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Why Should You Audit Your Company?

Why Should You Audit Your Company

Why Should You Audit Your Company

Auditing comes with several benefits. A good auditor can help your company in many ways such as clearing your issues quickly and enhancing your company via the excellent auditing services he or she provides.

 

Though the primary reason for auditing is associated with business and legalities, you should not ignore the psychological facet that is quite significant when handling entities such as banks, clients, and shareholders.

If you perform auditing regularly, you will attract more confidence from the individuals you work with, including government institutions as well. For businesses in Malaysia, there are several audit firms in Malaysia that offer audit services.

Before you are made to understand the benefits of carrying out an audit on your company, you should know what a financial audit is.

What is a Financial Audit?

As soon as an auditor gets to your company, they will carry out a complete and thorough examination of the financial records of your company, including other statements tendered by your accountant(s).

The job of the auditor is to examine and discover any detail that was inadvertently or intentionally left out by your system and put them in a report. While conducting an audit internally is possible, it is advisable to hire an auditor from an accounting firm who isn’t in any way connected to the company so that the report is objective.
Why Should You Audit Your Company-1
Below are a few reasons why you should audit your company:

1. You will be presented with a thorough overview

As soon as the auditors are done with their findings, you will be presented with the final report. Afterwards, you will have a comprehensive overview of how your business is functioning.

Even if you have splashed lots of cash in ensuring that your company has clear records and adhere to every rule, there are going to be little mistakes that ought to be corrected. Also, the report by the auditor will display to you the stable regions of your company.

2. Your company becomes more reliable

If you are the owner of a big company that boasts of upper management or corporate investors, a consistent audit can make your clients and investors believe that your business is going in the right direction. Even if you own a small business or just starting out, you will derive several benefits from the reliability your company will display to tax authorities.

Because you have an audit report, tax officials will be able to depend on these reports to ascertain your level of taxation or other matters that interest them.
Why Should You Audit Your Company-2

3. Gives you insight into the direction of your company

With an audit carried out by an expert, you will have the best insights into the aspects of your business that are performing well and those that are underperforming. For areas that display no error, you will know that those areas don’t require any recalculations to your original business plan.

While those areas that display the issues, however, requires a careful inspection such as: how they are activated and how you can rectify the problems before they end up hurting the company.

4. Enhance your credit rating

If you own a business that is quite strong and expands at regular intervals, your shareholders, banks, and investors should know all about this business of yours. Having a consistent audit report will enhance your relationship with stakeholders or financial bodies that you are in business with.

Your investors will want to know how successful your business is, and a financial statement is the best way to do that. Also, before a bank offers you a loan, it would want to be sure that you are capable of replaying the loan; an audit report is the best proof to display that you have the required resources to repay the loan.
Why Should You Audit Your Company-3

In a Nutshell

The regular audit of your company’s financial statements is essential to the reliability of your company. With an audit, you can indicate and resolve any internal problems that might ultimately bring down your company.


By auditing your company, you tend to prove to your investors and shareholders that you have the best intention for your company, and this can enhance the trustworthiness of your company. Looking for a reliable auditing firm, get in touch with us. 

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Duties of Auditors in Malaysia

Duties of Auditors in Malaysia

Duties of Auditors in Malaysia

In Malaysia, a qualified auditor is someone that has been approved by the Ministry of Finance.

 

According to Company Law in Malaysia, all registered companies — publicly listed, private equity firms, joint venture capital — are required to have a professionally certified auditor. The auditor is charged with the responsibility of going through the company account and ensuring that all necessary procedures are followed in the preparation of the account. It is important to know that the account are not to be prepared by the auditor but to be verified by him or her.

 

The standard procedure is to create an end to end checkup system for the company account such that there are no discrepancies whatsoever. While the directors of the company are required to prepare the account of the company, the auditors are required to check for any imbalanced rationales or factors.

 

At the end of every business year, companies are required to present their shareholders the audited financial statement at the annual general meeting (AGM) that points to how business was operated throughout the year and possibly the expectation of the business for the new year.

