, one of the entities may feel their interests are being sacrificed and deem it unjustifiable,\u201d Woon Chee says.[\/vc_column_text][vc_single_image image=”8584″ img_size=”full” alignment=”center” alt=”AGM Logistics” css=”.vc_custom_1699275735536{padding-right: 30px !important;padding-bottom: 30px !important;padding-left: 0px !important;}” el_class=”m-t-30″][\/vc_column_inner][\/vc_row_inner][vc_row_inner][vc_column_inner][vc_custom_heading text=”An overview of transfer pricing guidelines in Malaysia” use_theme_fonts=”yes” el_class=”m-t-10 m-b-20″][vc_separator color=”custom” align=”align_left” border_width=”3″ el_width=”10″ accent_color=”#4f9e45″ el_class=”m-b-20″][vc_column_text el_class=”m-t-20″]Transfer pricing is strictly regulated by the Inland Revenue Board of Malaysia (IRBM). Companies must abide by the Malaysian Transfer Pricing Guidelines, which provide detailed standards and rules on how businesses should handle transfer pricing in accordance with Section 140A of the Income Tax Act 1967 and the Transfer Pricing Rules 2023.[\/vc_column_text][vc_custom_heading text=”The arm\u2019s length principle” font_container=”tag:h3|text_align:left” use_theme_fonts=”yes” el_class=”m-b-20 m-t-30″][vc_column_text el_class=”m-t-20″]Central to these regulations is the arm\u2019s length principle, which dictates that transactions between related entities should be priced as if they were conducted between independent parties.<\/p>\n

\u201cIdeally, the transfer price should not be very different from the market price,\u201d Woon Chee says. \u201cSo companies must do benchmarking to understand whether the mark-up they apply as part of their transfer pricing is at the median range for their industry.<\/p>\n

\u201cIf your pricing is too high or low, you will need to justify this when you make the transfer to your related party.\u201d[\/vc_column_text][vc_single_image image=”8585″ img_size=”full” alignment=”center” alt=”AGM Logistics” css=”.vc_custom_1699275747700{padding-right: 30px !important;padding-bottom: 30px !important;padding-left: 0px !important;}” el_class=”m-t-30″][\/vc_column_inner][\/vc_row_inner][vc_custom_heading text=”Transfer pricing documentation requirements” use_theme_fonts=”yes” el_class=”m-b-20″][vc_separator color=”custom” align=”align_left” border_width=”3″ el_width=”10″ accent_color=”#4f9e45″ el_class=”m-b-20″][vc_row_inner][vc_column_inner][vc_column_text]Malaysian regulations require taxpayers to prepare and keep transfer pricing documentation if their company:<\/strong><\/p>\n