Transfer Pricing

Transfer Pricing


Transfer pricing generally refers to intercompany pricing arrangements for the transfer of goods, services and intangibles between associated persons. Ideally, the transfer price should not differ from the prevailing market price which would be reflected in a transaction between independent persons. However, business transactions between associated persons may not always reflect the dynamics of market forces. Thus, Inland Revenue Board Malaysia.

Inland Revenue Board Malaysia published Transfer Pricing Guidelines on 20 July 2012.  The guidelines are concerned with the application of the law on controlled transactions. They provide guidance for persons involved in transfer pricing arrangements to operate in accordance with the methods and manner as provided in the Rules, as well as comply with administrative requirements of the Inland Revenue Board Malaysia on the types of records and documentations to maintain.


One development of significance for transfer pricing law and practice in Malaysia is the introduction of country-by-country reporting under the Income Tax (Country-by-Country Reporting) Rules 2016 (Country-by-Country Reporting Rules). These Rules took effect on 1 January 2017 and apply to any multinational corporation (MNC) group where all of the following applies:

  • Any of its constituent entities enters into cross-border transactions with another constituent entity.
  • The total consolidated group revenue in the financial year preceding the reporting financial year is at least MYR3 billion.
  • Its ultimate holding company is:
    1. incorporated under the Companies Act 1965 or under any written law; and
    2. resident in Malaysia.
  • Its constituent entities are:
    1. incorporated or registered under the Companies Act 1965, under any written law or under the laws of a territory outside Malaysia; and
    2. resident in Malaysia


The ultimate holding company of an MNC group that is resident in Malaysia must file a country-by-country report with the Director General of Inland Revenue. The report must:

  • Comply with the requirements of the Country-by-Country Reporting Rules.
  • Cover the company’s reporting financial year on or before the date specified in the Country-by-Country Reporting Rules.


The surrogate holding company must file the report instead of the ultimate holding company if any of the following applies:

  • The ultimate holding company is not resident in Malaysia and is not required to file country-by-country report in its jurisdiction of tax residence.
  • The jurisdiction in which the ultimate holding company is resident for tax purposes has concluded an international agreement with Malaysia, but is not a party to the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports, at the time the country-by-country report must be filed under the Country-by-Country Reporting Rules.
  • There has been a systemic failure of the ultimate holding company’s jurisdiction of tax residence, which has been notified by the Director General to the constituent entity resident for tax purposes in Malaysia.


On or before the last day of the reporting financial year, any constituent entity of an MNC group that is resident in Malaysia must notify the Director General in writing if it is the ultimate holding company or surrogate holding company.

Where a constituent entity of an MNC corporation group that is resident in Malaysia is not the reporting entity, the constituent entity must notify the Director General of Inland Revenue in writing of the identity and tax residence of the reporting entity, on or before the last day of the reporting financial year.

The country-by-country report must be filed no later than 12 months after the last day of the reporting financial year.

Main Transfer Pricing Methodologies

  • Transaction-Based Methods, which are the:
    1. Comparable Uncontrolled Price (CUP) Method
    2. Resale Price Method (RPM)
    3. Cost Plus Method (CPM)


  • Profit-based methods, which are the:
    1. Profit Split Method
    2. Transactional Net Margin Method (TNMM)