Further to the updates and changes to the 2012 Transfer Pricing Guidelines in July 2017, the Malaysia Inland Revenue Board (“MIRB”) has also updated the Form MNE (latest version being [1/2017]).
The Form MNE, which was first introduced in 2011, aims to collect certain information from selected taxpayers relating to their cross border transactions for transfer pricing risk assessment purposes.
Selected taxpayers will receive a letter with the attached Form MNE [Pin 1/2017] and are generally required to complete and submit within 30 days from the date of the letter.
In brief, the updated Form MNE [Pin 1/2017] now requires taxpayer to disclose the following information:
· Name of company and country if taxpayer has any transaction with countries having lower tax rate compared to Malaysia.
· Information pertaining to Research and Development (“R&D”) activities performed by the taxpayer (if any), such as:
(a) The type of R&D activity;
(b) Type of processes involved with the R&D activity (i.e. whether to (i) enhance product’s production line or engineering (ii) enhance current product or updating current model or (iii) creating new product);
(c) Whether the R&D activity is performed for own use or on behalf of related parties;
(d) Whether there are any incentives granted for the R&D activity; and
(e) Whether the R&D activity leads to the creation of an Intellectual Property ("IP").
· If taxpayer received any financial assistance from related parties, to provide details such as:
(a) Information of the financial provider (name, country, etc.);
(b) Type of financial assistance;
(c) Whether interest (or other payment) is paid for the financial assistance; and
(d) Frequency of the payment.
· Name of company and country if the Group or any of its related parties has any trade/ brand name or IP or are performing R&D activities.
· Particulars of transactions with related companies.
Although this is not a new section, the updated Form MNE now requires taxpayer to provide amounts transacted with both related parties inside and outside Malaysia, as opposed to only those located outside Malaysia. Further, taxpayer also needs to disclose the amount of the contribution if they are a party to a cost contribution arrangement.
With the release of the updated Form MNE, it signifies the MIRB’s continued effort in tightening transfer pricing compliance. Those taxpayers who are considered high risk by the MIRB will be prioritized for a tax audit.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
If your company has received the Form MNE, we would be pleased to meet you to discuss on next steps. Please contact Mr Bob Kee at +603 7721 7029, Ms Chang Mei Seen at +603 7721 7028, or Mr Ivan Goh at +603 7721 7012.