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Transfer Pricing (TP) in Malaysia refers to the pricing of transactions between related parties, ensuring that these transactions are conducted at arm's length. This is crucial for preventing profit shifting and ensuring that taxes are paid on profits generated within Malaysia.
The Inland Revenue Board of Malaysia (LHDN) governs Transfer Pricing, with the primary legislation being the Income Tax Act 1967, supported by the Income Tax (Transfer Pricing) Rules 2023 and the Malaysia Transfer Pricing Guidelines 2023. Companies with related party transactions exceeding certain thresholds (e.g., RM 50 million in gross income and RM 20 million for services/intangibles) are generally required to prepare contemporaneous TP documentation. The LHDN has increased its focus on TP audits and assessments, with significant penalties for non-compliance.