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July - August 2021 www.micpa.com.my PP 3809/03/2013 (031857)
The Malaysian
ACCOUNTANT
Value-Driven Accountant,
Are You Ready?
Customer Experience is the New Corporate Battlefield
The Malaysian Transfer Pricing Developments
How to Build a High-Performance Team
Journal of The Malaysian institute of Certified Public accountants
The Malaysian aCCounTanT ConTenTs
Contents
Feature
Value-Driven accountant,
02 are you Ready?
07
Customer experience is the new
Corporate Battlefield
10
The Malaysian
Transfer Pricing
Developments
how to Build a
16 high-Performance Team
EDITORIAL BOARD PRINCIPAL OFFICE BEARERS
Datuk Robert yong Kuen loke (Chairman) President
alex Khaw (alternate Chairman) Dr Veerinderjeet singh
Dato' ahmad Fuaad Mohd Kenali
lee Tuck heng Vice President The Malaysian Accountant is published by:
Mohd Muazzam Mohamed Dato' Gan ah Tee The Malaysian Institute of
Patrick ng Gan hooi Certified Public Accountants
stanley Teo swee Chua PRINCIPAL OFFICER
195801000106 (3246-u)
15, Jalan Medan Tuanku
Chief Executive Officer 50300 Kuala lumpur, Malaysia
novie Tajuddin (novie@micpa.com.my) Tel: 03-2698 9622 Fax: 03-2698 9403
Concept & Design e-mail: micpa@micpa.com.my
Digibook sdn Bhd Website: www.micpa.com.my
Reign associates sdn Bhd
Note: The views expressed in this journal are not necessarily those of the Institute or the Editorial Board. All rights reserved; no part of this publication may be transmitted in
any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission of the Institute or the Editorial Board.
www.micpa.com.my
1•PeRsPeCTiVe The Malaysian aCCounTanT
a
Institute News
Perspective
22 Towards a Comprehensive
system of Corporate Reporting re accountants in Malaysia almost two-thirds recognise that
ready to be value-driven customer engagement will be done
- Communication of long-Term accountants? Many predominantly via virtual platforms
Value Creation accountants are still caught up in the and are willing to partner with third
old way of doing things. however, in parties to deliver service to their
24 excellence awards 2019/2020 these current times, it is vital to keep customers. hence, most Ceos are
26 Membership update abreast of new developments and prioritising technology investments
ideas. and to move ahead, because of pandemic implications.
27 upcoming CPD Programmes accountants need to broaden their Read the article inside for more
focus on value creation. information.
28 MiCPa Programme Term 1,
2020 examination There was a time when non-financial Transfer Pricing is one of the top tax
information played a secondary role compliance concerns that medium to
29 MiCPa Programme Term 3, to financial information. however, large corporations as well as
2020 examination now it has somehow evolved to a multinationals strive to achieve.
great extent that it demands an Malaysia has implemented several
equal standing with financial legislation and rules to uphold the
information. transfer pricing regime in place. The
Young MICPA Corner
article inside gives readers a good
33 Transfer Pricing as a Career There is an expectation for value- understanding of Transfer Pricing and
in Malaysia driven governance. leaders must how it affects businesses in Malaysia.
lead with values to create a culture
that elevates financial performance, how does one build a high-
encourage ethical practices, performance team? outdated ideas
TechWatch
develops social contribution, and no longer work these days. KPis,
35 MasB update enriches the environment. There bonuses are a thing of the past. The
36 iasB update must be a vibrant synergy in the increment of productivity depends on
accounting firm to create effective how one motivates people because
38 iFaC update communication between accountants poor leadership can destroy
and stakeholders. Read the article workplace environments.