Duties of Auditors in Malaysia-1

Duties Of An Auditor

1. The number one duty of an auditor is to check that the companies account has been drawn up properly and that they follow the Malaysia and Companies act of 2016.These duty perhaps is the drive that makes an auditor wear the face of a stranger while performing their duties for their organization. They are responsible for cross checking every little detail that goes into the financial accounts of their organization.

 

2. An auditor is responsible for giving informed opinion about the position of the account of their organization.

They can tell whether the account of the company truly implies the financial position of the company and that the shareholders and the public (in a case where they are publicly listed) are not charmed with an engineered financial accounts of the company.


3. Their job involves making sure that no member of the organization regardless of their power or position is allowed to tamper with the true financial position of the company. The auditors’ license and most importantly goodwill and reputation lies on this.


They must give the shareholders a complete assurance that the financial statement of the organization is untampered with.


4. An auditor must ensure that all accounting papers, and necessary records stipulated to be kept by the Malaysia and Companies act are all well-kept without any speck of atrocity.


5. Other responsibilities of an Auditor in Malaysia include:

  • Auditors are responsible to the shareholders of a company. They understand that while their duties are completely to the company, their loyalty is to the shareholders.
  • Auditors have the right to enquire any member of the organization about any information that will shed light on the true financial position of the company.
  • An auditor is expected to attend all annual general meeting (AGM) with the shareholders and any emergency meeting as deemed fit by the company.
  • In a case where the company has subsidiaries, auditors of the organization at all the branches are requested to submit their findings to the general auditor for the audition of a consolidated financial statement. Auditors at the subsidiaries are also required to give access to their books as requested by the general auditor.

For more information about auditors and accountants, fell free to get in touch with us.

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Avoid These Common Malaysian Tax Offences

tax payment

Avoid These Common Malaysian Tax Offences

If there is anything that business people cringe at, it’s at the thought of paying taxes. In 2017, a lot of Malaysian top notch celebrities were owing taxes and the Malaysian tax authorities were right on their tail.

One would think that since these people earn a lot, paying taxes shouldn’t be a problem to them but just like it is a problem when you earn so little money, it is even a bigger problem when you earn a higher income. The logic behind thus is not far-fetched.

The Malaysian tax system is progressive in nature and so, there is a range of higher income you earn that your taxes will become higher in rates than those earning less than you. Those earning less than the stipulated government range get a fixed tax rate that they must deliver on unfailingly.

In this blog post, we’ll be showing you some common tax offences you should avoid an all cost.

1. Bad Tax Advice

The first worst thing that can happen to anybody in any issue like tax payment that they are naive about us getting a compelling bad advice. It’s like putting the wrong foot first in a dance, every other step will definitely be a bad movement.

If you feel you need to understand how a few things work about taxes and maybe having a streamlined advice for your own tax payment, it is always better to find a professional to dish that advice not just someone who perhaps read economics in school.

The importance of having a professional advice you cannot be overemphasized. If you find out that you cannot get any professional advice from people around you then it is best to visit the nearest Lembaga Hasil Dalam Negeri (LHDN) around you.
counting taxes

2. Failure to submit tax return forms

Everyone is expected to submit their personal tax return form by the 30th of April and for those doing business, the 30th of June every year unfailingly.

It becomes an offence if these date passes and you as a rightful taxpayer did not make your submission. You can be liable to a fine raging from RM200 to RM20,000 or face imprisonment for not exceeding 6 months or both.

In addition, if not submit for 2 years or more, the fine is increased to RM1,000 to RM20,000 and special penalty equal to treble the amount of tax or additional tax. If you are unsure whether you are required to submit tax return and pay the income tax, it is advisable that you visit the tax agent to assist you on this matter.

In a case where you’ve already started paying taxes and filing tax return forms, then you shouldn’t ever forget to keep you from rolling in on it before the stipulated date.

3. Not disclosing your true income

This is a terrible offence to commit and it is classified under one straightforward order- tax evasion. The Malaysian law does not take it easy on those evading taxes. Penalty for omission or understatement of income can be equivalent 100% of the tax undercharged.

