Transfer pricing

The Transfer Pricing Guidelines issued by the tax authorities seek to provide taxpayers with information on the relevant existing domestic legislations, methodologies that can be used in determining arm's length price and administrative regulations including the type of records and documentation expected from taxpayers involved in transfer pricing arrangements.

Moreover, a specific transfer pricing provision was introduced to the tax legislations in the 2009 Budget to empower the tax authorities to make adjustments on the transfer prices in relation to related party transactions which are not transacted at arm's length. Following the introduction of the legislation, a Transfer Pricing Guidelines 2012 was issued by the tax authorities to provide taxpayers with information on the relevant existing domestic legislation, methodologies that can be used in determining arm's length price and administrative regulations including the type of records and documentations expected from taxpayers involved in transfer pricing arrangements.

Moreover, with effect from year of assessment 2014, companies have to make declaration in the annual tax return whether transfer pricing documentation has been prepared. More often than not, a transfer pricing audit on an unprepared taxpayer will result in transfer pricing adjustments which give rise to additional tax liability and penalty being imposed on the taxpayer concerned. Thus, taxpayers should demonstrate that reasonable care has been exercised in the context of reporting arm's length values for related party transactions in their tax returns.

Generally, in the event of a transfer pricing audit by the tax authorities, they would require transfer pricing documentation detailing the transfer pricing methodologies adopted and the documentary proof to support the transfer pricing policies to be made available to them for review. In practice, transfer pricing documentation produced following a transfer pricing study and review exercise normally serves as a first line of defence in the event of a transfer pricing audit by the tax authorities.

As consultants, we can reduce your exposure to the often-conflicting regimes that affect how much one should charge in cross-border, related-party sales of goods, services and intellectual property. We stand ready to assist and advise on transfer pricing issues in relation to transfer of goods, services and intangibles between related companies and associated companies within the country or involving cross-border transactions. We can also help you to document related-party transactions in formats required by the tax authorities.

Our transfer pricing services include:

  • Undertaking a transfer pricing study to determine whether the transfer prices in the related party transactions meet the arm's length standard for Malaysian transfer pricing purposes
  • Benchmarking exercise
  • Representing our clients to defend their transfer pricing policy and the financial result of a related party transaction in the event of a transfer pricing audit
  • International tax planning through effective transfer pricing techniques