Legal Update inside for more information.
it has become imperative to improve
landlords, Tenants and the in a recent survey by KPMG, it was the relationship between leaders and
extended CoViD-19 act in
42 found that 35 per cent of Ceos in their teams and allow the employees
Malaysia asia Pacific believe that their to achieve work-life balance. That
business is changed forever due to would play a significant role in
the on-going pandemic. With the boosting the team’s agility and
Global Insight unpredictable recovery timelines, resilience.
business leaders have recognised
44 news from Down under that customer experience has Many leadership practices are based
emerged as the new corporate on operational factors, such as how
46 World news playing field in this era of continuous to delegate appropriately,
disruptions. it is thus not surprising communicate effectively, and
that some companies and industries, manage the day. There should also
having recognised this fact, are be a program that teaches leaders
Life
striding ahead in the game. how to talk to upset employees, how
49 The Mystique of santorini to stop upsetting employees, and
The survey also showed that 53 per how to create a psychologically safe
cent of Ceos in asia Pacific plan to environment where employees
invest more in customer-centric aren’t scared to share their opinions.
Meet our Members
technologies, such as chat bots, For more information, read the
53 Dr lee Mei yee compared to the previous year. article inside.
July - august 2021
The Malaysian aCCounTanT FeaTuRe•2
Value-Driven Accountant,
V
Are You Ready?
alue creation is working its functions is evolving as the “Many accountants are still
way up the agenda of Boards emphasis of professional caught in an old paradigm where
of Directors because of the accountants continues to shift from returns to shareholders are often
drive by investors across the globe the production of accounts towards looked at as the more important
to incorporate these aspects in their value creation. Traditionally, value key performance indicators. it’s
decision-making process. creation has never been considered time for accountants to broaden
increasingly more leaders are or was always regarded as a our focus on value creation to
turning towards value-driven secondary role compared to the include all stakeholders as well
leadership. of course, professional provision of financial information. as esG considerations on a
accountants should forge ahead to The rising importance of non- longer-term perspective,” said
become value-driven accountants financial information in recent years Dato’ ahmad Fuaad Bin Mohd
and collaborate with others to is leading to a change in an Kenali, President and Group
create, innovate, and preserve organisation’s focus to create short, Chief executive officer of uMW
value. The landscape of finance medium, and longer-term value. holdings Berhad.
www.micpa.com.my
3•FeaTuRe The Malaysian aCCounTanT
There are two broad categories of
stakeholders. internal stakeholders
Value Creation through Step #1: Evaluate the Needs of
Before reaching out to refer to individuals within a
Stakeholders Internally
Engagement with
Stakeholders stakeholders, businesses are business, such as shareholders,
encouraged to perform a the board of directors, managers,
The question arises as to what is preliminary evaluation of their and employees. external
meant by value creation for a stakeholders’ needs and stakeholders vary depending on the
business. Value is created through expectations after dealing with business model. Generally, it
a wide range of activities, including them for many years. The consists of customers, suppliers,
engagements, courses, and preliminary evaluation helps identify regulatory bodies, government
relationships. These activities key stakeholders, set priorities, agencies, strategic alliances,
generally occur in the economic, prepare responses, and understand media, and the community. a key
societal, and environmental context their capabilities. stakeholder can have a positive or
within which the business operates
negative effect on the value
and depends on. such activities
creation of a business. hence, the
take place between the business
Step #2: Identify Key
identification of key stakeholders
and its stakeholders, such as There are many different
Stakeholders
that affect the value creation of a
customers, employees, suppliers, stakeholders in a business business is crucial to achieving
regulators, the government, organisation. The priorities of an sustainable goals in the long-term.
community, and others, in the organisation’s strategy can vary
context within which business depending on who the key
activities are carried out. The stakeholders are and what their
activities that we engage in with perspectives are, i.e., their needs
stakeholders affect the level and and expectations. Generally,
type of value that businesses can stakeholders in a business can be
create. categorised as follows:
one of the key reasons for
engaging stakeholders is
understanding their needs and
expectations and how they affect
the business’s activities. To some
extent, it helps determine the cost
and resources available as inputs
to carry out business activities and
create value for stakeholders. in
the process of creating value for a
business, the types of risk and
opportunities, including potential
uncertainties that could possibly
affect the business’s ability to
create value, should be identified
and managed throughout the value
creation process. an accountant is
expected to drive this process. The
following steps are intended to
guide accountants in engaging with
stakeholders and encouraging their
participation in a robust
sustainability strategy.