 

Therefore, to ensure that you calculate your tax return figures properly and if you can’t do that yourself, employing the skills of an audit firm in Malaysia is a viable option especially for business owners.

 

One other important thing is that the intricacies of tax laws change yearly and as such, tax payers must ensure that they evolve with the trend as it goes. Any slack in the knowledge gap about your supposed tax system can have government tax officials knocking on your door years later when the money is probably even finished.

 

To understand your standings about taxes, get in touch with us today on our website.  In case of any query, IRBM is always contactable through the online system, the Live Chat of HASIL and Help Line of HASIL at 03-89111000.

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What Does It Take to Register Your Company in Malaysia?

registering your company

What Does It Take to Register Your Company in Malaysia?

One of the best steps a business will ever take is registering as a legal entity. Business registration gives the business and its owners of administrators a proper perspective of what business truly is. Doing business without proper registration is just illegal.

The business is just there, unregulated by any institution yet it keeps making money from the economy of the country. In fact, unregistered business faces higher risk by not being a legal entity because a lot of government support for business will not pass through their way at all.

They will not be entitled to credit facilities from standard organizations, and in a civilized environment like in Malaysia, consumers might not even purchase their goods or services if the business is not properly registered.

The process of company registration in Malaysia especially for foreign companies is an easy one. The most important factor is to have the necessary papers and documents. Also, following due process in the incorporation process is very important.

While seeking for a work permit for your company, you should first decide on what the structure of your business will be like. Is it going to be a 100% foreign control company or a joint venture company with some Malaysian parties?

100% Foreign Controlled

This type of business structure is when the proposed company will be bringing all the workers and expatriates from their own country. Though the Malaysia government allows this on a very rare cases where the company’s operations can only be handled by staff that are well trained for it and such well-trained personalities are not present in Malaysia.

While the 100% foreign ownership might be learnt in some sectors of the economy, some secrets have been specially placed as a matter of law that there cannot be a 100% foreign ownership. A few examples of these sectors are: Education, Petroleum (Oil and Gas), Tourism, Agriculture, Banking and Finance.

This list however changes from time to time and as such business owners should always make sure to do their due diligence on a consistent basis to avoid falling on the wrong side of government laws.

The minimum Paid up capital for consultancy and advisory services and business is RM 500,000. And a minimum of RM 1million for import, export, trading and restaurants business.
shaking hands

Joint Venture Company

This type of business structure involves the participation of Malaysian nationals in the business. At least a minimum of 50% ownership must be held by the Malaysian business counterpart. The business is required to have a minimum paid up capital of RM 350,000.


  1. Define the focus of the business, know what type of business you’re about to embark on and go through all regulations related to such sector. Ensure that you decide on what structure of business you want to take and how you would run the processes. Make up your mind that all processes you’ll go through will be legal. This will ensure that you put a good foot forward on starting your business.
  2. Decide on who the directors of the companies will be. Leadership is very important in a business, the more so, you’ll need to fill their names and those of the shareholders in the business.
  3. Choose the name you’ll like your business to bear. This process is very important because it must not clash with the business name or identity of another business. You’re to run theses proposed names on the business name availability check.
  4. Prepare the requested registration documents and check that they all need standards.
  5. The commissioner’s office will get back to you either with your incorporation certificate or a request to update some document that is required to process not application.


For more information, please do not hesitate to get in touch with us. 

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Tax avoidance or tax planning?

money

Tax avoidance or tax planning?

There is a popular saying that “the only constant thing in life is change”. This means that there is always an evolution going on somewhere and we can choose to acknowledge it or not.

This however has proven to be much truer in the business world. The ways and processes of conducting business in the last decade is dramatically different from the ways in which we conduct business operation in this era.

These change has permeated all fibers of the business end and in this blog post, we’ll be discussing one of the issues that has changed the face of business.

In a bid to maximize profit and minimize cost including taxes, companies and organizations around the world now have strategic planning and thinking processes that allow them to make more money with reduced cost of business.

One of the very cost they try to avoid is tax and one of the best ways in which they perpetuate this legal reduction in their cost is through transfer pricing.

