Asia-Pacific Transfer Pricing Handbook

Chapter Thirty-Nine

Malaysia–Singapore Allocation Keys

The Organisation of Economic Co-operation and Development (OECD), through its Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, would have the multinational enterprises (MNEs) and tax administrations select the “most appropriate” transfer pricing method.1 The multinational enterprise or the tax administration, in seeking to apply this most appropriate transfer pricing method, might apply the transactional profit split method,2 and then would seek to apply the “most appropriate” allocation key.3 The reader should be aware of the fact that there may be more than one viable and appropriate allocation key. The OECD does not assert that transfer pricing is an exact science.

IMPORTANCE OF ALLOCATION KEYS

The TransferPricingConsortium.com and the Inland Revenue Board of Malaysia,4 through its Tax Academy, joint-ventured a two-day transfer pricing presentation to update tax agents with transfer pricing techniques.5 These sessions took place on September 19 through 20, 2011, in Malaysia. A significant portion of the presentation and a question-and-answer session addressed the development of transfer pricing allocation keys, as reflected within section 2.134 through section 2.149 of the July 2010 OECD guidelines.

As part of this transfer pricing presentation, counselors Robert Feinschreiber and Margaret Kent provided an example of a small condominium residential leasing company in Malaysia and Singapore. ...