Asia-Pacific Transfer Pricing Handbook

Chapter Twenty

Malaysia Advance Ruling Guidelines

Malaysia Permits a taxpayer to secure an advance tax ruling in many fact patterns. The advance ruling process is important to U.S. businesses doing business in Malaysia as well as for Malaysian businesses doing business in the United States because the two countries have no income tax treaty except for a shipping and air transportation treaty signed April 18, 1989. The Malaysian prime minister announced the advance tax ruling concept as part of the 2007 budget, effective January 1, 2007. The Inland Revenue Board Malaysia (IRBM) promulgated the specific advance rulings guideline procedure on February 14, 2008.1

As we shall see, Malaysia’s advance tax ruling process puts taxpayers in an uncertain position from a transfer pricing standpoint. At the outset, Malaysia’s advance process does not encompass bilateral advance pricing agreements. Further, Malaysia’s advance pricing process possibly might not encompass unilateral advance pricing agreements. Nevertheless, a matched unilateral advance pricing agreement, if permitted by the Malaysian tax authorities, would be an appropriate transfer pricing alternative for Malaysian businesses doing business in the United States and for U.S. businesses doing business in Malaysia.

GENERAL FACETS OF THE ADVANCE RULING PROCEDURE IN MALAYSIA

As a general matter, Malaysia’s advance ruling procedure is designed to interpret and apply the income tax provisions pursuant to Malaysia’s primary tax law, ...