How To Use Transfer Pricing?

The concept of how transfer pricing is used in tax avoidance can be explained in a situation as follows:


A company which has another related party company based in a different country transacts with each other at a discounted or excessive price for the goods or services with the intention of achieving a tax advantage.


The companies may be under the same management, share the same parent company or simply share a strategic partnership. Imagine that company A is a subsidiary of company B. Company A produces rice in Malaysia and exports to company B.


Company A, in the process of trying to reduce its taxes decides to sell its product to company B at a price that is lower than the average market price. This would result in a lower tax outflow for Company A and ultimately a higher profit for the Group as whole.


In a nutshell, a tax advantage is achieved by tweaking the prices between organizations. It’s also common for profit earned in the trade to be transferred to a lower tax jurisdiction.


Hence, most governments these days, including Malaysia have introduced their own transfer pricing regulation. Transfer pricing in Malaysia is well regulated and watched to avoid shady type of tax avoidance schemes.


These companies fail to understand that while their actions might seem profitable to them in the short term, it is at the detriment of the economy and ultimately the country.


To know more details about transfer pricing, get in touch with us.  In case of any query, IRBM is always contactable through the online system, the Live Chat of HASIL and Help Line of HASIL at 03-89111000.

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Types Of Transfer Pricing

transfer pricing

Types Of Transfer Pricing

Transfer price is defined as the price at which two parties transact with each other. For example, during the trade of supply or labor between the two departments. These prices are used when two individual parties of a big multi-entity firm are treated as though they are run separately. This is common in very large corporations. A transfer price is also called transfer cost.

There are five types of transfer pricing methods that can be applied. Three of the five are traditional pricing methods while the last two are transactional pricing methods.

Traditional Pricing Methods

Traditional transaction methods work by measuring the terms and conditions of actual transactions between independent entities and compares them to a control transaction. There are three types of transfer pricing under this method:

1) The CUP Method

The CUP method is a method that compares the terms, conditions and the price of a controlled transaction to those of a third party transaction. In this method, there are two types of third party transactions. The first type is a transaction between the taxpayer and an independent enterprise. This is known as internal Cup. While the second type is a transaction between two enterprises known as external Cup.

2) The Resale Price Method

This is also called the “Resale Minus Method.” The beginning of this method takes note of the price at which an associated enterprise sells products to a third party. This price is known as the “resale price.” This resale price is then altered with a gross margin, this is done by comparing gross margins in comparable uncontrolled transactions.

When this is done, the costs associated with the purchase or the products, such as custom duties are deducted from the price. After all the deductions, what is left is the arm’s length price for the controlled transaction between associated enterprises.

3) The Cost Plus Method

This method compares gross products to the cost of sales. The first thing to do is to determine the costs incurred by the supplier in a controlled transaction for products sold to a related purchaser. After that, an appropriate mark-up is added to the cost in order to make a profit.

After adding this markup to the cost, it can then be considered at arm’s length. When applying this method, you are required to identify a mark-up on costs applied for comparable transactions between independent entities. This has to be done before this method can be applied.

Transactional Pricing Methods

Unlike the traditional method, this method does not measure actual transactions. Rather this method measures the net operating profits that are gotten from controlled transactions and compares them to profit level realized by independent enterprises that are engaged in comparable transactions. There are two types of price transfer methods under this.

1) The Transactional Net Margin Method (TNMM)

In the TNMM, you will need to calculate the net profit of a controlled transaction of a related enterprise. This net profit is then compared to the net profit realized by comparable uncontrolled transactions of independent entities.

This method requires that the transactions are broadly similar before they can be compared. For this method, a comparable uncontrolled transaction can be between a related enterprise and an independent enterprise or between two independent enterprises.

2) The Profit Split Method

There are times when associated enterprises engage in transactions that are interrelated. This means that these transactions cannot be examined on separate basis. For transactions in this category, associated enterprises just split the profits realized.


This method looks at the terms and conditions of these transactions by extrapolating the division of profits that independent enterprises would realize from participating in those transactions.


