Important Things to Consider for Your Year-End Transfer Pricing Documents

It is important for companies, especially large organizations to perform a comprehensive year-end financial review and prepare an accurate and reliable transfer pricing document in Malaysia. Whether the review takes place at the end of December, June, or any other month, it must be performed with utmost care and professionalism so that the transfer pricing document is reliable.

An annual review is also important to perform transfer pricing risk assessment and determine if you need to make any significant changes to the transfer pricing process. There are different aspects that you must consider during this process. Keep reading to learn about these important factors:

1. Review Intercompany Transactions

It is crucial to review the intercompany transactions to evaluate the volume and cost of each transaction. Moreover, any significant errors should be removed in this review. If your company has made any new transactions during this process, you should add them in as well.

Generally, it is highly recommended that you get professional accounting services for a thorough review and the preparation of transfer pricing documents.

2. Financial Results

Companies have to review their financial condition on a daily basis. It includes reviewing the company’s financial records and statements. You should start this process by analyzing the financial involvement in any transactions with the related parties.

It also includes determining whether you have met your yearly financial goals. Transfer pricing adjustments have to be made if the intercompany pricing is not within the arm’s length range.

3. Adjustments

Generally, start-ups and small businesses will not have to make transfer pricing adjustments. However, large companies and multinational enterprises have to consider making transfer pricing adjustments due to the complexity of the intercompany transactions.

If you think that adjustments are required, then you will have to determine the amount and find out about any relevant rules and regulations that are applicable to that transaction.

Professionals who have years of experience in dealing with transfer pricing in Malaysia will be able to evaluate suitable adjustments easily.

4. Update Agreements

Reviewing and updating the intercompany agreements are an important part of the year-end transfer pricing process because up-to-date information should be used in the transfer pricing document.

Moreover, this process includes making sure you have all of the necessary agreements for every intercompany transaction.

5. Best Practices for Adjustments

There is no one specific year-end adjustment method that can be applied to all types of intercompany transactions. Instead, companies and transfer pricing experts in Malaysia have to spend a considerable amount of time and resources on determining the local transfer pricing rules and best practices. With thorough research and careful considerations, companies will be able to come up with a reliable transfer pricing policy that will not lead to any severe regulatory risk or an expensive failure.

Moreover, it is important for the companies to make sure that all of the transactions are as per the arm’s length principle. Moreover, the policy should be flexible enough to accommodate future adjustments as there are situations in which you will have to make further adjustments and update the transfer pricing document.

6. Internal Control System

There is no denying that companies that have designed and implemented an effective internal control system for transfer pricing in Malaysia enjoy more responsiveness and reliability in preparing transfer pricing documents.

While there is no single method that can be applied to all types of companies, there are some tried-and-tested practices of transfer pricing documentation that should be applied by the companies. Businesses have to assess potential deviations from the arm’s length principle on the basis of each transaction. In this way, they will be able to choose the most suitable method of adjustment.

The importance of an effective internal control system is enhanced by the fact that it facilitates companies in avoiding regulatory issues from the government agencies.

In a Nutshell

With the aforementioned, you should be able to conduct a thorough and efficient transfer pricing process in Malaysia. Adjustments are certainly one of the most important factors of year-end transfer pricing documentation as they can affect the income tax, customs duties, numerous accounting functions, and the overall financial condition of the company.

Therefore, it is important that companies should have strict rules and regulations to comply with the law and make sure the entire process is conducted smoothly. Ultimately, preparing a reliable transfer pricing document is beneficial for the organization in many different ways, so it is important to keep such factors in mind while preparing this document.