Identification of Transfer Pricing
Recently, transfer pricing has been a heavily discussed topic among taxpayers. A taxpayer may run a higher risk of being scrutinized for transfer pricing compliance if the company has a significant number of transactions with its associated companies or subsidiaries, repeatedly reports low margins or repeatedly makes losses etc. This has resulted in many questions raised for this topic. We would like to walk you through this topic so that you will have a better understanding on transfer pricing.
Based on the Transfer Pricing Guidelines 2012 issued by the IRB (“Guidelines”), the determination of an arm’s length price involves multiple steps; from analysis of transactions and functions, characterization of business, identification of comparable transactions, determination of a tested party (one which a transfer pricing method can be applied in the most reliable manner and for which the most reliable comparable can be found), selection and application of transfer pricing methodologies.
Transfer Pricing Threshold in Malaysia
The Malaysian Transfer Pricing Guidelines 2012 prescribes the following financial thresholds for preparation of a comprehensive set of transfer pricing documentation, i.e. Full Transfer Pricing Documentation:
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This material or communication has been prepared for the sole purpose of providing general information to our clients, and is not intended to be relied upon as accounting, tax or other professional advice. Consent has to be obtained from the firm prior to any act of republishing or circulating to the general public. While the information is considered correct at the date of publication, changes in circumstances or updates in tax ruling after the time of publication may impact its accuracy and reliability. We have not, by means of this material or communication, rendered any professional advice or services. Thus, we shall not be responsible for any losses sustained by any person who relies on this material or communication. Please refer to our tax advisors should you require our consultancy services.
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