Something You May Not Know About the Transfer Pricing “14 Days Rule” in Malaysia

Published: 28 Apr 2026

If you’ve been dealing with transfer pricing (TP), chances are you’ve heard people casually say:

“Don’t worry… just submit within 14 days.”

Sounds simple, right?

But here’s the reality:

Many taxpayers think the 14 days rule is a grace period.
In reality, it’s a compliance trap — if you are not ready before the clock starts.

This “14 days rule” has become one of the most critical — and risky — compliance areas today, especially with stricter enforcement in Malaysia.

The 14 Days Rule – Not New, But How Well Do You Really Understand It?

More importantly:

When does the 14-day clock actually start?
Is it from the audit letter… or something else?

Before we answer that, let’s first understand Contemporaneous Transfer Pricing Documentation (CTPD).

What Does “Contemporaneous” Really Mean?

This term is often misunderstood.

“Contemporaneous” does NOT mean:

“Prepare when the tax authority asks.”

Instead, under paragraph 11.2 of the Malaysia Transfer Pricing Guidelines 2024, “contemporaneous” means:

👉 The documentation must be:

• Prepared before the filing deadline for the tax return (e.g. Form e-C) for the relevant Year of Assessment (YA) in which the controlled transaction is entered into; and
• Comply with all requirements under the Income Tax (Transfer Pricing) Rules 2023 and be available immediately upon request.

However, the documentation is not required to be submitted upfront — it is submitted only upon request by the tax authority (IRBM).

How Does the Tax Authority Request CTPD?

👉 First, the process typically begins with a tax audit letter known as:

“Surat Memohon Dokumen dan Maklumat (SMDM)”

• This letter is issued by the tax authority to request relevant documents and information
• Taxpayers are required to respond within 14 days from the date of the letter

As shown in the screenshot extract of the SMDM below, the tax authority may also request transfer pricing documentation (TPD) at this stage as part of the audit process.

Can You Apply for an Extension of Time (EOT)?

👉 Yes — but only at this stage.

• EOT can be requested upon receiving the SMDM
• Approval is at IRBM’s discretion
• Maximum extension: 14 days from the original deadline

So… Is This the “Transfer Pricing 14 Days Rule”?

👉 Not yet.

This is where many taxpayers get confused.

Where the Real “Transfer Pricing 14 Days Rule” Comes In

This is where the actual Transfer Pricing 14 days rule in Malaysia begins.

It arises when:

• CTPD is not submitted, or
• The submitted documentation is incomplete or non-compliant under the Income Tax (Transfer Pricing) Rules 2023

👉 In such cases, the tax authority will issue a separate “written notice” to the taxpayer.

Once this written notice is served:

⚠️ You must submit complete and contemporaneous transfer pricing documentation (CTPD) within 14 days
❌ No further extension of time will be granted

👉 This is the real trigger point of the Transfer Pricing 14 days rule.

This position has also been clarified by the tax authority during the Transfer Pricing & Tax Corporate Governance Seminar 2025.

Summary

Stage	Deadline	Extension Allowed?
SMDM (initial audit stage)	14 days	✅ Yes (max 14 days)
Written Notice (TP rule trigger)	14 days	❌ No

Penalty Exposure – This Is Where It Gets Serious

Before 2021:

• There was no specific penalty framework for failing to submit within the 14-day timeline.

After 2021 (Section 113B, Income Tax Act 1967):

Failure to furnish contemporaneous transfer pricing documentation (CTPD) within 14 days may result in, upon conviction under subsection 113B(1):

• A fine ranging from RM20,000 to RM100,000;
• Imprisonment for a term not exceeding 6 months; or
• Both

What If There Is No Prosecution?

In practice, not all cases lead to prosecution.

Under subsection 113B(4), where no prosecution is initiated, the tax authority may impose a penalty from RM20,000 to RM100,000.

So, How Much Will the Tax Authority Charge You?

RM20,000? RM30,000? Or even RM100,000?

👉 The answer is:

It depends on the number of days of delay, calculated from the expiry of the 14-day deadline until the date a complete and compliant TPD is submitted.

This is determined based on the Transfer Pricing Tax Audit Framework (effective 31 July 2025).

A concession on penalties under subsection 113B(4) may be granted to taxpayers who has an accounting period that begins before 29th May 2023:

Additional Risk:

If transfer pricing adjustments arise:

👉 A surcharge of up to 5% may be imposed under subsection 140A(3C)

(on the adjustment amount, regardless of whether additional tax is payable)

Practical Example: How to Count the 14 Days

Let’s say:

• SMDM issued: 5 January 2026
• Transfer Pricing Documentation was not submitted by taxpayer
• Written notice served by tax authority: 18 February 2026

👉 The 14-day deadline falls on: 3 March 2026

If:

• CTPD is submitted on 9 March 2026

👉 Delay = 6 days

👉 Result:

• RM20,000 penalty under Section 113B in accordance with the Transfer Pricing Tax Audit Framework.

Important practical points:

• It is calendar days, not working days
• Weekends and public holidays are included

👉 Real-life risk:
If your documentation is not ready, 14 days is usually too short to prepare from scratch

Simple way to understand:

Scenario	Compliant?
TPD prepare after audit starts	❌ No
TPD prepare just before submission to IRB	❌ No
Prepared before tax filing & ready anytime	✅ Yes

Why IRB emphasises this?

Because TP documentation is meant to:

• Justify that your related party transactions follow the arm’s length principle
• Serve as a defence document during audit

Common Mistakes (Very Real in Practice)

❌ “We prepare when audit comes”
→ Too late

❌ “We have data, just need to compile”
→ Benchmarking takes time

❌ “Small company, not required”
→ Incorrect — unless specifically exempted

Final Thoughts

The 14 days rule is not about 14 days.

It is about whether you were already compliant before the 14 days even begin.

✅ Transfer Pricing Malaysia: 3-Point Compliance Checklist for Business Owners

Use this quick checklist to assess your company's transfer pricing compliance readiness.

	1. Does your company have related party transactions? If your company transacts with related companies, whether within or outside Malaysia, as well as directors, shareholders, or associates, transfer pricing rules may apply. If you tick this box, please proceed to Questions 2 and 3. If you do not tick this box, transfer pricing rules may not be applicable to your company.
	2. Is your transfer pricing documentation prepared on a contemporaneous basis? Your documentation should be prepared in accordance with the requirements of the Income Tax (Transfer Pricing) Rules 2023 before the tax return filing deadline—not only when the tax authority initiates an audit.
	3. Can you submit complete transfer pricing documentation within 14 days? Once a written notice is issued by the tax authority, no extension of time will be granted. Failure to comply may result in substantial penalties.

⚠️ If you tick Question 1 but are unable to tick either Question 2 or Question 3, it is time to review your company's transfer pricing compliance readiness.

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