Income Tax (Advance Pricing Arrangement) Rules 2023

The Income Tax (Advance Pricing Arrangement) Rules 2023 (“APA Rules 2023”) were also gazetted on 29 May 2023, replacing the Income Tax (Advance Pricing Arrangement) Rules 2012. The APA Rules 2023 is applicable with immediate effect.

Key Changes

Application

Under APA Rules 2023, a taxpayer who carries on cross-border transactions may apply to the Director General for an Advance Pricing Arrangement (“APA”), subject to the following:

Where the counterparty is from a country having a Double Taxation Agreement (“DTA”) with Malaysia under Section 132 of the Income Tax Act 1967 (“the Act”), the taxpayer may only apply for a Bilateral APA or Multilateral APA; or
Where the counterparty does not have a DTA with Malaysia under Section 132 of the Act, the taxpayer may only apply for a Unilateral APA; or
For an arrangement under Section 132 of the Act, a permanent establishment may only apply for a Bilateral APA or Multilateral APA where such application shall be made by its head office on behalf of the permanent establishment.

Documentation for the pre-filing meeting

For the pre-filing meeting, taxpayers are required to furnish documentation requirements which are largely aligned with Paragraph 11.3 of the existing APA Guidelines 2012 that are typically requested by tax authorities after the pre-filing meeting and for the formal application.

Rollback years

For the purpose of APA application, rollback means the application of terms and conditions of an APA to prior years’ assessment. A roll back shall be allowed for not more than three YAs immediately preceding the covered period. Previously the period of roll-back was not defined, but in practice, a three year roll-back period was considered.

Timeline for submission of APA Application

Taxpayers are now given six months (previously was two months) after receiving notification from the Director General to submit the formal application. In addition, the timeline for renewal application has also now been defined to two months.

Timeline for additional information

A timeline of 30 days has been specified for any request for submission of additional information during the course of APA proceedings, failing which, the application shall be deemed to have been withdrawn by the taxpayer.

Revocation of APA

The Director General may revoke the APA if the taxpayer fails to disclose any occurrence of voluntary disclosure, investigation, audit or incentive approval, etc.

APA Application fees

In respect of a fresh APA application, a non-refundable application fee applies:

of MYR5,000 if the application is made within two months after receipt of the notification from the Director General to proceed;
of MYR10,000 if the application is made after two months but within six months after receipt of the notification from the Director General

In respect of an application for renewal of APA, a non-refundable application fee of MYR5,000 shall accompany the application.

Key takeaway for taxpayers

Taxpayers that intend to enter into an APA should take note on changes pertaining to the application requirement, list of information / documentation, timeline, fees, etc.

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