July - august 2021
The Malaysian aCCounTanT FeaTuRe•4
identified material matters. it is businesses should consider
recommended that the strategies focusing on its link to
Step #3: Understand the Needs
are accompanied by a list of environmental, societal, and
and Expectations of
in order to be cognisant of implementation plans to achieve economic value. shared value is
Stakeholders
stakeholders’ needs and the targets of the business. it is based on the premise that having
expectations, information must be important to know that whatever an environmental, societal, or
elicited from them. an individual organisation decides to include in economic issues that are not
stakeholder’s request may or may its strategy needs to be addressed increases the cost of
not represent the entire category of implemented and integrated into businesses. instances of such
stakeholders accurately. Therefore, organisational behaviour. issues are wasted water and
an evaluation of the request from energy, air emission and air quality,
an individual stakeholder should be This ‘match’ between societal and and hazardous material use, which
carried out to ensure it represents organisational input on the one destroys the value or limits the
the wider stakeholder category. hand and output, on the other hand, extent of value creation over the
upon establishing the accuracy of is a crucial condition for business longer term. a business model
requests, they can be defined as a integrity behaviour. The most without addressing externalities
"wish list". important reason for identifying and make businesses unsustainable in
understanding stakeholders is that the long term.
it allows you to address their
genuine concerns. stakeholder
Step #4: Identify and Categorise
an analysis of the ‘wish list’ is a engagement is a continuous
as Material Matters
Value Creation for a
way of determining which requests process. With the appropriate Business Itself and for
have the most positive or negative preparation, feedback, and Other Stakeholders
influence on the value creation of a implementation plan, businesses
business, what is likely to be most can effectively create value for their Traditionally, businesses are profit-
affected by value creation, and how stakeholders in the short, medium, oriented. Business owners or
a business should work alongside and long term. managers have a profit-oriented
stakeholders with different levels of mindset and aim at maximising the
interest and influence. hence, a Value Creation income of the business for the sole
business should further analyse Covering Externalities benefit of the shareholders or
which material requests can be owners. however, due to the
regarded as a material matter for as for what value should be created recent demand for non-financial
the business. by a business, certain outcomes information by investors, the focus
must be reviewed from how its of businesses has increasingly
business activities create an impact shifted from profit-oriented to value-
beyond the business, such as to driven. a question arises as to
Step #5: Format a relevant
Through the above-mentioned the environment, society, and whether such value should be
Strategy
stakeholder engagement, an economy. externalities are seen as created solely for shareholders,
organisation can learn about the the responsibility of a business in multiple stakeholders, or both. To
expectations stakeholders may today’s world. externalities can be answer this question, businesses
have and integrate these positive or negative, resulting in a get the most out of a society’s
appropriately in the business net increase or decrease to the limited resources, so in return, they
strategy. The next step is to form a value created. in creating shared should consider returning greater
list of strategies to address the value with stakeholders, value to society. in other words,
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5•FeaTuRe The Malaysian aCCounTanT
businesses should consider the secure a competitive advantage, as the government, and the
pursuit of stakeholder value for this distinguishes itself from others community.
multiple stakeholders in addition to in this competitive environment.
maximising its financial value for such creation of value through Value-Driven
shareholders. There are differences innovation will also help businesses Accountant
between financial value and master new mechanisms to build
stakeholder value and how sustainable growth. There are Given the increasing demand for a
businesses manage the two. various methods by which value-driven business, the role of
Businesses should ask themselves businesses measure value the Chief Financial officer has
the following questions: creation. The common grown to encompass a broader
measurement methods such as scope, which includes looking into
• Does your business focus on surveys, balanced scorecard, non-financial information to the
financial value, i.e. profits and enterprise value, economic value- value-driven business model,
share price, to the point of added, total contribution, total leading to the emergence of the
neglecting stakeholder value, economic value, and total value are Chief Value officer. The role of the
i.e. customer safety, customer generally adopted by businesses. Chief Value officer is to assist in
satisfaction, public trust and so driving and creating value through
on? Trade-offs of Value the harnessing of the multi-capitals,
• Do your products or services Creation namely natural capital,
create a positive or negative manufacturing capital, intellectual
impact on stakeholders? inevitably, there will be times when capital, financial capital, social and
• Do your products or services the stakeholders’ interests in a relationship capital, and human
add value to your customers in business are not complementary. capital. it means that they are
the short, medium, and long Traditionally, business leaders have expected to be involved in
term? skewed some of their decisions too discussions about creating long-
• Does your business allow itself much toward the interests of term value for the business and its
to pursue projects that generate shareholders. however, this should stakeholders. in other words, their
significant value to stakeholders change moving forward. role has gradually been expanded
but do not generate revenue? Businesses should resolve the to cover monitoring of long-term
• are your products or services conflicts by focusing on long-term value creation in addition to the
the most meaningful way to add value creation, as the long-term traditional role of overseeing short-
value to stakeholders? value of a business cannot be term financial performance. Both
maximised if any important group of the value created and destroyed by
people with shared interests is the business is to be accounted for
Value Creation through ignored. The reality is that the and disclosed to the board of
Innovation interests of different groups can be directors, those charged with
at odds with one another. strategic governance, management, and key
Value creation for the business and decisions involve trade-offs bearing stakeholders through value-driven
other stakeholders should be a in mind that businesses cannot corporate reporting.
