Transfer Pricing Documentation in Malaysia: How to Prepare It (2025 Guide)
Malaysia appeals to multinational enterprises because of its reliable taxation structure, ease of doing business, and a big pool of multilingual talent. The country’s tax system has played an integral role in attracting businesses from all over the world.
Malaysia has a variety of tax jurisdictions inside its borders, resulting in both international and local transfer pricing legislation. When it comes to transfer pricing in Malaysia, the Malaysian Inland Revenue Board (IRB) has no special priority areas.
Instead, the authorities usually focus on a single sector for a certain period of time since it is simpler to concentrate on businesses with comparable problems.
Nevertheless, tax audit activity in Malaysia has grown significantly due to the growing number of businesses, especially large-scale organizations. Therefore, it is important to be familiar with the process of preparing a transfer pricing document to deal with transfer pricing policies.
In this updated 2025 guide, we’ll walk you through the essentials of transfer pricing documentation in Malaysia, including who needs it, what to include, key deadlines, penalties, and how ShineWing TY Teoh can help.
What Is Transfer Pricing Documentation?
Transfer pricing refers to the pricing of transactions between related parties, such as parent-subsidiary, branches, or companies under common control. Transfer pricing documentation is the set of records that justifies how prices were determined for these controlled transactions.
In Malaysia, TPD is mandatory under:
Section 140A of the Income Tax Act 1967
Income Tax (Transfer Pricing) Rules 2012
This ensures your pricing follows the arm’s length principle, where related party transactions are priced similarly to third-party dealings.
Requirements of Transfer Pricing Documents
Generally, an accounting firm in Malaysia can evaluate your business and prepare a transfer pricing document. You have to prepare a full version of the transfer pricing document if you meet the following criteria:
- The company conducts overseas controller transactions.
- The company has a turnover of more than RM25 million or more.
- The organization offers financial assistance to a related company of more than RM50.
- However, if an organization does not meet these criteria, it can easily prepare simplified transfer pricing documentation to comply with the requirement.
Documents & Information Needed for the Transfer Pricing Document
Malaysian TPD generally consists of a Master File and a Local File in line with OECD’s BEPS Action 13.
Master File
Provides a global overview of your group structure, including:
Group’s organisational structure
Global transfer pricing policies
Intangible assets and financing arrangements
Global allocation of income and activities
Local File
Focuses on your Malaysian entity and includes:
Company profile and organisational structure
Nature and value of related-party transactions
Functional analysis (functions performed, assets used, risks assumed – “FAR”)
Economic analysis and benchmarking
Transfer pricing method selected and justification
Financial data and supporting evidence
You need ample information to create a comprehensive transfer pricing document:
- Information about the company structure includes a thorough chart that lists all people engaged in a regulated transaction.
- Market circumstances and the nature of the company or industry.
- The transaction that is being monitored.
- Strategies, assumptions, and knowledge on the elements that drove the price policies that were established.
- Analysis of comparability, functionality, and risk
- The chosen transfer pricing technique and approach. It is better to rely on professional accounting services in Malaysia to choose a suitable transfer pricing technique and approach.
- Documents that were utilized to create the transfer price document.
- Any additional information, data, or document that the individual considers important in determining an arm’s-length price.
Simplified Transfer Pricing Documentation
The widespread misperception about preparing a simplified transfer pricing document is that taxpayers only need to reveal the following information in the documentation:
- organizational structure
- restricted transactions
- pricing rules
However, this is not the reality because simplified transfer pricing documentation still needs some effort and research to demonstrate that the transfer pricing price is a market price and respects the arm’s length principle.
It’s worth mentioning that taxpayers still need to test their regulated transactions using a suitable technique, but they don’t have to go through the selection process of the five approved transfer pricing methods that are necessarily incomplete transfer pricing paperwork. Depending on the facts and circumstances, taxpayers may still be obliged to do a benchmarking study.
Hence, even if you are preparing a simplified transfer pricing document, you will need the professional services of an accounting firm in Malaysia to get through the process with maximum efficiency.
Benefits
You have to evaluate your company or get it evaluated by professional accounting services in Malaysia to determine whether you have to prepare a simplified or full transfer pricing documentation.
Companies should also consider the cost of preparing the transfer pricing documentation and the potential penalties they can face for non-compliance. Nonetheless, there are some advantages to generating and keeping current transfer price documentation:
- Minimize the chances of an audit and a disagreement with the tax authorities like IBM.
- Ensure maximum compliance with the law.
- Reduce fines in the case of an audit adjustment.
- Authorities in Malaysia recognize creating the full transfer pricing document as an excellent business practice. Accounting firms in Malaysia follow a checkbox in the corporation tax return to indicate if transfer pricing paperwork has been generated to assure compliance.
Who Needs to Prepare Transfer Pricing Documentation?
You’re required to prepare TPD in Malaysia if:
You engage in controlled transactions (goods, services, royalties, IP, loans) with related parties
Your annual gross income exceeds RM25 million and the total related-party transactions exceed RM15 million
For financial assistance (e.g. intercompany loans), thresholds apply if loans exceed RM50 million
Even if you fall below these thresholds, you must still determine arm’s length pricing and retain sufficient records for IRB review.
Key Deadlines and Submission Rules
| Action | Deadline |
|---|---|
| Prepare TPD | By tax filing deadline (Form C) – 7 months after year-end |
| Submit to IRB (on request) | Within 14 days of written request |
| Annual updates required | Yes – if business models or transactions change |
What Happens If You Don’t Comply?
Failing to prepare or submit transfer pricing documentation can result in:
Penalty between RM20,000 and RM100,000 per year of assessment
5% surcharge on additional income adjusted by IRB
Potential tax audit or investigation
In 2021, the IRB collected RM1.8 billion in tax and penalties related to transfer pricing audits (Source: The Star).
2024–2025 Updates You Should Know
Here are some key changes businesses must factor in for 2025:
TP Surcharge enforcement continues: Even if no penalties are levied, the 5% surcharge applies to any upward income adjustment.
Greater focus on benchmarking: The IRB is scrutinizing benchmarking reliability and database selection.
More digital audits: Remote TP audits are becoming more common.
Submissions may move online: A new electronic TPD portal is being piloted for large taxpayers.
Step-by-Step: How to Prepare Your Transfer Pricing Documentation
Identify all controlled transactions and related parties.
Conduct a Functional Analysis: Assess functions, assets, and risks (FAR) across entities.
Choose the appropriate TP method: CUP, RPM, TNMM, Profit Split, or Cost Plus.
Perform benchmarking: Compare your transactions with independent third-party data.
Compile documentation: Include all supporting contracts, invoices, and computations.
Update annually: Revise the report whenever there are significant business or regulatory changes.
Tip: Consider using Malaysian TP-specific databases or services to support your benchmarking analysis.
Frequently Asked Questions (FAQs)
No. You only need to prepare the documentation annually, but submission is only required upon request.
You risk adjustment by the IRB, penalties, and a 5% surcharge. The method used must reflect commercial reality and be supported with valid data.
Not entirely. While full TPD may not be needed if thresholds aren’t met, you still need to prove arm’s length pricing using contemporaneous records.
All In All
Creating and providing transfer pricing documents is important for large-scale companies and multinational enterprises to avoid penalties for non-compliance. If a company chooses not to implement effective transfer pricing policies, it is at the risk of transfer pricing scrutiny from the authorities.
You can easily avoid such issues by hiring professional accounting services of an accounting firm in Malaysia to prepare simplified or full transfer pricing documents, ensure compliance with the law and avoid any penalties related to transfer pricing.
