Malaysia widens its transfer-pricing MNE-group definition

P.U. (A) 300/2026 was made on 19 August 2026 and amends the Income Tax (Transfer Pricing) Rules 2023, P.U. (A) 165/2023. The amending rules are deemed to have effect from year of assessment 2023, so the changes are relevant to documentation already prepared for that year and later years.^[1][2]

A wider MNE-group test

Amended rule 4(4) defines a Multinational Enterprise Group as a group of associated enterprises with business establishments in two or more jurisdictions. The previous definition required enterprises related through ownership or control that prepared consolidated financial statements, or would have done so if an equity interest were publicly traded, together with cross-jurisdictional tax-residence or permanent-establishment conditions.^[1][2]

Removing the consolidation and tax-residence wording can bring less formally consolidated cross-border structures within the MNE-group definition. For taxpayers otherwise required to prepare contemporaneous transfer-pricing documentation, rule 4(2) requires the group information listed in Schedule 1; rule 4(3) requires inapplicable information or documents to be identified as such rather than silently omitted. Groups should therefore revisit documentation for year of assessment 2023 onwards against the amended definition.^[1][2]

Offsetting adjustments remain discretionary

New rule 13(1A) allows an adjustment made to one party under rule 13(1) to be reflected by an offsetting adjustment to the other party’s assessment. The other party must request the relief and the Director General must approve it: the relief is not automatic.^[1]

The amendment does not remove the Director General’s section 140A(3C) power to impose a surcharge of up to 5% on a transfer-pricing adjustment. Groups should distinguish relief from double-counted taxable income from the separate surcharge exposure attached to the original adjustment.^[3]

The remaining changes revise the definition of “service” and delete rule 10(3), which contained a rule-specific related-person definition for cost-contribution arrangements. Taxpayers reviewing affected arrangements should use the amended rules alongside the associated-person and arm’s-length requirements in section 140A of the Income Tax Act 1967.^[1][3]