continuous process. in addition, create sustainable value without
businesses are also encouraged to having a good relationship with key
lay down strategies that innovate stakeholders such as customers,
new outcomes regularly to help employees, suppliers, regulators,
July - august 2021
The Malaysian aCCounTanT FeaTuRe•6
“The role of a CFo has achieving the planned outcomes. business model needs to cascade
developed in ways previously To fulfil such goals, the CFo cum down and become part of the Dna
unanticipated. a modern CFo CVo needs to change their of the entire business.
holds responsibilities far beyond mindsets to embrace value
just overseeing a company’s creation. Traditionally, the focus is a CVo is expected to manage
finances. simply put, a CFo of always placed on financial key value and drive all strategies,
today’s modern business must performance indicators (KPis). cultures and mindsets, processes
be involved in driving and There is a need for a change to a and organisational elements
creating value for the multiple capital approach, towards value. a brief competency
company’s shareholders and managing other business capitals, expected from a CVo includes:
stakeholders.” said encik including natural, human, social • Deploying value-based
Rozaini Bin Mohd sani, Group and relationship, manufactured and strategies, including the use of
Chief Financial officer of Johor intellectual capitals. in addition to multiple capital approach
Corporation. the KPis, CVos are involved in • setting the tone from the top,
setting and measuring non-financial advocating a value-based
Competency of a Chief KPis, including innovation, culture and mindset, and
Value Officer customer satisfaction, employee embracing integrated thinking
engagement and quality of service. • implementing value-based
Today, the CFos are becoming the The deployment of a multiple processes and managing risks
Chief Value officers (CVos) to lead capital approach helps businesses strategically
and report on how the business move away from reporting in silos • Generating both financial
deploys resources, i.e. multiple and embrace integrated thinking. outcomes for the organisation
capital approaches, to perform its This requires communicating the and value-based outcomes for
business activities to produce the interconnected and interdependent stakeholders
intended outputs with the aim of nature of these capitals, and the
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7•FeaTuRe The Malaysian aCCounTanT
Customer Experience is
M
the New Corporate Battlefield
By Datuk Johan Idris, Managing Partner of KPMG in Malaysia
ore than a year since the This isn’t to say that we’ll go back believe their business is forever
CoViD-19 pandemic first to the normal as we knew it. earlier changed, higher than the global
became rampant, we are this year, our 2021 KPMG Ceo average (24 percent).
finally starting to see a viable path outlook Pulse survey found that 35
forward now that most countries percent of Ceos in asia Pacific
have begun their vaccination roll-
out. at this time of writing, the
When do CEOs envision that their company will return to a normal
Malaysian Government has begun
course of business?
to accelerate the nation’s
vaccination program to administer a
delivery rate of 200,000 doses daily
and our honorable Prime Minister
has also unveiled the national
Recovery Plan.
While the past year has thrown
everyone for a loop, this light at the
end of the tunnel means leaders
can now start to plan for a post-
pandemic future.