These are the different types of transfer pricing. Still have questions? Please feel free to get in touch with us.

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Accounting Vs Bookkeeping

accounting vs bookkeeping-3

Accounting Vs Bookkeeping

As a small business owner, you will need your financial data to be very accurate and also current as this will help your business to maintain healthy cash flow. However, as your business starts to grow and expand, the act of financial management becomes more cumbersome because now more money is flowing in and out of the business. At this point, you will not be able to manage your finances on your own because it will be time-consuming and you will not have that time.

When your business gets to this level, you will need help but most business owners are confused on what kind of help to get. Should they hire a bookkeeper or an accountant? Sometimes both works are used interchangeably but are they really the same thing? The answer is No.

So how does a bookkeeper differ from an accountant?

Bookkeeping vs. Accounting

Importance of Vacancy Tax

Bookkeeping is defined as the process of recording the day-to-day transactions of a business and it is the bases of building a financially successful business. So what are the things that are done in bookkeeping?

Bookkeeping is made up of activities like:
  • Recording Financial transactions
  • Posting debits and credits
  • Producing invoices
  • Making sure that the subsidiaries, general ledgers and historical accounts are balanced.
  • Managing payroll.

Managing the general ledger is the key component in bookkeeping. This general ledger is the document where the bookkeeper records amounts of sales and expenses that were made. The process of doing this is called posting. A ledger can be created with a software, or a computer excel spreadsheet or simply using a piece of paper depending on the choice of the business.

These are the functions of the bookkeeper and the thing is, the work gets more complex as the business increases in size. This is because all the transactions must be recorded and if the amount of sales and purchases keep increasing, the work gets more tasking.
accounting vs bookkeeping-2

Accounting

The accounting process is a high-level process that uses the information compiled by a bookkeeper or a business owner to general financial models that will help the business move forward.

The process of accounting is different from bookkeeping because accounting is subjective while bookkeeping is transactional. The accounting process is comprised of:
  • Recording expenses that have been made but not yet recorded in the bookkeeping process.
  • Preparing the financial statements of the business.
  • Running analysis of operation costs.
  • Completing income tax returns.
  • Helping the business owner to understand the impact of his financial decisions.

The accounting process provides reports that merge the important financial indicators of a business. The result is that the business owner better understands the state of his business and is aware of how profitable the business is.

The accounting process takes the information in the ledger and breaks it down in such a way that it reveals the bigger picture of the business. This helps the owner to plan and set down strategies for growth and business advancement.
accounting vs bookkeeping

The Difference

Basically the difference is that while the bookkeeper is tasked with recording that transactions and keeping the business financially organized, the accountant helps to make the sense of the financial records. The accountant is more like a consultant.


So now that you know the difference, you need to ask yourself: What do I need for my business? Is it an accountant or a bookkeeper?


If you are still confused, you can simply employ the services of an accounting firm in Malaysia, who will help you manage your finances and you will not have to worry about a thing. Feel free to get in touch with us.


Your finances is the most important part of your business. Take it seriously.

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8 Reasons Why Bookkeeping Is Essential For SME

bookkeeping

8 Reasons Why Bookkeeping Is Essential For SME

Bookkeeping is very vital for SME businesses because it helps them to maintain accurate financial records. Despite its being important, many business owners fail to employ it in their business process. Most of them do bookkeeping because it is required under law not because they see it as necessary.

 

But the truth is that bookkeeping can take your business to a whole new level.

Why Bookkeeping Is Essential For SME

1) It Helps Your Budget

Bookkeeping helps you to maintain your budget. When you have all your income and expenses outlined in an organized manner, it becomes easier to perform an audit to know where you stand as a business.


With your budget intact, you can plan ahead and decide where you want your business to be financially in the near future. It also helps you to plan for future expenses.

budgeting

2) Tax Preparation

In Malaysia, businesses are required to file a tax return every year. But what happens most times is that when it’s time to file the report, many business owners are trying to get the paperwork right because their book is not well organized. This makes the whole process tedious and annoying.

