On 15 December 2019, the Malaysian Inland Revenue Board (“MIRB”) published the TP audit framework (2019). The Transfer Pricing Audit Framework 2019 is effective from 15 December 2019 and replaces the Transfer Pricing Audit Framework 2013 which was issued on 1 April 2013.
The framework clarifies that transfer pricing audit under Section 91 (5) of the Income Tax Act 1967 may cover up to 7 years that gives the Director General seven years to make an assessment or an additional assessment regarding transfer pricing adjustments.
Previously, taxpayers had to submit PowerPoint slides detailing the business during the audit opening meeting. The TP framework for 2019 states that the PowerPoint slides must be made available to the MIRB at least 7 calendar days before the audit visit.
In a typical transfer pricing audit, taxpayers are given 21 days to respond to the IRB’s request for documentation and information. This timeline has been reduced to 14 days. If the taxpayer does not respond on time, the MIRB can conduct the review using a method or approach that is deemed appropriate.
Previously, taxpayers are given 21 days to object to the MIRB’s proposed transfer pricing adjustments. The 2019 TP Framework reduces the period to 18 days.
The concessionary penalty rates have been revised under the TP Audit Framework 2019. Accordingly, 50% of tax adjustment if the taxpayer has not prepared transfer pricing documentation. 30% if taxpayer has prepared TPD but the TPD does not comply fully with the requirements of the Transfer Pricing Guidelines; or Taxpayer has prepared comprehensive and good quality TPD but fails to submit this within 30 days from the audit notification. 20% for voluntary disclosure.