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Transfer Pricing for Malaysian Companies

What is Transfer Pricing?

Transfer Pricing is the pricing of goods, services, and intangibles between related parties. The arm’s length principle should be adopted for transfer pricing between related parties. Taxpayers should prepare and keep contemporaneous transfer pricing documentation to show that their related party transactions are conducted at arm’s length.

When is Transfer Pricing Documentation Essential?

The compliance burden targets taxpayers to prepare “contemporaneous” transfer pricing documentation annually under the Malaysian Transfer Pricing Guidelines.

Taxpayers are required to prepare transfer pricing documentation if they have:

  • Gross income exceeding RM25 million; and
  • The total amount of related party transactions exceeding RM15 million or
  • Provision of financial assistance exceeding RM50 million (not applicable for financial institutions).

Transfer Pricing Services We Provide

Transfer Pricing Documentation

Preparation and advice on Master File, Local File, Country-by-Country Report to ensure compliance with local regulations.

Adhere to Malaysia employment regulations and compliance

Price-setting Analysis (benchmarking analysis)

Undertake benchmarking analysis to recommend arm’s length pricing. We support multiple databases including – Osiris/ Orbis/ RoyaltyStat/ Bloomberg.

On-Site HR Team

Intra-group Services Documentation

Analyse and advise the most appropriate methodology for charging the related entities, allocation methodology and supporting documentation to be maintained.

Fund Raising

Value-chain Analysis

Realignment of taxing rights with the economic substance is the norm. The value-chain analysis aids in such realignment keeping in view the intensity of functions and capacity to assume risks.

Copies of education certificates

Intellectual Property (IP) Valuation

Valuation of intellectual property for the purpose of migration between related entities, determining the terms & conditions and pricing of licensing arrangements.

Share Valuation

Operational Transfer Pricing

Analysis of the proposed/ existing related party transactions and preparing the Transfer Pricing Policy Document covering the pricing, data input, documentation and reporting of the transaction for review by stakeholders.

Duly filled application form

Drafting of Inter-company Agreements

Drafting inter-company agreements covering the intention of the parties at the time in relation to the division of responsibilities, obligations and rights, assumption of identified risks and pricing arrangements.

Reverse Take Over

Tax Authority Audit Defence

Assist in preparation of appropriate response to defend the outcome of related party transactions and discuss the response with the Tax Authorities.

Our Approach

1Understand the Business and the Functional Profile
2Assess the potential Risks assumed vis-à-vis the related party transactions
3Undertake Benchmarking of related party transactions
4Assess the Audit Risk
5Prepare Transfer Pricing Documentation to manage Tax Authority challenge

Manage your transfer pricing documentation smartly with us.Talk to our Experts

Why WeCorporate?

  • No Hidden Charges

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Other Related Services in Malaysia

  • Review of financial statements
  • Taxation

FAQs

What is the arm's length principle in transfer pricing?

The arm’s-length principle of transfer pricing states that the amount charged by one related party to another for a given product must be the same as if the parties were not related. An arm’s-length price for a transaction is therefore what the price of that transaction would be in an open market scenario.

What is the deadline to prepare Transfer Pricing Documentation in Malaysia?

Transfer Pricing Documentation is required to be prepared by the due date for filing the annual tax return.

What is an example of transfer pricing in Malaysia?

Company A in Malaysia is a subsidiary of Company X in Singapore. Company A undertakes manufacturing of products for Company X. Company A purchases raw material, arranges for labour and manufactures products as per specifications provided by Company X.

What is the price at which the manufactured products should be sold by Company A to Company X? From Transfer Pricing perspective, Company A should sell the manufactured products to Company X at a price at which it would have sold the same products to unrelated customers.

Transfer Pricing analysis ensures that the pricing methodology followed by the companies adheres to the principle mentioned above and is in conformity with the Transfer Pricing Regulations. This will assist the companies in managing their audit risk effectively.

What are the penalties for not furnishing contemporaneous transfer pricing documentation?

Failure to submit TP documentation shall lead to the following consequences

  • A fine of RM20,000 to RM 100,000 or
  • imprisonment for terms not exceeding six months or both

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