What is comparability analysis for transfer pricing in Malaysia?

KnowledgeWhat is comparability analysis for transfer pricing in Malaysia?

What is the comparability analysis for transfer pricing in Malaysia?

The Inland Revenue Board of Malaysia (“IRBM”) adopts the arm’s length principle as a basis to determine the transfer price of a transaction between associated entities. Arm’s length price is the price which would have been determined if such transactions were entered between independent entities under the same or similar circumstances.   

The application of the arm's length principle is based on a comparison of conditions in a controlled transaction (associated entities) with those in an uncontrolled transaction (independent entities) under comparable circumstances. This is known as the comparability analysis.

A comparability analysis requires the selection of reliable comparables and it could be either internal or external comparables:

Internal comparables

External comparables

Transactions carried out by the tested party and independent entities in comparable circumstances

Transactions between independent entities which is comparable to the tested party

What are the Five Comparability Factors?

An uncontrolled transaction is deemed comparable if the following five comparability factors are sufficiently similar with the controlled transaction:


Transfer Pricing Solutions Malaysia can assist with the preparation of TP documentation locally and regionally, Master File and Local File to comply with the OECD and also local legislation.


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