On 15 December 2019, the Malaysian Inland Revenue Board (“IRB”) issued the updated Tax Audit Frameworks including Transfer Pricing (“TP”) Audit Framework 2019. The updated tax audit frameworks take effect from 15 December 2019.
The 2019 TP Audit Framework introduced several key changes that can impact taxpayers and increase the total value of a transfer pricing adjustment significantly.
The most relevant change relates to the penalty surcharge for taxpayers that do not prepare transfer pricing documentation. If a taxpayer doesn’t prepare transfer pricing documentation and is subject to an audit, the tax authority will impose a penalty of 50% increase on the total transfer pricing adjustment.
For example, a taxpayer is subject to audit and the total value of a transfer pricing adjustment is RM1 million. The adjustment can be increased by 50% (i.e. 500k) if the taxpayer does not have transfer pricing documentation increasing the total adjustment to RM1.5 million.
The different penalty rates introduced by 2019 TP Audit Framework are summarised in the table below.
Other changes in the 2019 TP Audit Framework include:
Be proactive, and manage your transfer pricing compliance and risks since the beginning to avoid future headaches and high penalties. Transfer Pricing Solutions Malaysia can help with practical and cost-effective solutions for Malaysian companies to prepare Transfer Pricing documentation.
Contact Transfer Pricing Solutions Malaysia. We can assist with the preparation of transfer pricing documentation locally and regionally, Master File and Local File to comply with the OECD and also local legislation.
+ 603 2298 7153
Singapore is often a preferred location for setting up headquarters as the door to conduct business in Asia. The IRAS has released its views on how Singapore HQ's should plan and implement their transfer pricing framework. Want to know more? Read our article with our views on IRAS TP Guidelines for Singapore HQs.
The Malaysian Finance Bill 2020 incorporates transfer pricing-related changes to the current Income Tax Act, 1967 (“ITA”). The changes permit significantly greater authority to the Malaysia Inland Revenue Board (“MIRB”) and re-emphasises the importance of transfer pricing compliance, with effect from 1 January 2021.
Singapore introduced compulsory transfer pricing documentation effective from the year of assessment (YA) 2019. A new penalty regime was also included for non-compliance with the TP documentation requirements.