On 24 December 2024, the Inland Revenue Board of Malaysia (“IRBM”) released the Malaysian Transfer Pricing Guidelines 2024 (“MTPG 2024”), replacing the previous guidelines issued in 2012. The MTPG 2024 are more comprehensive and aligned with the OECD’s Transfer Pricing Guidelines and the Income Tax (Transfer Pricing) Rules 2023. Although issued in December 2024, the guidelines are effective from the year of assessment 2023.
Key changes arising from the MTPG 2024
| Scope of preparation of full contemporaneous transfer pricing documentation | Annual gross business income of more than RM30 million and cross-border controlled transactions totalling over RM10 million; or Receiving or providing controlled financial assistance of more than RM50 million annually. Taxpayers that fall below these thresholds are eligible to prepare minimum contemporaneous transfer pricing documentation. |
| Arm’s length range | In line with the TP Rules 2023, the MTPG 2024 highlight that the arm’s length range should be set between the 37.5th and 62.5th percentiles of the profit level indicator range, as determined by benchmarking analysis of comparable companies. If the tested party’s results fall outside this arm’s length range, the IRBM has the authority to adjust them to the median point of the range. This arm’s length range differs from the interquartile range (25th to 75th percentiles) commonly applied in most of the other tax jurisdictions. |
| Introduction of a simplified approach for low value adding intragroup services (“LVAS”) | The MTPG 2024, following the OECD guidance, have introduced a safe harbour mechanism for LVAS. LVAS are defined as services performed by one or more members of a multinational enterprise (“MNE”) group that benefit other members of the group which: • are supportive services and not part of the core business operations of a MNE group. • do not require the use of unique and valuable intangibles and would not lead to creation of such intangibles. • do not require the service provider to assume or control substantial risks and do not give rise to the creation of significant risks for the service provider. The service provider shall apply a fixed mark-up of 5% on all relevant costs without the need to carry out benchmarking study. Examples of LVAS include accounting and auditing, budgeting, human resources activities, IT, legal and general administrative services. |
| Business restructuring | The MTPG 2024 has expanded the Business Restructuring chapter to align the IRBM’s expectations more closely with those of the OECD Guidelines. The key areas for taxpayers to demonstrate include: • Assessing the commercial justification for restructuring initiatives. • Evaluating whether entities involved in business or asset transfers received appropriate compensation. • Analyzing the consistency between legal documentation and the actual behavior of parties after restructuring. |