Source: 2021 KPMG CEO Outlook Pulse Survey
July - august 2021The Malaysian aCCounTanT FeaTuRe•8
Whatever the timeline that recovery Majority of Ceos also noted Today, most customers are now
takes, it’s clear that business experiencing significant digital comfortable using online channels
leaders have already recognized acceleration in the creation of a to buy what they need. adding on
that they are operating in an era of seamless digital customer the psychological impact of CoViD-
experience. 31 percent of Ceos 19 on customer spend, there is also
continuous disruptions. in many
said that their progress has sharply a heightened expectation for
ways, this pandemic has been a
accelerated, putting them years in brands to deliver better, safer, and
global reset that has also leveled advance of where they expected to more seamless interactions at a
the playing field. Customer be, while 65 percent said that their lower cost.
experience is now the new progress has accelerated by a
corporate playing field, and already matter of months. only 4 percent The companies getting customer
we see some companies and were said to maintain the same experience right have a crystal-
industries striding ahead in the amount of progress as before the clear understanding of who their
game. pandemic. winning customers are today. They
have deep insights into their likes,
habits, preferences, needs and
our survey revealed 53 percent of
value. These companies clearly
Customer experience
Ceos in asia Pacific plan to invest and the way forward understand who they want to win
more in customer-centric with and why.
technologies, such as chat bots, For the near future, businesses will
compared to the previous year. need to mesh two separate
almost two thirds (61 percent) playbooks—one they’ve used this
The New Reality
recognize that customer past year to survive the crisis and a customer
new one to help lead the company
engagement will be done
into the post-pandemic future. Customers in the new reality prefer
predominantly via virtual platforms,
organizations can start with contactless interactions, are more
and are willing to partner with third strategically re-engaging with their financially constrained and are
parties to deliver service to their customers. more thoughtful and selective in
customers. unsurprisingly, a their decision-making. Most of all
majority of Ceos (69 percent) are With lockdowns and social they prefer to prioritize brands they
prioritizing technology investments distancing in place, many trust.
as a result of pandemic organizations have had to
implications. accelerate and augment their • Organizations will need to
existing operating models to rethink their business and
operating models. Value for
money has become one of the
most important factors in
decision-making and has
become a significant driver of
loyalty. The consumer’s search
for value for money is a
fundamental change in
purchase priorities and will be
prevalent for 12 months or
more.
• as customers are now more
Source: 2021 KPMG CEO Outlook Pulse Survey (Asia Pacific results) comfortable using online
channels to buy what they need
one of the reasons for this is maintain continued transactions and gravitating towards
customer driven, as 46 percent of and commercial cadence with their touchless shopping and
Ceos mentioned that they are customers, thereby creating contactless payments,
prioritizing these investments as digitally savvy consumers that organizations should
their customers are more open to demand easy and effortless consider investing in new
these measures since the interactions. digital methods of
pandemic. communication and
www.micpa.com.my9•FeaTuRe The Malaysian aCCounTanT
payments. use of chat The six Pillars of experience
technologies and social media excellence are inextricably supply chain risk was
3) Build in resilience
has grown with a threefold intertwined and, when utilized considered one of the top risks
increase in consumers claiming properly can provide a powerful to Ceos given the disruptive
they will use social channels, mechanism to help organizations impact of CoViD-19, and was a
webchat, messenger apps and understand how well their customer driver for organizations to
sMs chat as their main means experience is delivered across become more agile in response
of communicating with channels, industries, and company to changing customer needs.
organizations in the new reality.1 types.
• Trust becomes multi- While embedding new
4) Keep it human
dimensional. integrity and trust technologies such as ai and
The future is customer
are anchored in an centered automation are likely to be
organization’s purpose and sets critical in developing more
an ethical standard that the There are several key seamless interactions for
business must live up to. considerations that business customers, remember not to
Consumers are more likely to leaders can contemplate to make lose the human touch at key
gravitate towards firms who faster progress towards a moments.
have demonstrated resilient, customer-centered strategy.
moral principles and a
commitment to humanity, the
5) Make use of new
environment and social aims. Make sure that you research
technologies
into what new technologies are
1) Keep close to what your
KPMG’s Customer experience The ability to think “outside in” is available that could help you
customers want
excellence Centre (CeeC) key in building a customer- serve customers better or
research hub has validated six centric business. ensure that connect your business up more
fundamental components of you are not deviating from your seamlessly. are you utilizing
every great customer experience original goal of delivering on cloud effectively and securely?
journey, which applies across all what your customers want, are you building in appropriate
industries. The results are based on need and are willing to pay for; automation and ai? are your
almost a decade of research and keep looking up and outside of teams empowered with
more than 2 million evaluations the organization to ensure your collaborative tools so that they
across multiple markets. mission is at the fore. can better work together and
share key information and data
2) Do things in an agile easily?
