Updated: Sep 7
CTIM's transfer pricing issues have received a response from the Inland Revenue Board of Malaysia (IRBM), which was provided on February 15, 2022.
The following is a response from the IRBM to the points that CTIM made:
1. On the threshold for preparation of transfer pricing (“TP”) documentation
IRBM acknowledges the need to revise the thresholds to reflect the requirement of preparing the TP Documentation with the risk of tax base erosion and exclude a particular group of SMEs that only have domestically controlled transactions.
Chapter I of the Malaysian Transfer Pricing Guidelines 2012 (MTPGL 2012) is now undergoing revision by IRBM to consider these modifications.
2. Intercompany Financing
IRBM's Response: When determining an interest rate at arm's length, taxpayers may choose to utilise any pre-approved reference rates. However, there is a discussion of implementing a more simple method shortly.
3. In conjunction with the Safe Harbour
IRBM's Response: It is being thought about whether to give specific guidance on a group of intragroup services called "low value-adding intragroup services."
Taxpayers can choose this easy way to figure out arm's-length charges for low-value-adding intra-group services if certain conditions are met.
4. TP considerations for taxpayers who have been adversely affected by the COVID-19 pandemic
Any particular issues or concerns related to the pandemic's impact on limited-risk operating entities must be carefully documented and justified.
The IRBM recognises that low-risk operating entities could sustain financial losses but insists that such a claim must be backed up by sufficient documentation and an adequate explanation.
For instance, the decision of any limited risk entities to accept certain losses ought to be reviewed in light of the impact that the pandemic will have on their operations by evaluating their functions, assets, and risks.
The IRBM has updated the Frequently Asked Questions on APA treatment due to the COVID-19 pandemic in October 2020.
Further clarification on specific issues on APA can be forwarded to IRBM (lhdnm_APA@hasil.gov.my).
5. Cooperative compliance program
The IRBM is currently in the process of preparing a framework that will be known as the Tax Corporate Governance Framework (TCGF).
This framework will be the basis upon which the IRBM and taxpayers will build and maintain a more comprehensive working relationship to guarantee that the tax compliance process is fair and effective.
This framework also makes it possible for businesses, the IRBM, and the community to understand one another better.
In addition, the aspects of accountability and transparency under governance arrangements to foster a better understanding of tax treatment are also crucial to ensure that proper and effective tax compliance can be achieved.
6. Guidance on Financial Assistance Transaction
The IRBM is in the process of incorporating some guidance provided under the OECD’s Transfer Pricing Guidance on Financial Transactions.
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