Transfer pricing, tax audits and investigations

Transfer pricing

Transfer pricing (TP) is a term used to describe inter-company pricing arrangements relating to transactions between related entities. These can include transfers of intellectual property, tangible goods, services and loans or other financing transactions.

Such inter-company transactions, carried out domestically and across borders, are growing rapidly and increasing in complexity. Complying with the varied requirements of multiple overlapping tax jurisdictions is often complicated and time-consuming.

Tax authorities, locally and regionally, are imposing stricter penalties, mandatory documentation requirements and increased information exchange, accompanied by intensive audits. Increased compliance obligations in Malaysia mean companies need to keep abreast with transfer pricing developments.

You may need to:

have a better understanding of TP compliance requirements and the expectations of tax authorities

know how to respond to the tax authority during a transfer pricing audit/enquiry

have a more in-depth understanding of what takes place during TP audits

have reasonable assurance that your internal controls over transfer pricing are sufficient

have best practices for managing your transfer pricing policies and issues

know which options are available to you to resolve disputes involving two or more territories

How we can help you

Whatever your transfer pricing needs, you can rely on our dedicated transfer pricing professionals to support you.

Against the backdrop of increasing scrutiny over transfer pricing activities, we can help you prepare for tax audits, develop tax-efficient structures that align with local compliance requirements, resolve transfer pricing disputes and decrease transfer pricing exposure in the future.

Tax audits and investigations

Tax audits and investigations are the primary activities managed by the Malaysian Inland Revenue Board (MIRB) in ensuring a high level of compliance under the self-assessment system.

What is a tax audit?
What is a tax investigation?

What is a tax audit?

A tax audit is an examination performed by the MIRB on a taxpayer’s business records and financial affairs to determine that the right amount of income is declared and the right amount of tax is calculated and paid in line with tax laws and regulations.

Generally, there are two types of tax audits performed by the MIRB, namely the desk audit and the field audit.

What is a tax investigation?

Tax investigation on the other hand is a more severe enforcement measure undertaken by the MIRB.

Generally, the objective of a tax investigation is similar to a tax audit but is carried out if MIRB suspects, based on precise and definite evidence, that the taxpayer is deliberately trying to avoid paying tax or has committed an act of wilful evasion under the tax laws. As tax audits or investigations are intensive and time-consuming, it is critical for the process to be handled with great care to achieve the desired outcomes.

You may need to:

be able to identify potential risks from the various tax positions taken

have reasonable assurance that internal controls over tax management are sufficient

have assurance that tax positions are taken with a strategic and long-term view

have a more in-depth understanding of tax investigation and field audit components from common irregularities in documentation requirement

have a better understanding of the appeal process and procedures in dealing with the tax authorities

explore alternative avenues to resolve complex tax disputes

How we can help you

The direction and outcome of a tax field audit or investigation is very much influenced by how tax exposure is assessed, how defence strategies are developed as well as the negotiation process.

Failure to adequately prepare for the tax field audit or investigation could result in unexpected and excessive liabilities as well as a diversion of the company's resources.

Early preparation puts you in a better position to gain a favourable outcome.

Our services

Tax audits

Planning ahead through a risk assessment review
Addressing potential tax issues with tailored solutions
Coordinating with the tax authorities and supplying the necessary documents and information
Liaising and negotiating with the Malaysian Inland Revenue Board (MIRB) including being present during the tax field audit visit to assist the company and providing advice on dealing with the MIRB’s queries
Outlining the most appropriate defence strategies to finalise the audit favourably

Tax investigations

Managing the tax investigation process proactively to mitigate tax risks
Assessing the scope of the investigation and providing tailored solutions to address the tax issues
Outlining the most appropriate defence strategies to finalise the tax investigation favourably
Coordinating with the tax authorities and supplying the necessary documents and information needed for the investigation, ensuring that issues are satisfactorily resolved to shorten the investigation period

Others

In addition to our tax audit and investigation assistance services, our team also provides tax litigation defence support.

Reviewing tax related documentation relating to the case
Commenting on the adequacy of defence, the probability of success and prevention of occurrence