TP rules of Malaysia

 The TP world has been rocked again – new rules have been published in the Federal Gazette to change the TP landscape. The TP Rules 2023 are effective for YA 2023 onwards.

My initial thoughts are as follows:

1.      The TP Rules 2023 provide additional powers to the Director General ("DG") to make adjustments to controlled transactions. This includes the specific power to adjust the price of controlled transactions to the median of the range under Rule 13 of the TP Rules 2023. Interestingly enough, the DG appears to have the power to adjust the controlled transaction to the median where comparability defects cannot be quantified, identified or adjusted. Taxpayers should take note and plan accordingly.

2.      The redefinition of the term median and the arm’s length range. It is noted that the TP Rules 2023 have provided new rules to the game and defined the arm’s length range to being at the 37.5 percentile up to the 62.5 percentile. The median is instead appears to be defined as the midpoint of the arm’s length range under Rule 13(5)(b).

3.      An integration of elements of the prevailing Documentation Chapter of the Malaysian TP Guidelines into Schedules to the TP Rules 2023.

4.      The TPD’s must be dated now to show the specific date that it has been prepared under Rule 4(2) and must be submitted upon request within 14 days from the date of service of a notice under Rule 5(3)

5.      Methods for selections of the TP methodologies must be supported by proper justification – in the event this is not done, the DG has the right to replace the selected method under Rule 6(3) . This appears to be an attempt to fill an existing gap in law which was an area of contention in TP cases argued at the Courts in Malaysia

6.      Detailed selection of comparable data must now be in any contemporaneous TPD and this includes the basis for selection, which refers to both quantitative and qualitative reasons – Schedule 2 of the TP Rules 2023

7.      Specific rules have been included to address issues regarding intragroup services under Rule 9 and intangible assets under Rule 10