Transfer Pricing
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Transfer Pricing (TP)
- Arm’s length principle is an international standard to determine transfer price. Taxpayers with controlled transactions should comply with arm’s length principle.
- Taxpayers are required to maintain contemporaneous TP documentation (i.e., full TP documentation or simplified TP documentation) annually to prove its compliance with arm’s length principle.
- Taxpayers are required to prepare a full transfer pricing documentation if they meet any of the following requirements:
- Annual revenue exceeding RM25 million and total amount of controlled transactions exceeding RM15 million; or
- Provision of financial assistance exceeding RM50 million (does not apply to financial institutions).
- Taxpayers that fall outside the thresholds may opt to prepare a simplified transfer pricing documentation.
- The TP documentation should submit to IRB within 14 days upon request.
- Penalties for non-compliance:
- Penalty of between RM20,000 to RM100,000 or imprisonment for up to 6 months, or both for failure to furnish TP documentation on time.
- Surcharge of up to 5% on TP adjustments.