Transfer Pricing Audit Framework 2019
The Malaysian Inland Revenue Board (“MIRB”) released the Transfer Pricing (“TP”) Audit Framework 2019 (“TPAF 2019”) to replace the 2013 version (“TPAF 2013”) effective 15 December 2019.
Highlighted below are some of the key points from the TPAF 2019:
- TP audit coverage period
- Generally, 3 to 6 years and can be extended up to 7 years of assessment depending on the TP issues. However, this maximum coverage period does not apply to audit cases involving fraud, wilful default and negligence
- Case selection
- The main criteria for audit selection is based on significant related party transactions amount
i. Submission of documents and information – Within 14 calendar days upon request.
ii. Submission of TP documentation – Within 30 calendar days upon request.
iii. Submission of presentation slides (field audit) – At least 7 calendar days prior to the commencement of the field audit.
iv. Appeal against the audit findings and proposed tax adjustments – Within 18 calendar days from the date of the letter.
v. Appeal against the notice of additional assessment – Within 30 calendar days from the date of the letter.
In addition to the details above, the framework also emphasizes on the new penalty rates as follows:
- Understatement or omission of income – 100%
- Taxpayer did not prepare TP documentation – 50%
- Taxpayer has prepared a comprehensive and good quality TP documentation but failed to submit within 30 days upon request – 30%
- Taxpayer has prepared and submitted the TP documentation with the voluntary disclosure but not in accordance to the requirements – 20%
- Taxpayer has prepared a comprehensive and good quality TP documentation and submitted within 30 days upon request – No penalties
- Taxpayer has prepared and submitted a comprehensive and good quality TP documentation with the VD in accordance to the requirements – No penalties
Please keep in mind that the TPAF 2019 also specifically discusses the consequences of requesting for extension of time for submission of TP documentation. Even though taxpayers have successfully obtained the extension of time, it will still be deemed as late submission as taxpayers failed to submit within the stipulated time frame of 30 calendar days.
Based on the above, it is evident that the TPAF 2019 is MIRB’s attempt to emphasize compliance and introduce tighter deadlines for taxpayers to submit the relevant documents and information. Hence, taxpayers are encouraged to ensure that the TP documentation and other information is prepared in a timely manner and are readily available for submission.
T S TEOH
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