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New Transfer Pricing Rules and Advance Pricing Arrangement Rules

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The Income Tax (Transfer Pricing) Rules 2023 (TP Rules 2023) were gazetted on 29 May 2023 (replacing the Income Tax (Transfer Pricing) Rules 2012), and will take effect from year of assessment (“YA”) 2023. Separately, the Income Tax (Advance Pricing Arrangement) Rules 2023 (APA Rules 2023) were also gazetted on 29 May 2023 (replacing the Income Tax (Advance Pricing Arrangement) Rules 2012, and are applicable with immediate effect. 

Key Highlights    

The key highlights set out in the new TP Rules 2023 and APA Rules 2023 are summarized in the table below: 

​
​Key Highlights
​TP RULES 2023
  • ​Transfer Pricing Documentation (“TPD”) is considered contemporaneous when it is brought into existence prior to the due date for furnishing the income tax return (i.e., 7 months after the close of the financial year); 
  • Additional requirements for content of the local TPD including information on the Multinational Enterprise Group (similar to the content of the Master File); 
  • Requirement to date the contemporaneous TPD when it is completed; 
  • The Malaysian tax authorities will issue a separate “notice” for taxpayers to furnish the contemporaneous TPD within 14 days from the date of issuance of the notice. Penalty provisions will apply for non-compliance; 
  • The results of taxpayers shall be compared against the comparables’ results at the same basis period. Application of prior year data for the selection of comparables is allowed to prove the effect of life cycles or business cycles but not for the use of multiple year averages for comparison purposes; 
  • Definition of arm’s length range being between the value of 37.5 percentile and 62.5 percentile of the data set. Where the price falls outside the arm’s length range, an adjustment shall be made to the median which is determined as the mid-point of the arm’s length range. 
​APA RULES 2023
  • ​Taxpayers that carry on cross-border transactions may apply to the Director General for an APA subject to conditions; 
  • Taxpayers are required to furnish documentation requested by the tax authorities for the pre-filing meeting and for the formal application; 
  • A roll-back application, i.e., application of terms and conditions of an APA to prior YAs shall be allowed for not more than three YAs immediately preceding the covered period; 
  • Taxpayers are given six months from the receipt of notification from the Director General to submit the formal application. Timeline for renewal application is two months; 
  • The Director General may revoke the APA if the taxpayer fails to disclose any occurrence of voluntary disclosure, investigation, audit or incentive approval; 
  • Application for new APA will incur a non-refundable application fee of MYR 5,000 (if application is made within two months after receipt of the notification from the Director General to proceed); or MYR 10,000 (if the application is made after two months but within six months after receipt of the notification from the Director General. Application for renewal of APA will incur a non-refundable fee of MYR 5,000. 

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