With the increasing collaboration amongst tax authorities across borders and intensified transfer pricing audit activities by the local tax authority, business organisations are now subject to higher transfer pricing risk and scrutiny.

In the Malaysia context, companies are now required to make declaration in the annual tax return whether they are required to prepare transfer pricing documentation according to the requirement in the Transfer Pricing Guidelines and Transfer Pricing Rules in Malaysia. Disclosure of related party transactions in the tax return form is also mandatory. 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.

Further, Malaysia has also introduced the Country-by-Country Reporting [“CbCR”] rules which took effect from 1^st January 2017, as part of the three-tiered approach to transfer pricing documentation to enhance the transparency for tax administration purposes. The three-tiered standardised approach to transfer pricing documentations is represented by Master File, Local File and CbCR.

As part of the compliance requirement, Lembaga Hasil Dalam Negeri would request for 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 during a tax audit or transfer pricing audit. In practice, the transfer pricing documentation would normally serve as the first line of defence in those instances.

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, financial assistance and intellectual property. We stand ready to assist and advise on transfer pricing issues and also help you to comply with the Malaysian transfer pricing rules and regulations.

Our transfer pricing services include:

• Preparation of a transfer pricing documentation
• 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
• Assisting our clients to comply with the CbCR rules
• International and local tax planning through effective transfer pricing techniques