We have taken efforts in this assignment. However, it would not have been possible without the kind support and help of lecture and friends. We would like to extend our sincere thanks to all of them.
We am highly indebted to Puan Nurul Hidayah binti Ahamad Nawawi for the guidance and as well as for providing necessary information regarding the assignment and also for the support in completing the assignment.
We would like to express our gratitude towards our parents and friends for their kind co-operation and encouragement which help me in completion of this assignment.
We would like to express our special gratitude and thanks to all for giving such attention and time.
Our thanks and appreciations also go to my classmate in developing the assignment and people who have willingly helped me out with their abilities.
There are many businesses in the world. Every of them will be tax for every year for business that had been done. In the world of technology, business nowadays not only within their home country, it will go beyond the world to market their product and services. From that many business go on franchise, joint venture and other thing to wider their market in the world. From that will cause company that is parent company with multiple of subsidiary around the world. Parent company wills sale their product to subsidiary that in term of raw material or even product itself. Beyond on that sale will be happen, however the sale price might be not at normally or independent sale like to the unrelated customer or company. This will cause sale price that much lower than unrelated company. From this transfer pricing will be occurring. This will cause minimize in the group tax liability.
Transfer pricing is the one that can be used to reduce tax liability. It is the way of tax avoidant. Tax avoidance is the deliberate attempt to plan affairs so that the scheme or transaction would not fall within the ambit of taxation. Transfer pricing is legal. However it become illegal if had been abused.
Tax efficiency can be achieved by way of adopting a sensible pricing arrangement within a commercial framework with the main objective of minimising the total tax liability of the group of company. Whenever goods and services across national boundaries within multinational group, transfer pricing can be attached to those transaction. Transfer pricing in the way of arm length is used to minimise the group tax liability.
In ways Malaysia goes for globalisation, many companies increasing to overseas investment or reverse investment by Malaysian company. The practice of shifting of profits overseas and remitted it back to Malaysia is not uncommon and it usually tax exempt. Transfer pricing is also found in shifting of profits from non-pioneer status companies to companies enjoying pioneer status through intercompany sale or purchases and also management fees, royalties and interest paid to related companies, especially those in low tax countries.
Objectives from IRB guideline
The IRB Transfer Pricing Guidelines (hereinafter referred to as the Guidelines) seek to provide all MNEs concerned with information on existing domestic legislation; methodologies acceptable to IRB that can be used in determining arm’s length price and administrative regulations including the types of records and documentation expected from taxpayers involved in transfer pricing arrangements. It is the prerogative of the taxpayer to choose from the various methodologies laid out with the ultimate aim of arriving at an arm's length transfer price. It is intended that these guidelines, which may be reviewed from time to time, will assist MNEs in their efforts to determine transfer prices which are consistent with the arm's length principle and at the same time comply with Malaysian tax laws as well as administrative requirements of the IRB (Zainol,...