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Transfer Pricing and BEPS 2.0: What It Means for Multinational Companies in Malaysia

As global tax regulations tighten and cross-border transactions grow more complex, multinational companies (MNCs) in Malaysia are under increased scrutiny when it comes to transfer pricing. 

With the implementation of BEPS 2.0 (Base Erosion and Profit Shifting) and enhanced local transfer pricing guidelines, understanding your compliance obligations is no longer optional — it’s a strategic priority.

In this article, we’ll break down what transfer pricing in Malaysia means in the context of BEPS 2.0, its implications for MNCs, and how your business can stay compliant and competitive.

What Is Transfer Pricing?

Transfer pricing refers to the pricing of goods, services, and intellectual property (IP) exchanged between related parties across borders.

For example, if a Malaysian subsidiary sells products to its parent company in another country, the pricing of that transaction must be conducted at arm’s length — meaning the price should reflect what independent third parties would charge.

Malaysia’s transfer pricing framework follows OECD guidelines and is governed under the Income Tax Act 1967 and the Transfer Pricing Rules 2023, updated from earlier versions to align with global standards.

Learn more: How Does Transfer Pricing Work in Malaysia

Introducing BEPS 2.0: A Global Tax Overhaul

BEPS (Base Erosion and Profit Shifting) is an OECD-led initiative that addresses tax avoidance strategies used by multinational enterprises to shift profits to low or no-tax jurisdictions.

BEPS 2.0 is the next phase and is split into two pillars:
  • Pillar One: Targets large digital companies by reallocating a portion of global profits to markets where customers are located (even without physical presence).
  • Pillar Two: Introduces a global minimum tax rate of 15% for MNCs with annual revenues exceeding €750 million.
Though BEPS 2.0 is a global framework, Malaysia is actively aligning its tax policies to support its implementation — making it essential for MNCs operating here to prepare early.

Official guidelines: Malaysia Transfer Pricing Guidelines PDF

Why Transfer Pricing Compliance Matters More Than Ever

With the introduction of BEPS 2.0 and enhanced Malaysian transfer pricing rules, the risks of non-compliance have grown substantially. Key changes that businesses must take note of include:

  • Stricter documentation requirements
  • Higher penalties for non-compliance or late submission
  • Increased focus on intangible assets and IP-related transactions
  • More aggressive audit enforcement by LHDN (Inland Revenue Board of Malaysia)
Read more:
Malaysia Transfer Pricing Rules & Changes Impact
New Penalties for Transfer Pricing in Malaysia

Common Transfer Pricing Challenges Faced by MNCs in Malaysia

Even well-established multinationals can face challenges under Malaysia’s evolving transfer pricing framework. Common issues include:

  • Incorrect benchmarking of related-party transactions
  • Inconsistent documentation across multiple entities
  • Failure to prepare contemporaneous transfer pricing reports
  • Misclassification of intangible assets
  • Unclear justifications for management fees and royalties
These issues can lead to audits, adjustments, penalties — and reputational risk.
Related read: Demystifying Transfer Pricing Audits in Malaysia

BEPS 2.0 + Transfer Pricing = A Strategic Shift

The convergence of BEPS 2.0 and stricter local rules is prompting many MNCs to rethink their group structures and pricing policies. Key considerations include:

  • Restructuring supply chains to ensure proper value creation and substance in each jurisdiction.
  • Revisiting IP ownership and licensing agreements, especially for digital services or high-margin intangibles.
  • Adopting technology for real-time data collection to support future audits and disclosures.
The goal isn’t just compliance — it’s to align tax strategy with commercial reality.
Explore: Transfer Pricing for Intangible Assets in Malaysia

Malaysia’s Simplified vs. Full Documentation Requirements

MNCs operating in Malaysia should understand the two levels of transfer pricing documentation:
Documentation Type Eligibility Requirements
Simplified SMEs or businesses below threshold Basic details of controlled transactions, no benchmarking
Full Gross income > RM25 million & related party transactions > RM15 million Full transfer pricing documentation, benchmarking study, functional analysis
Failing to prepare documentation — even simplified — can result in hefty penalties and tax adjustments.
Compare both options: Simplified vs. Full Transfer Pricing Documentation

How ShineWing TY Teoh Can Support Your Transfer Pricing Needs

With a growing focus on transfer pricing in Malaysia, business owners and CFOs are increasingly seeking expert support. At ShineWing TY Teoh, we provide tailored solutions for:

  • Preparing full or simplified transfer pricing documentation
  • Benchmarking studies aligned with OECD and Malaysian guidelines
  • Advisory on group restructuring and intangible asset arrangements
  • End-to-end audit support and risk assessment
  • Integrated tax and accounting services in Malaysia
We don’t just help you stay compliant — we help you plan proactively and mitigate future risks.

Conclusion: Prepare Now, Compete Better

As BEPS 2.0 gains global traction and Malaysia strengthens its transfer pricing enforcement, MNCs must act now to avoid compliance pitfalls. Transfer pricing is no longer just a tax requirement — it’s a critical business strategy.

By understanding your obligations and partnering with an experienced accounting firm, you can align global operations, optimize tax positions, and build sustainable business structures.

Further reading:
Need help navigating Malaysia’s complex transfer pricing landscape?
Contact ShineWing TY Teoh today for a personalised consultation.
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