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
Be prepared for potential transfer pricing audits by tax authorities. Ensure that your transfer pricing documentation is readily available, organized, and easily accessible.
There is an increasing focus on transfer pricing documentation for intragroup loans in Malaysia. Tax authorities expect comprehensive documentation that demonstrates the arm's length.
In Singapore Taxpayers are required to review and update your transfer pricing documentation annually to ensure its accuracy and relevance.