The corporate tax rate is 24%. Certain resident companies capitalized at MYR 2.5 million or less are subject to a corporate income tax rate of 18% (19% for year of assessment 2016) on the first MYR 500,000 of chargeable income, with the balance taxed at 24%. Labuan companies carrying on Labuan trading activities are taxed at 3% of audited net profits or may elect a fixed tax of MYR 20,000.
Transfer pricing is regulated by the provisions of Section 140A of the Malaysian Income Tax Act. Subsection 140A(2), ITA1967: (2) Subject to subsections (3) and (4), where a person in the basis period for a year of assessment enters into a transaction with an associated person for that year for the acquisition or supply of property or services, then, for all purposes of this Act, that person shall determine and apply the arm’s length price for such acquisition or supply.” Rule 2(2), Income Tax (Transfer Pricing) Rules 2012 “For the purposes of sub-rule (1), a person shall determine and apply the arm’s length price for the acquisition or supply of property or services in accordance with the method and manner provided for in these Rules.” “These Transfer Pricing Guidelines (hereinafter referred to as the Guidelines) are largely based on the governing standard for transfer pricing which is the arm’s length principle as set out under the Organization for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines”.
Malaysian transfer pricing legislation and regulations are based on the arm’s-length principle in the OECD Guidelines. Malaysian Transfer Pricing Guidelines (Malaysian Guidelines) and Advance Pricing Arrangement Guidelines (APA Guidelines) was published in July 2012. The Malaysian Guidelines provide taxpayers with further guidance on the application of the arm’s-length principle espoused in Section 140A of the Malaysian Income Tax Act, 1967 (MITA) and the TP Rules 2012, and the extent of documentation required to be maintained by taxpayers with related party transactions.