Malaysia Transfer Pricing Guide 2026: CTPD Rules & Penalties

A Guide by HTL & Co Chartered Accountants in Malaysia

Malaysia transfer pricing guide 2026: Businesses must price controlled transactions at arm’s length and, where applicable, prepare contemporaneous transfer pricing documentation (CTPD). The current framework combines the Income Tax (Transfer Pricing) Rules 2023, Malaysia Transfer Pricing Guidelines 2024, Transfer Pricing Tax Audit Framework 2025 and LHDN’s latest clarification published on 15 June 2026.

This guide explains who is exempt, when minimum or full CTPD is required, the 14-day submission deadline and the main audit and penalty risks.

Malaysia Transfer Pricing Guide 2026: Quick Answer

Transfer pricing is the pricing of property, services, financial assistance or other transactions between associated persons. Both cross-border and domestic controlled transactions may be covered where at least one party is assessable or chargeable to tax in Malaysia.

Question	Current Malaysia position
Core rule	Controlled transactions must follow the arm’s length principle.
When must CTPD be prepared?	It must be completed and dated before the due date for the relevant income tax return.
LHDN submission deadline	Complete CTPD must be furnished within 14 days after a written notice is served.
Latest official clarification	LHDN’s 15 June 2026 clarification explains how the exemption tests must be applied sequentially.

What Changed in 2023, 2024, 2025 and 2026?

Year	Official development	Practical effect
2023	The Income Tax (Transfer Pricing) Rules 2023 were gazetted on 29 May 2023.	They introduced more detailed CTPD requirements and Malaysia’s 37.5th-to-62.5th-percentile arm’s length range for YA 2023 onward.
2024	LHDN published the Malaysia Transfer Pricing Guidelines 2024 on 24 December 2024.	The guidelines explain scope, exemptions, full and minimum CTPD, comparability and documentation for YA 2023 onward.
2025	The Transfer Pricing Tax Audit Framework 2025 took effect on 31 July 2025.	It sets out LHDN’s current audit approach and the revised penalty and surcharge structure.
2026	LHDN published a clarification on paragraph 1.5 of the 2024 guidelines on 15 June 2026.	It clarifies the sequential exemption test, the RM1 million calculation and domestic-transaction conditions.

Who Is Exempt from Preparing CTPD?

LHDN’s 2026 clarification requires the exemption conditions in paragraph 1.5 to be checked in sequence. CTPD is generally not required for:

Individuals who are not carrying on a business.
Individuals carrying on a business, including partnerships, who engage only in domestic controlled transactions.
A person whose total controlled transactions for the year do not exceed RM1 million.
A person entering only into domestic controlled transactions where both parties do not enjoy tax incentives, are taxed at the same headline tax rate and have not suffered losses for the two consecutive years immediately before the tested year.

The RM1 million test includes the combined value of operational transactions and financial assistance. For example, related-party goods or services of RM950,000 plus an intercompany loan of RM500,000 total RM1.45 million and exceed the threshold.

Even when CTPD is not required, the transactions must remain at arm’s length and supporting records should be retained.

When Is Full or Minimum CTPD Required?

Position	When it generally applies
Full CTPD	Gross business income exceeds RM30 million and annual cross-border controlled transactions total RM10 million or more; or controlled financial assistance received or provided exceeds RM50 million annually.
Minimum CTPD	The taxpayer has controlled transactions, does not qualify for an exemption and does not meet the full CTPD thresholds. The taxpayer may still choose to prepare full CTPD.
No CTPD	One of the paragraph 1.5 exemptions applies, but arm’s length support and relevant records are still needed.

A permanent establishment must prepare its own full CTPD separately from its head office and related branches, regardless of the general thresholds.

What Must Contemporaneous Transfer Pricing Documentation Cover?

The documentation should explain the commercial reality of the controlled transactions, not merely reproduce agreements or accounting entries. Depending on whether full or minimum CTPD applies, the file should cover relevant items such as:

Group and business background.
Related parties and controlled-transaction amounts.
Functions performed, assets used and risks assumed.
Intercompany agreements, invoices and actual conduct.
The selected transfer pricing method and reasons for using it.
Comparable transactions or benchmarking where required.
Financial information and reconciliation to the accounts and tax return.

Common controlled transactions include sales and purchases of goods, management or shared services, royalties, contract manufacturing, intercompany loans, advances, guarantees, reimbursements and balances owing between related parties.

How Does Malaysia’s Arm’s Length Range Work?

For YA 2023 onward, the arm’s length range is the value between the 37.5th percentile and 62.5th percentile of an acceptable data set. If a controlled price falls outside the range, the arm’s length price is generally taken to be the median.

LHDN may also adjust to the median or a point above the median where the comparables have a lower degree of comparability or material comparability defects cannot be identified, quantified or adjusted.

What Is the 14-Day CTPD Deadline?

CTPD is not prepared only after an audit begins. It must already be complete, dated and contemporaneous before the relevant tax-return due date. If LHDN serves a written notice, the complete documentation must be furnished within 14 days.

A file submitted within 14 days can still be treated as non-contemporaneous if it was prepared late or is incomplete. Businesses should therefore maintain the file annually instead of waiting for an LHDN request.

Transfer Pricing Penalties and Surcharge

Failure to furnish CTPD within 14 days may result in a fine of RM20,000 to RM100,000, imprisonment for up to six months, or both.
Where prosecution is not instituted, LHDN may impose a penalty of RM20,000 to RM100,000 for each year of assessment.
A transfer pricing adjustment may carry a surcharge of up to 5% under subsection 140A(3C), even where no additional tax assessment is raised.
The 2025 audit framework provides lower surcharge rates of 0% to 4% for qualifying voluntary disclosures, depending on the circumstances.

Practical Transfer Pricing Checklist for 2026

Map related parties. Include local and overseas companies, branches and other controlled relationships.
List every controlled transaction. Include financial assistance, year-end balances and payment-on-behalf arrangements.
Calculate annual values. Apply the RM1 million exemption test and the full CTPD thresholds accurately.
Check the domestic exemption carefully. Review tax incentives, headline tax rates and the two-year loss condition for both parties.
Select the correct documentation level. Decide whether full CTPD, minimum CTPD or an exemption applies.
Test the pricing. Confirm that methods, comparables and results support the arm’s length principle.
Reconcile the figures. Match CTPD amounts to agreements, invoices, ledgers, audited accounts and the tax return.
Complete and date the file on time. Do not wait for an audit notice.

How HTL Can Assist

HTL & Co assists Malaysian businesses with transfer pricing risk assessments, related-party transaction mapping, full and minimum CTPD, benchmarking, intercompany pricing reviews and LHDN tax-audit support.

Learn more about HTL’s transfer pricing services, review our LHDN tax-audit support or browse the latest Malaysia Tax & Corporate Compliance Insights.

Official LHDN publication dates covered: 29 May 2023, 24 December 2024, 31 July 2025 and 15 June 2026
HTL last updated: 31 July 2026

Official References

This article provides general information based on official LHDN materials available on 31 July 2026. The appropriate transfer pricing treatment depends on each taxpayer’s facts and circumstances.