Malaysia Transfer Pricing Guidelines
Transfer pricing in Malaysia generally pertains to the pricing of cross-border transfers of goods, of services, and of intangibles. The Malaysia Transfer Pricing Guidelines address only transactions between associated enterprises within a multinational business where one enterprise is subject to tax in Malaysia and the other enterprise is located overseas and would apply to the taxpayer by analogy as to transactions between a permanent establishment (PE) and to the company’s head office or other related branches.
Non-arm’s length dealings include transactions between persons one of whom has control over the other. “Control” refers to both direct control and indirect control.
Malaysian Transfer Pricing Guidelines permit the taxpayer to select from various transfer pricing methodologies, doing so “with the ultimate aim of arriving at an arm’s length transfer price.”
The IRBM takes a strong stance against “global formulary apportionment,” stating that the global formulary apportionment is arbitrary and that the method could not reliably approximate arm’s length conditions. The term “global formulary apportionment” refers to a transfer pricing method that applies a predetermined, mechanistic formula, normally based in a combination of costs, assets, payroll, and sales undertaken to allocate the global profits of a multinational enterprise among associated enterprises in different countries.
Under the Malaysian Transfer Pricing Guidelines, a profit split analysis would normally involve making comparisons with independent enterprises that have entered into joint ventures.
The Malaysian Transfer Pricing Guidelines acknowledges that most multinational corporations provide for a wide range of services for intra-group use. Such services include technical aid and know how.
Malaysia now permits a taxpayer to secure an advance tax ruling in many fact patterns.