Malaysia: Updated advance pricing arrangement guidelines

The Malaysia Inland Revenue Board (MIRB) updated its advance pricing arrangement (APA) guidelines to realign guidance on APAs to changes introduced in the Income Tax (Advance Pricing Arrangement) Rules 2023, which were released in May 2023.

The updated guidelines tighten the eligibility criteria for APA applications, including setting out the MIRB’s expectations on profit margins based on the proposed benchmarking analysis:

• For a taxpayer whose functions, assets, and risks (FAR) and business model remain the same, the proposed benchmarking analysis must not result in a reduction in operating margin that is more than 3% of the average weighted margin for the last five years in the case of existing business, or at least three years for a taxpayer who commenced business operations in the previous three to five years
• For a taxpayer with a change in FAR, a reduction of equal to or more than 5% reduction in operating margin may not be acceptable if there is no transfer of intangible properties or major shift in FAR or transfer of significant people functions

Read a May 2024 report prepared by the KPMG member firm in Malaysia