Good TP documentation is critical
Transfer Pricing (TP) generally refers to intercompany pricing arrangements for the transfer of goods, services and intangibles between associated persons. TP is one of the key areas of scrutiny by the Malaysian Inland Revenue Board (MIRB). Effective 1 January 2009, Section 140A of the Income Tax Act 1967 (ITA) requires that transactions with associated persons for the acquisition or supply of property or services as well as the provision of financial assistance be carried out on an arm’s length basis.
The MIRB also introduced the Income Tax (TP) rules 2012 and TP Guidelines 2012 which provide guidance to taxpayers on the type and extent of TP documentation required. This applies to both cross border and domestic transactions. The preparation of TP documentation will act as a risk management tool to minimise penalties and defend the taxpayer’s intercompany transactions in the event of a TP Audit.
The Organisation for Economic Cooperation and Development (OECD) also issued its recommendations in October 2015 to address what it perceived to be Base Erosion and Profit Shifting (BEPS) in relation to multinational enterprises. These recommendations require much more information to be disclosed by such enterprises and are expected to drastically increase transfer pricing related challenges.
In the face of all these requirements, BDO’s TP team has the ability to assist our clients in terms of planning, compliance and tax controversy management including the following:
- Preparation of TP documentation
- Development of an inter-company TP policy
- Review of intra-group services and agreements
- Advance pricing agreement
- TP audit management
- TP dispute resolution