Becoming a connected This pandemic has been a
way
enterprise is a challenging time but it has also
transformation — but that emphasized the need to put
doesn’t mean the customers at the heart of the
business needs to business. Going forward, we
revolutionize itself believe that digitally transformed
overnight. Break changes companies can gain and maintain
down into specific steps, competitive advantage when they
sequence them and align their front, middle and back
implement them. Keep office to deliver on the
assessing whether the organization’s customer promise
change has been and value proposition and do so
successful in a ‘test and economically and profitably.
learn’ approach. it’s about
a series of small changes 1 Global Customer Experience
that together add up to a Excellence research 2020: The
Figure 1: The Six Pillars of Customer Experience significant and impactful COVID-19 special edition,
Excellence transformation. KPMG International
Source: KPMG Global Customer Experience
Excellence research 2020
July - august 2021The Malaysian aCCounTanT F e a T u R e • 10
The Malaysian Transfer Pricing Developments
By H’ng Yee Ling and Kang Suit Gim
crucial that arm’s length price is and implemented. Thereafter,
taken into consideration in income Tax (Transfer Pricing) Rules
Introduction
over the past decade, Transfer
Pricing has been undeniably one of determining the pricing of 2012 [Pu(a)132/2012] and Transfer
the top compliance concerns facing transactions between associated Pricing Guideline 2012 were both
medium to large corporations as persons. This is in line with section issued on 11th May 2012 and 20th
well as multinational companies 140a of income Tax act (iTa) 1967 July 2012 respectively to ensure
(MnCs) in striving to achieve tax which requires taxpayers to apply consistent compliance among
efficiency within the group. arm’s length price on controlled businesses. The guidelines have
Therefore, Malaysia has transactions. The establishment of been updated with reference to the
implemented numerous legislation controlled transactions would organization for economic Co-
and rules to uphold the transfer trigger the preparation of operation and Development
pricing regime in place. contemporaneous Transfer Pricing (oeCD) Transfer Pricing Guideline.
Documentation either simplified or Moving forward, in year 2017,
Before diving into the development full by businesses depending on the updates on the Transfer Pricing
of Malaysian Transfer Pricing rules, size and amount of related party Guideline 2012 was made with the
let’s have a brief understanding on transactions, which will be addition of new chapter on the
what Transfer Pricing is all about discussed in the later part of this arm’s length principle, intangibles,
and how it affects businesses in article. commodity transactions and
Malaysia. in general, transfer documentation followed by the
pricing refers to intercompany The evolution of transfer pricing revision of definition of ‘control’
pricing arrangements for transfer of legislation goes all the way back to under section 140a(5a) of iTa
goods, services and intangibles 1st January 2009, when section 1967 in year 2019. lastly, in year
between associated persons. it is 140a of the iTa 1967 was gazetted 2020, amendments on rules and
www.micpa.com.my11 • F e a T u R e The Malaysian aCCounTanT
penalty which includes the The new provision of section 113B With the new provisions surfaced, it
introduction of surcharge on tax of the iTa 1967 requires taxpayers is evident that the iRBM has
adjustment made by inland to furnish Transfer Pricing switched sides to prioritize the
Revenue Board of Malaysia (iRBM) Documentation within 14 days upon Transfer Pricing compliance among
was introduced. The latest updates request by the inland Revenue companies. Therefore, taxpayers
on transfer pricing rules will be Board. Failure to furnish Transfer would want to re-examine their
discussed in the next chapter of this Pricing Documentation to iRBM level of compliance to the Transfer
article. For easier reference, the within the stipulated timeframe Pricing rules within the Group.
timeline for the evolution of Transfer would expose the taxpayer to the other than medium to large
Pricing legislation in Malaysia are risk of penalty ranging from corporations, the small and
illustrated below. RM20,000 to RM100,000. Medium enterprises (sMe) should
be on high alert too as related party
transactions are inevitable in this
fast-paced business world.