However, with bookkeeping, the tax filing process becomes easier. You don’t have to mess up your office looking for missing paperwork. So when bookkeeping is in place you are prepared for tax time.
tax preparation

3) Analysis

Bookkeeping is an analysis tool, it helps you to analyze your business and determine where your business is based on performance. When you do bookkeeping, you generate financial statements and these statements helps you to analyze the business properly.

When you are analyzing your finances, you will be able to track your cash flow. It helps you know what is working in your business and what is not.
analysis

4) Helps you Plan

Bookkeeping gives you the past financial performance of your business. This past performance helps you to plan for the future. This is because when you have a view of the past you will see areas of the business that needs adjustments and areas that you may have to cut off totally.

business planning

5) Helps you report to investors

At one point or the other in your business, you would need investors and they will want to know how your business is performing financially. They will want to look at your balance sheet, your income statement and your cash flow statement.

These statements are all products of bookkeeping and it helps your investors to know where the business is and how to invest. When you practice bookkeeping, these financial statements will be easily available and it will show your investors that you are serious with business.
investor report

6) Financial Management

Bookkeeping is essential because it allows you to be in control of the finances of your business. It shows you how much money you spend and also gives you an overview of how much money you owe. This way you are informed and you make good decisions based on that information.

financial management

7) Monitor Profit and Growth

Many business owners do not even know if their business is growing or not because they do not have any indicator for monitoring growth. But if you practice bookkeeping or will help you to know the profitability of your business.

You will know if you are making a profit or running at a loss. It will help you know if your business has taken a quantum leap or not. Understanding the growth of your business goes a long way in managing your business effectively.
profit and growth

8) Better Cash Flow

Finally bookkeeping helps you to maintain a good cash flow in your business. Money is not held up in unnecessary debts and your business is taken to a whole new level.

cashflow
The importance of bookkeeping cannot be overemphasized. It’s something you have to do if you are an SME in Malaysia. It’s vital for your growth. To find out more about bookkeeping services in Malaysia, feel free to get in touch with us.
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What You Should Prepare For Your First Business Audit

audits

What You Should Prepare For Your First Business Audit

Most business owners are scared of the word “audit”, it has been made to look like a bad word because once it is mentioned, and the business owner starts thinking about the Inland Revenue Board (IRB). However, they fail to understand that the IRB tax audit is not the only type of audit on the planet, there are others which a beneficial for your business.

Many businesses, mostly multinationals do internal self-audits per annum to make sure that their books are accurate. External audits may be necessary if your business is applying for certifications or any other programs. And if your tax return is not accurate then the IRB can audit you.

But the question is, what is an audit?

For a small business, an audit is an examination of the accounting books and tax returns of the business to ensure that that are correct and are compliant to the relevant laws.

How is a small business audit conducted?

There are different types of small business audits but all of them share the same characteristics and they involve similar processes. The auditor is the person who performs the audit, he can either come from within the organization if it’s an internal audit or from outside the organization for an external audit. The auditor will then do a careful evaluation of your accounting books and financial statements.


For your auditing process, you can either give the auditor a physical copy of your books or you can give the auditor access to your accounting software. Usually the auditor goes through a year’s worth of financial data. If you want the auditing process to be faster you will have to make sure that your books are organized and not messy. This means that you would have to maintain a good bookkeeping process.


When the auditor is done, he sends you an audit report. This report is a statement that contains the auditor’s identity, the scope of the audit and if the financial records of your business is accurate or not.

Types of Small Business Audits

There are basically three types of small business audits.

1) Internal Audit

This is an audit conducted within the business by the business owner. It is carried out by the accounting department of the business. This is usually done once a year and it is not submitted to any external body. It is solely for the good of the business and its owner. An internal audit can also be outsourced to an audit firm in Malaysia.

2) External Audit

An external audit is also called an independent audit. It is carried out by someone outside the business. It is independent because the auditor is not loyal to the business and will not compromise the results of the audit.

This type of audit is carried out in order to comply with a legal requirement or maybe to get a certification. After the audit the external auditor will provide you with an audit report.

