Minimum Transfer Pricing Documentation LHDN

On 11.11.2022 LHDN has published a new document for transfer pricing which is Minimum Transfer Pricing Documentation.

The Minimum Transfer Pricing Documentation is to replace the Limited Transfer Pricing Documentation.

Key takeaways:

You will understand the:

1. Requirement to use this documentation.

2. Differences between Minimum Transfer Pricing Documentation and Limited Transfer Pricing Documentation.

Requirement to use the documentation

According to Section 3.1 of Transfer Pricing Guidelines 2012, there are two criteria to be determined:

i. gross income and total related party transactions must be greater than RM25 million and RM15 million respectively; or

ii. financial assistance must be greater than RM50 million.

If tax payer fulfils one of the criteria as above, Full Transfer Pricing Documentation should require to be prepared.

On the other hand, Minimum Transfer Pricing Documentation is required for those falls outside the transfer pricing guidelines 2012 section 3.1.

Differences between Minimum Transfer Pricing Documentation and Limited Transfer Pricing Documentation.

The major difference between these two documentations is comparability study. In previous Limited Transfer Pricing Documentation, we do not perform any comparable working and causing there is a limitation to justify the reasonableness of pricing policy.

Minimum Transfer Pricing Documentation has implemented a new section to resolve this limitation.

New Requirements

Under section D of Minimum Transfer Pricing Documentation, there are 6 columns need to fill in to justify the transfer price is reasonable, which are:

• What is the element of costs

• What is the anticipated profit mark-up

• Who determine the pricing policy

• How often is the policy being revised

• Sample of documents to support the pricing policy

• Comparability study Source Minimum Transfer Pricing Documentation

Source:

https://www.hasil.gov.my/media/gesbb4yx/template-minimum-tp-doc-1_2022.pdf

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