Malaysia: Malaysia Transfer Pricing Guidelines 2024

IRBM has revised the threshold for preparing full Contemporaneous Transfer Pricing Documentation (CTPD) as follows:

• For a person carrying on a business, gross business income more than RM30 million and cross border controlled transactions totalling RM10 million and more annually; or
• Where a person provides or receives controlled financial assistance more than RM50 million annually.

To ease the compliance burden, the following persons are not required to prepare a CTPD:

1. individuals not carrying on a business;
2. individuals carrying on a business (including partnerships) who only engage in domestic controlled transactions;
3. person who entered into controlled transactions with a total amounting to not more than RM1 million; or
4. person who entered solely into domestic controlled transactions with another person where both parties –

1. do not enjoy tax incentives;
2. are taxed at the same headline tax rate; or
3. do not suffer losses for two consecutive years prior to the controlled transactions.

However, persons who are exempted above must still comply with the arm’s length principle for all controlled transactions entered into and must ensure to keep all relevant documents that are related to the controlled transactions, including documentation to support and prove the determination of the arm’s length price.

TPR 2023 defines the arm’s length range as “a range of figures or a single figure falling between the value of 37.5 percentile to 62.5 percentile of the data set and acceptable by the Director General of Inland Revenue (DGIR)…”. However, due to insufficient comparables in Malaysia, any benchmarking data set would have varying degrees of comparability and some dissimilarity with the taxpayer’s profile. Therefore, the DGIR may adjust to the median or any point above median within the arm’s length range if the DGIR has reason to believe that the comparables have a lesser degree of comparability or there are any comparability defects that cannot be identified, quantified or adjusted accordingly. 

Comparable companies with turnover of less than ten percent (10%) of the tested party’s revenue will be deemed to have a lesser degree of comparability unless they are accepted by IRBM.

In conclusion, MTPG 2024 clarifies the latest transfer pricing legislations and enhances the understanding of taxpayers in transfer compliance.

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Reference/Citation‍

Official Portal of Inland Revenue Board of Malaysia (IRBM) https://www.hasil.gov.my/en/international/transfer-pricing 

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