Transfer Pricing is a neutral concept to explain how prices are determined for the acquisition and supply of goods and services between related parties in the same Group. As a result of such an arrangement, the prices charged are required to adhere to the arm’s length principle.
Transfer pricing documentation is one of the most important tax compliances in Malaysia. Taxpayers need to prepare transfer pricing documentation (TPD) to establish that the related party transactions have been conducted in compliance with the arm’s length standard as per S140A(2) of Income Tax Act 1967 (ITA), Rule 2(2) of Income Tax (Transfer Pricing) Rules 2012 and the Malaysia Transfer Pricing Guidelines. The transfer pricing documentation (TPD) is to be prepared in accordance with guidelines set by Inland Revenue Board in the Malaysia Transfer Pricing Guidelines which is largely based on the Organization for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines
In this context, the first requirement for any business having controlled transactions is to ensure that the TPD is a contemporaneous document that must be prepared when the Taxpayers are developing or implementing any controlled transaction. Non-compliance will attract heavy penalties from the tax authorities in Malaysia. The TPD is not required to be submitted with the annual return forms. However, with effective from January 1, 2021, by virtue of S113B(1) ITA 1967, failure to furnish TPD within 14 days from the date of request from the Inland Revenue Board of Malaysia can be penalised for RM20K to RM100K or imprisonment for a term not exceeding 6 months or both. Despite the penalty being settled, a TPD is still required to be submitted to IRBM.
If you are having a business in Malaysia, transfer pricing consultants at Treasure Advisory will provide their best services to advise you on the required information to prepare your transfer pricing documentation, inter-company agreement, and bench marking analysis. A robust TPD is a prerequisite for the effective implementation of transfer pricing policies. Maintaining a robust TPD is important to equip your business for impending tax audits.
Well thought out inter-company agreements are important to establish the commercial arrangement between the contracting parties which includes the actual delineation of the transactions taking into account the agreed allocation of functions, risk, and remuneration to conform to the conduct of the parties. Agreements are starting point to establish the commercial intention between the contracting parties reflecting the same to be done between two unrelated commercial parties. Treasure Advisory offers a range of intercompany agreements which includes intragroup financing agreements, intercompany loan agreements, limited risk distribution intercompany agreements, and intragroup management services.
Upon completing your business financial audit process, you may provide the relevant information to the team at Treasure Advisory for further discussion and evaluation of your case to prepare the required TPD.
You need peace of mind to run your business effectively. Alternatively, you may sign up Treasure Advisory as your transfer pricing documentation consultant to advise your financial personnel to prepare your TPD. Treasure Advisory is also providing a standard transfer pricing documentation template for your easy usage.
Besides consulting on TPD, Treasure Advisory has been facilitating companies in business financing from government agencies as well as private financial institutions. In other words, Treasure Advisory is the one-stop solution for your transfer pricing compliances and business funding requirements.
For any questions on transfer pricing documentation, you may reach out to the transfer pricing consultant at Treasure Advisory at ask@treasureadvisory.com or call us at 013-875 2318