Transfer pricing documentation in Malaysia: who needs it, and who does not.
Transfer pricing is about the prices and terms you set with related companies and persons. Malaysia’s transfer pricing rules apply to domestic dealings as well as cross-border ones.
Some businesses are exempt from documentation. Others may prepare a shorter minimum version. Businesses that meet LHDN’s thresholds must prepare full transfer pricing documentation, unless an exemption applies. Permanent establishments with controlled transactions must prepare full documentation regardless of those thresholds or exemptions.
Documentation self-check
A first look at which documentation may apply.
Answer three questions for a general-information result. If you need help, you can then discuss your circumstances with NXS.
Three questions
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Question 1 of 3Do you buy, sell, lend, borrow, rent, license, give or receive guarantees, or pay or charge fees with a related company or person? Family members’ businesses can count too, depending on the control relationship.
Question 2 of 3Do those dealings total RM1 million or less a year, loans included?
Question 3 of 3Is your total business turnover above RM30 million with at least RM10 million of cross-border related-party transactions, excluding financial assistance, interest and dividends? Or did you receive or provide more than RM50 million of related-party financial assistance during the year?
Use the basis period for the year of assessment. For financial assistance, count the aggregate amount received or provided during that period; exclude interest, opening and closing balances, and repayments.
First look only. A permanent establishment, such as a Malaysian branch of a foreign company, must prepare full documentation if it has controlled transactions. The thresholds and exemptions do not apply to it. As at 23 October 2026. General information, not tax advice.
Four related-party situations to check
"Related" is wider than most owners expect. One company takes part in the management, control or capital of the other, or the same person does in both. A relative's business can count.
Two SME-rate companies trading only with each other.
SME rates are not the headline rate, so the domestic exemption does not apply.
An interest-free loan to a sister company.
It still needs an arm's length rate, and LHDN may impute interest.
A management fee from a parent.
You must show a benefit and an arm's length charge.
A director's loan.
A company's loan to its director from the company's own funds falls under a separate rule, section 140B. A loan from a director to the company can be a transfer pricing matter: where it is a controlled transaction, it needs an arm's length interest rate.
RM1 million or less of dealings can mean no documentation. It never means no rules.
Three documentation outcomes
Documentation requirements at a glance
May not need TP documentation
If there are no controlled transactions, there is no TP documentation duty. If you have controlled transactions, an exemption may apply. These exemptions are not available to permanent establishments.
Minimum documentation
This applies to controlled transactions where no exemption applies and the full-documentation thresholds are not met. Permanent establishments do not qualify for minimum documentation. Full documentation remains an option.
Full documentation
Full documentation is required when LHDN’s full-documentation thresholds are met and no exemption applies. Permanent establishments with controlled transactions must prepare full documentation regardless of those thresholds or exemptions.
Eligibility depends on your circumstances. Arm’s length pricing and supporting records are still required for controlled transactions, even if TP documentation is not required. Information as at 26 October 2026. General information, not tax advice.
Three transfer pricing services, one clear route
Transfer pricing documentation.
NXS prepares both minimum and full transfer pricing documentation. Minimum documentation covers your group and organisation structure, related-party dealings and pricing policy. Full documentation adds the detailed analysis required by the Transfer Pricing Rules, including functional and comparability analyses. NXS also carries out benchmarking where the engagement requires it.
Related-party transaction reviews.
Listing your related parties and dealings, running the tests below in order, and checking whether prices, fees and loan terms look arm's length.
Policy design and implementation.
A written pricing policy for each type of dealing, then applied in practice.
What to remember about transfer pricing documentation
- 1Relationships and the type of dealing decide it, not just size.
- 2Exempt from documentation is not exempt from arm's length pricing. Keep records that show how you priced.
- 3Ready and dated before the return is due, not submitted with it. If LHDN asks in writing, you have 14 days.
- 4Quality counts: late or non-compliant documentation can attract a penalty.
- 5Keep the records for 7 years, and review the financial data every year.
What changed in 2026 for transfer pricing in Malaysia
- 27 Aug 2026: the Income Tax (Transfer Pricing) (Amendment) Rules 2026 were gazetted, with effect from YA 2023. If LHDN adjusts one party's price, the other party may ask for an offsetting adjustment, subject to LHDN's approval.
- 15 Jun 2026: LHDN's FAQ on exemptions confirmed the RM1 million test counts loans, and that SME rates are not the headline rate.
- 30 Jul 2026: LHDN published guidelines on intra-group loans, for arrangements entered into on or after 31 Jul 2026.
Information as at 23 October 2026.
Transfer pricing questions and answers
Is a small company exempt from transfer pricing documentation in Malaysia?
There is no general exemption for small companies. You may be exempt if your related-party dealings for the year, loans included, are RM1 million or less, or if another exemption applies. Otherwise you prepare at least minimum documentation.
Are two SME-rate companies that only deal with each other exempt from transfer pricing documentation?
Not under the domestic exemption. LHDN treats SME rates as concessionary, not the 24% headline rate. Check the RM1 million test and the other exemptions first.
Who counts as a related party for transfer pricing in Malaysia?
Broadly, where one takes part in the management, control or capital of the other, or the same person does in both. Relatives can count. A holding of at least 20% can also count if certain kinds of dependence or influence apply.
Is transfer pricing documentation submitted with the tax return?
No. It must be ready and dated before the return is due. If LHDN asks in writing, you hand it over within 14 days of the notice being served.
If we are exempt from transfer pricing documentation, is there anything to do?
Yes. Related-party prices must still be at arm's length, and you should keep documents that show it.
Is an interest-free loan to a sister company a transfer pricing problem?
It can be. Related-party loans need an arm's length interest rate even when none is charged, and LHDN may impute interest. For eligible ringgit loans entered into from 31 July 2026, LHDN allows a simplified rate based on Bank Negara published rates, subject to conditions. LHDN says loans that do not charge interest yet can use the same guideline as general guidance.
Is a company's loan to its director a transfer pricing matter?
Not where the company lends from its own funds: that loan is handled by a separate deemed-interest rule (section 140B), not the transfer pricing rule. A loan from a director to the company can fall under transfer pricing: where it is a controlled transaction, it needs an arm's length interest rate.
What does LHDN look for when a parent company charges a management fee?
That you actually receive a benefit, and that the charge is at arm's length, with documents to support it. For some low-value support services, a 5% cost mark-up can be used under a simplified approach. If the parent is overseas, LHDN accepts it on your side only if the parent's country also applies that approach.
What happens if we cannot produce transfer pricing documentation within 14 days of LHDN asking?
It is an offence. Where LHDN does not prosecute, it may impose a penalty of RM20,000 to RM100,000 for each year of assessment, scaled by how late the documentation is. Documentation that does not meet the rules can also attract the penalty.
What if LHDN says our transfer pricing was not at arm's length?
LHDN can adjust the price and add a surcharge of up to 5% of the adjustment, even if no extra tax results. The other party may ask for an offsetting adjustment, subject to approval. If you make a voluntary disclosure that meets LHDN's conditions before an audit starts, the surcharge rate is 0% to 4%.
Free 30-minute consultation.
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Tell us which related parties you deal with and the types of transactions involved. The first consultation is free, and it helps us understand where you stand. You will have one point of contact.