Malaysia has amended its transfer pricing rules to refine the definition of services, clarify the scope of multinational enterprise groups, remove a transfer pricing provision, and introduce a framework for offsetting adjustments, with changes applying from assessment year 2023.
Malaysia’s government has published Order No. P.U. (A) 300/2026, the Income Tax (Transfer Pricing) (Amendment) Rules 2026, in the Official Gazette on 27 August 2026, officially updating Malaysia’s regulatory framework regarding transactions between related entities, with retroactive effects beginning in assessment year 2023.
These rules refine the legal definition of services and clarify that a Multinational Enterprise Group must operate across at least two different jurisdictions.
The key amendments to the Income Tax (Transfer Pricing) (Amendment) Rules 2026 are:
Revision of the definition of “service”
The first measure amends Rule 3 of the principal Rules to refine the definition of a “service”. The amendment replaces the phrase “facilities provided, or are to be provided” with the grammatically corrected phrase “facilities that are or to be provided”. This linguistic update ensures grammatical and statutory precision within the transfer pricing framework.
Standardised definition of a “multinational enterprise group” (MNE group)
The second measure replaces subrule (4) of Rule 4 in the principal Rules to establish a clear definition of an MNE Group. Under the substituted subrule, a “Multinational Enterprise Group” is formally defined as a group of associated enterprises that maintain business establishments in two or more jurisdictions.
Deletion of the transfer pricing provision under Rule 10
The third measure alters Rule 10 of the principal Rules by deleting subrule (3) in its entirety. Although the amendment rules do not explicitly detail the contents of the original subrule (3), its formal deletion means that the specific transfer pricing requirement is no longer applicable under domestic law.
Implementation of offsetting adjustments
The fourth measure inserts a new subrule (1A) immediately after subrule (1) of Rule 13 in the principal Rules to govern offsetting adjustments. This amendment establishes that a transfer pricing adjustment made under subrule (1) against a person in a controlled transaction can be reflected by a corresponding offsetting adjustment on the assessment of the other person in that same transaction. To utilise this mechanism, the other person must formally submit a request, and the offsetting adjustment remains strictly subject to the approval of the Director General.