3) IRB Audit

If your tax returns shows discrepancies then the IRB will impose tax penalty on the discrepancies during tax audit on your business. If you are innocent, this is not a process to be scared of. It is actually something you should embrace as it shows transparency.

How do you prepare for an audit?

You prepare first of all by getting your books in order. Make sure that your books are organized. Then after that you can conduct your internal audit to make sure everything is in place before submitting your business for an external audit or an IRBM audit.

 

Still have questions? Please feel free to get in touch with us on our website.  In case of any query, IRBM is always contactable through the online system, the Live Chat of HASIL and Help Line of HASIL at 03-89111000.

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How Does Transfer Pricing Work In Malaysia

transfer pricing in Malaysia

How Does Transfer Pricing Work In Malaysia

Transfer Pricing Malaysia

Transfer pricing is an accounting practice by which inter-company generally makes reference to companies who are part of the same Group or related companies.

Over the years, Malaysia has become one of the fastest growing business hubs in the world because of her business friendly environment and central location. More than half of the world’s population lives within a 5-hour radius of Malaysia, and several business tycoons are looking to establish their companies on her soil.

Due to this, tax audit activities have intensified especially for Transfer Pricing. Tax payers who are involved in related company transactions must prepare “transfer pricing documents” which needs to be submitted to the tax authorities when requested.

Transfer Pricing Obligations in Malaysia

Malaysia has a list of items that should be included in the Transfer Pricing Documentation as follows:
  • The organizational structure, containing an organization chart which shows the parties involved in any controlled transaction.
  • Nature of business/ industry and market conditions
  • The controlled transaction.
  • Pricing policies
  • Assumptions, strategies, as well as information pertaining to factors influencing the pricing policy established.
  • Functional, comparability, and adequate risk analysis.
  • Selection and Application of the transfer pricing method.
  • Financial information
  • Documents used in developing the transfer pricing system index.
  • Any other relevant information or document for determining price.
Note that all transfer pricing documentation must be written in English or Bahasa Malaysia. Also note that it is not mandatory to submit transfer pricing documentation when filing a tax return. Nevertheless, these documents must be provided to the Malaysian Inland Revenue Board (IRB) within 30 days, and it must be kept in the administration for 7 years.

The Transfer Pricing Guidelines now has two other requirements in addition to the transfer pricing documentation. These are the Country-by-Country reporting, and the Master File.

Country-by-Country Reporting (CbCR)

This applies only to Multinational Enterprises (MNEs) with consolidated revenue of RM3 billion or more in the previous financial year.

In the event that the Malaysian company is the ultimate holding company of an MNE that fulfils the requirement above, the company should prepare and submit the following documents:
  1. Complete the notification for reporting entity to notify the Director General in writing if it is the ultimate holding entity on or before the last day of the reporting FY (i.e. 31 December 2019 if the tax payer’s year end is 31 December 2019). Please note that the notification letter will have to include details of all Malaysian and foreign non-reporting constituent entities
  2. Complete the CbyCR and submit it to the tax authorities on or before 12 months from the last day of the reporting FY (i.e. 31 December 2020 if the tax payer’s year end is 31 December 2019).


Malaysian companies who are subsidiaries of the MNE (either Malaysian based or foreign based ultimate parent) only has to fill up and submit the notification letter to notify the IRB in writing of the identity and tax residence of the reporting entity.

Master File

The IRB has also mandated the submission of a Master File alongside the transfer pricing documentation (also known as Local File) and CbCR. Any MNE which meets the criteria for submitting the CbCR in Malaysia, must also present the Master File.


What would happen when you fail to comply with the rules of transfer pricing Malaysia?


The following penalties or fines will be imposed on you when you fail to comply with the rules:

  • Omission or understatement of income will attract a 45% penalty
  • Failing to provide a contemporary transfer pricing documentation will attract a payable tax of 35%;
  • If transfer pricing documentation is not prepared according to the guidelines, a payable tax of 25% is the fine.

For more information, feel free to get in touch with us.  In case of any query, IRBM is always contactable through the online system, the Live Chat of HASIL and Help Line of HASIL at 03-89111000.