The Malaysian Inland Revenue Board (MIRB) has added a new check box on the 2014 tax return form for corporate taxpayers to declare whether transfer pricing documentation has been prepared. Contemporaneous documentation should be prepared accordingly (i.e. 7 months from the close of the financial year). The KPMG Newsletter describing this new initiative is referenced at the following link:
Re: Best Practices, new transfer pricing boxes / questions on tax returns are becoming a common practice. Some questions by a multinational to ensure proper governance for tax return transfer pricing disclosures include:
- What internal governance mechanism is in place to alert the tax dept. timely of new disclosures for proper planning of contemporaneous documentation, etc.?
- Is the tax return preparer / reviewer knowledgeable about the transfer pricing documentation processes in place to answer the questions accurately?
- If a transfer pricing question is to be answered negatively (i.e., no documentation exists), is there adequate time to proactively address, as applicable? Is there any correlative impact for a financial statement tax reserve?
- For transfer pricing methodology questions, who ensures the proper methods are accurately disclosed?
- Is there a pre-audit strategy, upon notification, to review tax return disclosures?
- Is there a documented process in the global tax risk framework that alerts the tax dept. of new disclosures?
These questions, among others, should be discussed to ensure internal and external alignment in a corporation’s tax risk policy.