Expert Transfer Pricing Advisory Services | KL | Malaysia

Ensuring Compliance & Strategic Tax Efficiency

Transfer Pricing is a critical element of corporate taxation, governing the pricing of goods, services, and intellectual property between associated entities. In Malaysia, adherence to the arm’s length principle is mandatory under Section 140A of the Income Tax Act, 1967 and the Income Tax (Transfer Pricing) Rules 2023 [P.U.(A) 165/2023].

With increasing scrutiny by the Inland Revenue Board of Malaysia (IRB), businesses must ensure accurate documentation and strategic planning to avoid costly penalties and tax disputes.

At YYC, we provide comprehensive transfer pricing services to help businesses navigate complex compliance requirements, mitigate risks, and optimize their tax strategies.

What is Transfer Pricing?

Transfer pricing refers to the pricing of transactions between related entities, including:

Intercompany sales of goods
Provision of services

Intellectual property transfers

Cost-sharing arrangements
Financial transactions, including loans and guarantees

These transactions must be priced at market rates (arm’s length pricing), ensuring they align with what independent parties would agree upon under similar terms.

Malaysia’s Transfer Pricing Regulations

Businesses in Malaysia are subject to stringent transfer pricing compliance obligations, including the preparation of contemporaneous Transfer Pricing documentation annually. The key requirements include:

Transfer Pricing Documentation (TPD) Obligations
Companies must prepare a comprehensive TPD if they meet the prescribed thresholds.

No.	Threshold
1.	Generate gross business income of more than RM30 million in total and engages in cross-border controlled transactions totalling RM10 million or more annually; or
2.	Receives or provides controlled financial assistance of more than RM50 million annually.

Key Updates in Transfer Pricing Legislation
The Budget 2021 announcements which have gazetted the law under Finance Act 2020 have tightened the Transfer Pricing compliance requirements in Malaysia with effect from 1 January 2021 with the introduction of the following provisions:

No.	New Legislation	Tax implications
1.	Section 113B: Failure to furnish contemporaneous TPD	A penalty of between RM20,000 and RM100,000 for failure to submit the TPD.
2.	Section 140A(3C): Surcharge on the transfer pricing adjustment	A surcharge of up to 5% of the total transfer pricing adjustment is imposed whether or not the adjustment results in additional tax payable
3.	Section 140A(3A) & (3B): Power to disregard structure in a controlled transaction	To grant the power to the IRB for making transfer pricing adjustments to reflect arm’s length economic and commercial reality

These measures reinforce the importance of timely and accurate transfer pricing documentation to avoid unnecessary tax liabilities.

Transfer Pricing Documentation (TPD) Obligations
Companies must prepare a comprehensive TPD if they meet the prescribed thresholds.

No.	Threshold
1.	Generate gross business income of more than RM30 million in total and engages in cross-border controlled transactions totalling RM10 million or more annually; or
2.	Receives or provides controlled financial assistance of more than RM50 million annually.

Key Updates in Transfer Pricing Legislation
The Budget 2021 announcements which have gazetted the law under Finance Act 2020 have tightened the Transfer Pricing compliance requirements in Malaysia with effect from 1 January 2021 with the introduction of the following provisions:

These measures reinforce the importance of timely and accurate transfer pricing documentation to avoid unnecessary tax liabilities.

No.	New Legislation	Tax implications
1.	Section 113B: Failure to furnish contemporaneous TPD	A penalty of between RM20,000 and RM100,000 for failure to submit the TPD.
2.	Section 140A(3C): Surcharge on the transfer pricing adjustment	A surcharge of up to 5% of the total transfer pricing adjustment is imposed whether or not the adjustment results in additional tax payable
3.	Section 140A(3A) & (3B): Power to disregard structure in a controlled transaction	To grant the power to the IRB for making transfer pricing adjustments to reflect arm’s length economic and commercial reality

With the introduction of penalty for non-compliance of TPD, the requirement to prepare TPD is absolute and mandatory and there is no discrimination between large and small medium sized companies.

The non-compliance for TPD penalty is hefty as it provides the IRB with the absolute power to penalise a taxpayer prior to the commencement of the audit process for not being able to furnish the TPD for the relevant year of assessment on time. Further, a 5% surcharge would be imposed on any taxpayer on transfer pricing adjustment regardless of whether the taxpayer is a loss or a tax-exempt company for non-compliance of the arm’s length principle.

How YYC Can Help

At YYC, we offer a comprehensive suite of transfer pricing services designed to ensure full compliance with Malaysian and OECD guidelines while maximizing tax efficiency.

Transfer Pricing Planning & Strategy
- Development of intercompany pricing policies
- Risk assessment for related party transactions
- Advance Pricing Agreements (APAs) to prevent tax disputes
- Cost allocation methods for intra-group services & intangibles
Transfer Pricing Documentation & Compliance
- Preparation of Master File and Local File in accordance with Malaysian Transfer Pricing Guidelines
- Preparation and submission of Country-by-Country Reports (CbCR)
- Assistance with XBRL filing for transfer pricing compliance
Transfer Pricing Audit & Dispute Resolution
- IRB Transfer Pricing Audit Management – Assistance in responding to tax queries and audits
- Dispute resolution – Handling tax controversy and appeals
- Transfer Pricing Risk Management – Strategies to minimize tax exposure

Common Transfer Pricing Mistakes to Avoid

The following pricing practices are red flags for the IRB and may trigger tax adjustments or penalties:

Transacting below market value

Providing free services to related entities

Non-standard pricing models

Interest-free intercompany loans

Lack of written agreements for related-party transactions

Businesses must ensure that all related party transactions are supported by proper documentation to avoid scrutiny from tax authorities.

Why Choose YYC for Transfer Pricing in Malaysia?

Proven Expertise – Decades of experience in tax advisory and compliance

Strategic Approach – Combining regulatory compliance with tax optimization

Custom Solutions – Tailored strategies for businesses of all sizes

Proactive Risk Management – Helping businesses mitigate tax exposure

With the IRB’s heightened focus on transfer pricing, ensuring compliance and strategic tax planning is more important than ever. Let YYC's esteemed tax advisory team help you navigate the complexities of transfer pricing so you can focus on growing your business.