Effective from Jan 1,2021, taxpayers that fail to submit the contemporaneous TP documentation within 30 days upon request by the IRB can be fined between RM20,000 and RM100,000 and/or to imprisonment for a term not exceeding six months. Practically all tax payers that have related party transactions need to take heed of this new penalty.
TRANSFER pricing (TP) refers to inter-company pricing arrangements for the transfer of goods, services and intangibles between associated or related persons.
Transfer pricing laws and guidelines are in place to ensure fairness of the transactions by enforcing the arm’s length rule. Simply put, taxpayers are required to demonstrate that the related party transactions are carried out in an arms-length manner i.e. comparable to third party transactions and to demonstrate this, transfer pricing documentation is to be prepared accordingly.
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