Transfer Pricing
Threshold
Companies are required to prepare
contemporaneous Transfer Pricing
Documentation if related party
transactions exist. however, the
type of documentation prepared
differs, whether full or simplified,
depending on the size of related
party transactions entered. The
Malaysian Transfer Pricing
Guideline 2012 sets out the
threshold for the preparation of
Transfer Pricing Documentation to
ease taxpayers in determining
Recent updates of alongside with section 113B of iTa whether full or simplified Transfer
Transfer Pricing 1967, the introduction to section Pricing Documentation should be
140a(3a) and section 140(3B) of prepared. however, it should be
in most cases, Transfer Pricing iTa 1967 provides the Director noted that transfer pricing is only
Documentation are considered General of inland Revenue (DGiR) applicable to controlled transactions
insignificant by taxpayers as it is with the power to disregard any between associated persons,
not mandatory to be submitted structure in a controlled transaction where at least one person is
together with the annual Return if arm’s length basis is not applied assessable or chargeable to tax in
Forms. however, effective from the and adjustment shall be made to Malaysia.
year 2021, Transfer Pricing the structure as the DGiR thinks fit
Documentation should not be taken to reflect the arm’s length basis. in The threshold that requires a
lightly by businesses with the addition, section 140a(3C) of iTa taxpayer to prepare full Transfer
introduction of new provisions 1967 was also introduced to Pricing Documentation includes
under the Finance Bill 2020.The specifically provide that any either:-
newly introduced sections clearly adjustment made by the DGiR on (a) a person carrying out business
have a significant impact to most of the transactions would burden the whereby their annual gross
the companies in Malaysia which taxpayer to a surcharge of not more income exceeding RM25
million, and the total amount of
have controlled transaction. than 5% of the gross adjustment.
July - august 2021The Malaysian aCCounTanT F e a T u R e • 12
related party transactions For instance, if a company is selling
exceeding RM15 million. a particular model of computers to a
Arm’s length Principle
The entire concept of transfer third-party customer at RM2,000,
(b) a person provides financial the company also sells the same
pricing could be acceptable to the
assistance which exceeds model to its related company at the
DGiR if the pricing is at the arm’s
RM50 million (except
length price. The arm’s length same price of RM2,000. hence, we
transactions involving financial
principle is the manner of can conclude that the transaction
institutions).
determining price in a transaction with the related company is at arm’s
between independent parties. length price as the selling price to
Meanwhile, a taxpayer who does
under section 140a of iTa 1967, the related company is at the same
not fall into the scope set out above
the pricing between related parties price as an independent party.
may opt to prepare a simplified
version of Transfer Pricing would be acceptable for tax
purposes if arrived at through the however, there are a number of
Documentation. With that said,
arm’s length principle. if the pricing factors which could affect the price
below is a summary of information
is not at arm’s length, then it may or margin of a transaction:
required for both full and simplified
Transfer Pricing documentation: - require adjustment of pricing.
• the geographic location of the
market
• the size of the market
• the extent of competition in the
markets
Full Transfer Pricing Documentation Simplified Transfer Pricing
• the level of supply and demand
Documentation
• organisational and ownership • organisational and in the market as a whole and in
particular region
structure ownership structure
• customer purchasing power
• nature of business or industry and • Controlled transactions • cost of production including the
costs of lands, labour and
market conditions capital, and transportation cost
• Controlled Transaction • Pricing policies * • level of market
• the date and time of transaction
• Pricing policies * • the availability of substitute
• assumptions, strategies, and goods and services
• the extent of government
information regarding factors that intervention
influence the setting of pricing policies
level of market that a company is
• Comparability, functional and risk servicing could have an impact on
analysis the margin, pricing for different
levels of the market could be
• selection of the transfer pricing different. if a company sells its
method product to its related company who
is a distributor, the margin that the
• application of Transfer Pricing
company gets is lesser as
Methodology compared to the margin obtained
• Financial information from selling to a third party who is
an end customer. For the end
• supporting documents customers, the company can
charge a higher price and gain
more profit.
