Income Tax (Advance Pricing Arrangement) Rules 2023

Key Points

Description

Covered period under APA

Minimum of 3 years of assessment and maximum of 5 years of assessment. 

Application for APA

A taxpayer who has cross-border transaction may apply to the Inland Revenue Board of Malaysia (“IRBM”) for one of the following types of APA :

a) Bilateral or multilateral APA

• If the counterparty is from a country which has double tax agreement (“DTA”) with Malaysia under Section 132 of the ITA. Please refer to the link below for the list of countries that has DTA with Malaysia. 

https://www.hasil.gov.my/en/international/double-taxation-agreement/ 

• For a permanent establishment (“PE”), such application shall be made by its Head Office on behalf of the PE.

 b) Unilateral APA 

• If the counterparty is from a country which does not have DTA with Malaysia under Section 132 of the ITA.

Documents required for pre-filing meeting

A taxpayer is required to furnish the following documentation and information in his request for a pre-filing meeting:

a) Contemporaneous Transfer Pricing (“TP”) documentation prepared in accordance to the Income Tax (Transfer Pricing) Rules 2023

b) Name, address and tax file references of the taxpayer and other persons involved in the proposed APA whether in Malaysia or outside Malaysia

c) Proposed covered transaction

d) Proposed period covered by the APA

e) Proposed TP methodology accompanied with explanation of whether the method accords to the arm’s length principle

f) Description of the critical assumptions under which the proposed TP methodology and analysis relating to the critical assumption will operate and the events that should be taken into account when considering the said assumption

g) Financial statements and tax computations for the latest 3 years prior to the application

h)  A written indication whether the income from the covered transactions is exempted by the other Competent Authority

i) Name, telephone number and e-mail of contact person 

j) Any other details requested by the IRBM 

Request for rollback

A taxpayer may request for a rollback for a bilateral or multilateral APA for not more than 3 years of assessment immediately preceding the covered period. If a rollback is allowed by the IRBM, the taxpayer will be required to submit the amended tax computations for the rollback years within 30 days from the date of signing the APA.

Rollback will not be allowed if:

a) A tax audit has been conducted by the IRBM on the prior years of assessment

b) A voluntary disclosure for TP case has been submitted for the prior years of assessment

c) The matter on which the APA is sought has been decided by the Special Commissioners or a court 

Application fee

For a fresh APA application, a non-refundable fee is applicable as follows:

a) RM5,000, if the application is made by the taxpayer within 2 months after receipt of notification by the IRBM to proceed; or

b) RM10,000, if the application is made by the taxpayer after two months but within six months after receipt of notification by the IRBM to proceed.

As for a renewal application, a non-refundable fee of RM5,000 is applicable.

Important timelines

1) Taxpayer’s request for pre-filing meeting

• 12 months prior to the first day of the proposed covered period.

2) IRBM’s notification whether the taxpayer may proceed with APA application

• Within 14 days after the pre-filing meeting.

3) Submission of application for unilateral/bilateral/multilateral APA to the IRBM

• Within 6 months after receipt of IRBM’s notification.

4) Submission of further information to the IRBM (at any stage of the APA process) 

• Within 30 days upon IRBM’s request. 

5) Renewal of APA

• Application form shall be submitted to the IRBM within 2 months after receipt of the IRBM’s written approval.