The technical update on the changes in Transfer Pricing (hashtag#TP) ruling in Malaysia from the TP Rules 2012 to TP Rules 2023 highlights several key areas where modifications have been made.

Here’s an outline of the changes:

1. Definition of hashtag#CTPD (Controlled Transaction Pricing Documentation) – Redefined to emphasize documentation prepared before the due date of a tax return in the year a controlled transaction is entered.

2. Timeline to Furnish the CTPD – CTPD must be available within 14 days upon request by the Inland Revenue Board (IRB).

3. Content of CTPD – Mandates inclusion of extensive MNE Group information, detailed business information guidance, completion date, and indications of inapplicable information.

4. Definition of Arm’s Length Range – Defined as a range or a single figure between the 37.5th to 62.5th percentiles of the benchmarking data set.

5. TP Adjustment – Allows IRB to adjust to the median if outside the range, and to the median or above if within the range under certain conditions.

6. Selection of the Most Appropriate TP Method – Removes the hierarchy of methods and gives the IRB authority to replace the taxpayer’s chosen method if deemed inappropriate.

Key Points to Note for hashtag#taxpayers on TP Rules 2023:

1. Documentation Timeliness:

The new rules emphasize the need for timely preparation and submission of CTPD, which must now be done before the tax return due date and made available within 14 days upon request.

2. Detailed and Comprehensive Reporting:

There is a new requirement for comprehensive and detailed information in the CTPD, including specific business and group information.

3. Arm’s Length Range Precision

The definition of the arm’s length range is more precise, potentially affecting the analysis of transfer pricing and the range within which transactions should fall.

4. TP Adjustment Clarity

The 2023 rules clarify how adjustments should be made, giving the hashtag#irb more authority in adjusting to the median, thereby reducing ambiguity and discretion.

5. Flexibility in Method Selection

The removal of the method hierarchy suggests a more flexible approach to selecting the most appropriate TP method, while also granting the IRB the power to intervene if necessary.