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Transfer Pricing

Introduction

Transfer pricing generally refers to intragroup pricing arrangements for the acquisition or supply of property or services between associated persons. These intragroup arrangements also include financial assistance within the groups. Ideally, the transfer price should align with the prevailing market price, as would be the case in a transaction between independent persons. However, business transactions between associated persons may not always reflect market dynamics, due to the fact that members of the group may have the flexibility and discretion to decide on the specific terms and conditions that maximise the group's tax benefit. Therefore, domestic legislation on transfer pricing should be put in place to govern such pricing arrangements ensuring compliance with the arm’s length principle (ALP).

Malaysia Transfer Pricing Journey
Year	Events
2003	The first Transfer Pricing Guidelines (TPGL) were issued to address adherence to the arm’s length principle (ALP) for controlled transactions. This TPGL served as an initial framework supporting Section 140 of the Income Tax Act 1967 (ITA) as a general anti-avoidance measure for transfer pricing issues.
2009	The introduction of Section 140A of the ITA is specifically tailored for transfer pricing purposes. This new provision marked a pivotal moment, providing a specific legal foundation for the ALP in controlled transactions and ensuring a structured approach to managing transfer pricing risks.
2012	The Transfer Pricing Rules (TPR) 2012 has been gazetted to further reinforce the requirement for taxpayers to prepare and maintain contemporaneous transfer pricing documentation to demonstrate compliance with Section 140A. In tandem, the Malaysian Transfer Pricing Guidelines 2012 (MTPGL 2012) has also been published to serve as administrative guidance for taxpayers to fulfil the requirement and document transactions effectively, including record keeping.
2013	The Transfer Pricing Audit Framework was incorporated into the 2013 IRBM Audit Framework and aims to ensure that both cross-border and local transfer pricing audits are carried out in a fair and transparent manner in accordance with the provisions of the ITA.
2014	The inclusion of Transfer Pricing declaration in the corporate tax return.
2017	The MTPGL 2012 has been updated to reflect changes made by the OECD and simultaneously address administrative requirements in relation to: The Arm’s Length Principle Intangibles Commodity transactions Documentation
2019	The transfer pricing audit framework has been revised and supersedes the 2013 version. This framework is issued separately since different approaches apply to transfer pricing audits. A provision to expand control definition for transfer pricing purposes has also been introduced.
2021	Section 113B was introduced for offences of failure to furnish contemporaneous transfer pricing documentation within the time limit, and the provision of subsection 140A (3C) was also included for the imposition of a surcharge of no more than 5% on TP adjustments.
2022	Minimum Transfer Pricing Documentation template
2023	Transfer Pricing Rules (TPR) 2023 has been gazetted on 29th May 2023, which provide robust requirements for contemporaneous transfer pricing documentation (CTPD). The TPR 2023 also empowers the Director General of Inland Revenue (DGIR) to issue a written notice to request a taxpayer to furnish a CTPD. Failure to do so may expose the taxpayer to a prosecution or penalty under subsection 113B(4).
2024	Malaysia Transfer Pricing Guidelines (MTPGL) 2024 has been published that serves as guidance for taxpayers to prepare the CTPD effective from the year of assessment 2023. This MTPGL includes all changes made to Section 140A before 2024, as well as TPR 2023. A new Transfer Pricing Tax Audit Framework 2024 has been released to replace the Transfer Pricing Audit Framework 2019. This new framework is to cater to the imposition of surcharges on TP adjustments and penalty subsection 113B that can be imposed for failure to furnish a CTPD within 14 days from the date the notice is served.
2025	The Transfer Pricing Tax Audit Framework 2025 was uploaded on the HASiL official portal on 31 July 2025 to address the revised structure of penalty and surcharge applicable to transfer pricing audit adjustments.

Contact

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Disclaimer

Examples in these Guidelines are provided for illustration purposes only. It should not be used as a justification for any disputes as the facts in those examples might be different from the actual cases.