Transfer pricing generally refers to intercompany pricing arrangements for the transfer of goods, services and intangible between associated persons. Ideally, the transfer price should not differ from the prevailing market price which would be reflected in a transaction between independent persons. (excerpt from TP Guideline 2012)
In Malaysia, Section 140A of the Income Tax Act 1967 engross with the TP Guideline 2012 requires taxpayers to determine and apply the arm's length price on controlled transaction.
A documentation is deemed “contemporaneous” if it is prepared:
Further, the TP Guideline requires a taxpayer who has entered into a controlled transaction with an associated person to prepare and keep contemporaneous documentations in the relevant YA.
- at the point when the taxpayer is developing or implementing any arrangement or transfer pricing policy with its associated person; and
- if there are material changes, when reviewing these arrangements prior to due date of furnishing the relevant tax return of his income for the basis year for a year of assessment.
We provide our clients with specialist support during preparation of TP documentations
Changes to Form C w.e.f. YA 2014
The revised Form C for YA 2014 onwards had enclosed a new item (R4) compelling the taxpayer to indicate the preparation of transfer pricing documentation for the relevant YA; whether it has been prepared by the tax payer or not.
Implications to the taxpayer on new development of Form C
Taxpayer is required to maintain contemporaneous documentation for the year in which there are controlled transactions. In the event of occurrence of material changes, the deadline for updating the documentation is prior to due date of furnishing the return of income.
The above said matter change by the new implementation of preface in Form C that eventually requires the disclosure of the TP documentation. This is to emphasize that it is mandatory for the taxpayer to prepare and maintain TP documentation prior to the due date of filing the return (irrespective of whether or not there are material changes) in order to be able to tick 'YES' to item R4 in Form C.
Transfer Pricing Penalty Provision
The following penalty rates are applicable:
If there is no contemporaneous transfer pricing documentation
If there is transfer pricing documentation prepared, but not according to requirements in the Guidelines
If the taxpayer does not fall under the scope of the Guidelines, and does not prepare a contemporaneous transfer pricing documentation
For further enquiry, please contact us NOW.