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Transfer Pricing Updates for 2021

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The Finance Act 2020 was gazetted on 31 December 2020 and has been operative since 1 January 2021. Amongst others, there are several new provisions found in the Finance Act 2020 that aim to strengthen the enforcement for transfer pricing (“TP”) compliance in Malaysia. On another note, the Inland Revenue Board ("IRB") has also updated the timeline for furnishing TP Documentation (“TPD”) in the Malaysian TP Guidelines ("MTPG") on 29 January 2021. 

The key changes that will take effect from 1 January 2021 are:
  • Section 113B of the Income Tax Act, 1967 ("ITA")
    Introduction of new penalty of between RM20,000 to RM100,000 for failure to submit TPD to the IRB on time.  
  • Updated para 11.2.3 and 11.3.5 of MTPG
    Period to submit TPD to IRB has been shortened from 30 days to 14 days, and circumstances where no penalty is imposed by the IRB.
  • Section 140A(3C) of the ITA
    Introduction of new surcharge of not more than 5% on TP adjustments made during a TP audit. TP adjustments are adjustments made to transfer prices between related parties which the IRB does not consider to be at arms’ length.
  • Section 140A(3A) & (3B) of the ITA
    The IRB is empowered to disregard the structure in a controlled transaction and make TP adjustments to the structure that the IRB thinks fit.

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