|Lee Hishammuddin Allen & Gledhill|
|Shearn Delamore & Co|
|Wong & Partners|
|Raja, Darryl & Loh|
There have been several updates to the Malaysian transfer pricing rules since their introduction in 2003 as the authorities' focus on the area has intensified. This includes the introduction of formal legislation in 2009 and its subsequent revision in 2012. The 2015 Budget introduced a further change with the extension of the statute of limitations to seven years from five years for transfer pricing audits specifically.
Malaysia, in its role as an OECD observer to the BEPS Project, has participated in the discussions around many of the topics in an effort to come to a global standard for BEPS implementation. Following the release of final reports in October 2015, Malaysia has been considering whether to include the minimum standards of the initiative in its domestic legislation, particularly Action 13 on country-by-country reporting (CbCR).
The government set up a special committee to study the recommendations and its first step was to sign the agreement on the automatic exchange of CbCR in January 2016. On March 24 2016, the government announced plans to update the existing local TP documentation requirements to include the master file and local file concepts and introduce the CbCR requirement, expected to be effective from January 2017.
Moreover, Malaysia has also indicated its interest in engaging the multilateral instrument under Action 15 to streamline the implementation of global tax treaties.
"Malaysian multinationals with international tax structures will need to begin assessing the impact to their business operations now," said Jagdev Singh, head of tax and transfer pricing at PwC.
These proposed updates will not be the only regulation changes to impact taxpayers in the coming year. New thin capitalisation rules are expected to be effective from January 1 2018 and some BEPS recommendations such as anti-avoidance provisions, may be adopted under the existing framework and not require separate legislation.
The Malaysian authorities are scrutinising transfer pricing policies more closely, but are also looking towards effective dispute resolution. Penalties are reduced for voluntary disclosure and the advance pricing agreement (APA) process is proving popular with taxpayers.
"I think APA will become more important and I'd expect more taxpayers to come on board to deal with all uncertainties rather than waiting for audits to happen," said Singh.
Royal Malaysian Customs Department
Jabatan Kastam Diraja Malaysia,
Kompleks Kementerian Kewangan No 3, Persiaran Perdana, Presint 2, 62596, Putrajaya
Tel: +60 3 8882 2100/2300
Inland Revenue Board
Headquarters Inland Revenue Board of Malaysia
12th Floor Menara Hasil, Persiaran Rimba Permai, Cyber 8, 63000 Cyberjaya Selangor
Tel: +60 3 8313 8888
Fax: +60 3 8313 7848 / +60 3 8313 7849
(As of January 1 2016)
|Corporate income tax rate||24% (a)|
|Real property gains tax rate||30% (b)|
|Branch tax rate||25% (a)|
|Royalties from patents, know-how, etc.||10% (c)|
|Distributions by real estate Investment trusts and property trust funds||10/25% (e)|
|Payments to non-resident contractors||13% (f)|
|Payments for specified services and Use of movable property||10% (g)|
|Other income||10% (h)|
|Branch remittance tax||0%|
Net operating losses (years)
Source: EY 2016 Worldwide Corporate Tax Guide