Do related-party transactions between my group companies need transfer pricing documents?
Prices between related parties must be at arm's length for every company. A full transfer pricing document is required if gross business income exceeds RM30 million and cross-border related-party transactions are RM10 million or more, or financial assistance exceeds RM50 million. Smaller taxpayers use a lighter minimum document, unless exempt.
Transfer pricing means pricing transactions between related parties as if they were independent. The rules apply to every company, but the paperwork scales with size.
Full contemporaneous documentation (Malaysian Transfer Pricing Guidelines 2024, from YA 2023) is needed if either:
- gross business income is above RM30 million and cross-border controlled transactions are RM10 million or more per year, or
- controlled financial assistance is more than RM50 million per year.
Exemptions from preparing documentation (Guidelines, paragraph 1.5): individuals not carrying on a business; individuals carrying on a business, including partnerships, with only domestic controlled transactions; persons whose controlled transactions total no more than RM1 million; and persons whose controlled transactions are only domestic and meet the stated conditions on tax incentives, headline tax rate and losses. Exempt taxpayers must still price at arm's length and keep records.
Minimum documentation: taxpayers not exempt but below the full thresholds may prepare a shorter document covering group and organisation structure and the key controlled transactions.
Timing: documentation must exist before the return due date.
Risk: LHDN can adjust prices on audit. The assessment period for transfer pricing is seven years (s.91(5)), and the Director General may require a surcharge of up to 5% of the adjustment (s.140A(3C)). Failing to furnish the required documentation is an offence with a fine of RM20,000 to RM100,000 (s.113B).
SME examples: a Malaysian company paying management fees to a foreign parent, or lending to a sister company, should document the basis for the price.
The Income Tax (Transfer Pricing) Rules 2023 were amended by P.U.(A) 300/2026, with effect from YA 2023, in definitions and in the rules on corresponding adjustments. Check the Guidelines and the Rules for the exact items.
Legal basis
- Income Tax Act 1967, s.140A
- Income Tax Act 1967, s.113B
- Income Tax (Transfer Pricing) Rules 2023 [P.U.(A) 165/2023], as amended by P.U.(A) 300/2026
Sources
Applies to YA 2023 onwards · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- What is the corporate tax rate for a small company in Malaysia?A Malaysian resident company normally pays 24% income tax. A company that meets the SME conditions pays 15% on the first RM150,000 of chargeable income, 17% on the next RM450,000 (up to RM600,000), and 24% on anything above that.
- What conditions must my company meet to get the SME tax rates in Malaysia?To use the lower 15%/17% rates, the company must be resident, have ordinary paid-up capital of RM2.5 million or less, and gross business income of RM50 million or less. It must also pass the related-company test and, from YA 2024, a foreign-ownership test.
- Can a company with foreign shareholders still get the SME tax rate in Malaysia?Only if foreign ownership stays at 20% or below. The SME rates also need paid-up ordinary capital of RM2.5 million or less and gross business income of RM50 million or less. If more than 20% of the ordinary capital is held, directly or indirectly, by foreign companies or non-citizen individuals at the start of the basis period, all income is taxed at 24%.
- Does a dormant company with no income still have to file a tax return in Malaysia?Yes. LHDN says companies that are dormant or have not started business must still register a tax file and file returns. A nil return tells LHDN there is no taxable income, and failing to file can be an offence even when no tax is due.
- What is the Year of Assessment and how does it relate to my financial year?The Year of Assessment (YA) is the calendar year in which your company's accounting year (the basis period) ends. A company with a financial year ending 30 June 2025 reports that income in YA 2025.