Transfer Pricing Threshold Malaysia

Overview of Transfer Pricing Threshold Malaysia :

Every taxpayer who has entered into controlled transactions with “associated persons” is required to prepare transfer pricing documentation.

However, the compliance requirements for transfer pricing documentation may differ depending on the factors, such as gross business income, amount of related party transactions or financial assistance.

Key takeaways:

You will understand: -

1. Duty to prepare transfer pricing documentation

2. Threshold to determine the compliance requirements

Summary of learning:

A) Duty to prepare transfer pricing documentation

i. Taxpayer is required to ensure all related party transaction to be conducted at arm’s length price, i.e. the price which would have been determined if such transactions were made between independent entities under the same or similar circumstances.

ii. Therefore, transfer pricing documentation is important to setting the inter-company pricing arrangements for the controlled transactions.

iii. Example of controlled transactions:

a. Sales or purchases of raw materials, stock in trade or other tangible assets;

b. Royalties / license fees / other types of considerations in connection with use of intangible assets;

c. Management fees including charges for financial, administrative, marketing and training services;

d. Research and development;

e. Any other services not previously mentioned;

f. Rents / lease of assets;

g. Interests; or

h. Guarantee fees.

B) Transfer pricing threshold

i. According to Transfer Pricing Guidelines, taxpayers have to prepare Contemporaneous Transfer Pricing Documentation (full documentation) if:

- Gross business income exceeding RM25 million, and total amount of related party transactions exceeding RM15 million; or

- Provision of financial assistance exceed RM50 million.

ii. Taxpayers who fall outside the above threshold may opt to prepare Abbreviated Transfer Pricing Documentation.

Stay tune in our next ektp on “contents in transfer pricing documentation”

Sources:

- Transfer Pricing Rules 2012:

http://phl.hasil.gov.my/pdf/pdfam/MalaysianTransferPricingGuidelines2012.pdf

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