* Comparability study to ensure the arm’s length price is required
www.micpa.com.my13 • F e a T u R e The Malaysian aCCounTanT
comparable data. however, in
many cases, it is difficult to
Transaction which falls Transfer Pricing
compare “apple to apple” as the
under Transfer Pricing Method
Transactions that fall under transfer according to the Malaysian transaction between independent
pricing include tangible and Transfer Pricing Guideline 2012, parties that are similar enough with
intangible transactions. it covers there are five transfer pricing the controlled transaction are
sale, purchase, lease, provision of methods to be applied to determine difficult to be found, there will be
services and borrowing or lending the arm’s length price. although the comparability differences.
of money. it should be noted that methods appeared to be so simple
even though it is not a business in theory, sometimes it might be Resale price method
transaction, transfer pricing law still difficult to apply in our real-life intra-
applies. Bear in mind that the group transactions. The company Resale price method is generally
dividend transaction is not under has to choose the most appropriate most appropriate where the final
transfer pricing due to it has no tax transfer pricing method which most transaction is with an independent
implication on the company as it is suit the controlled transaction to distributor. it is suitable when one of
non-taxable under iTa 1967. come up with the arm’s length the parties performs a distribution
charge of the transaction. function and does not take a
Tangible assets are the physical significant function that adds little
assets of a business, it could be in Malaysia, traditional transaction and no value then resells. The
current assets or fixed assets. The methods are commonly preferred resale price method begins with the
term “assets” are made up of over transactional profit methods. price at which a product that has
inventory and fixed assets. Reason has to be given if the been purchased from an associated
inventory include raw materials, company chooses not to use the enterprise is resold to an
work-in-progress, and finished traditional transaction method but to independent enterprise. The resale
products. Transaction in fixed adopt the transactional profit price is then reduced by an
assets are machinery and method. appropriate margin in light of the
equipment, fittings and vehicles. selling and distribution expenses
intangible assets would be incurred and functions performed to
make an appropriate profit. it is
Comparable
software, know-how, trademarks,
difficult in obtaining gross profit
Uncontrolled Price
patents and skills. intangible assets
when doing the comparability
(CUP) Method
can be categorized into two
categories which are trade The Comparable uncontrolled Price analysis as unable to obtain the
intangible and marketing intangible. (CuP) method compares the price gross margin information from the
Trade intangibles such as patents charged for property or services Companies Commission of
are created through risky and costly transferred in a controlled Malaysia (CCM) as many
research and development, know- transaction with the price charged companies do not disclose gross
how, designs and models that are for property or services in a margin information in their audited
used in producing a product or in comparable transaction undertaken account.
providing a service. Marketing between independent parties. This
intangibles are trademarks and method requires an uncontrolled Cost-Plus Method
trade names that are used in the transaction to meet high standards
exploitation of the products, of comparability. This is the most Cost-plus method is similar to
customer lists, distribution channels reliable method if the company is resale price method. This method
and so forth. able to access high quality can be used in the case where
semi-finished goods are sold
July - august 2021The Malaysian aCCounTanT F e a T u R e • 14
between associated parties, where are applied to the consolidated Whereas in the position of recipient
associated parties have concluded profit of the parties involved. This of service, does the service provide
joint facility agreements or where method is most appropriate when economic or commercial value?
the controlled transaction is the both parties to the transaction hold
provision of services. it begins with valuable intangibles, or when the in general, activities that would not
the costs incurred by the related operations are sufficiently be considered as an intra-group
party supplier in the provision of integrated to generate economies service are shareholder activities,
goods or services to a related party of scale and similar advantages. duplicate services, services that
customer. an appropriate provide incidental benefits, and on-
percentage mark-up is applied to Transactional Net call services. shareholder activities
the costs to give the arm’s length Margin Method are activities performed by a parent
profit. The cost referred to in the company solely because of its
cost-plus method is the aggregation Transactional net margin method ownership interest. it does not
of direct and indirect cost of works in a similar manner to the justify a charge to recipient
production. Direct cost is the cost resale price method, by substituting companies. Duplicate services are
identified specifically with a the gross margin with the net services performed by a group
particular activity such as material operating margin with an member or by a third party that are
and supplies, compensation, appropriate base such as costs, duplicative. services performed by
bonuses, and travelling expenses sales and assets. This is the most a group member that only relates to
incurred by staff directly involved in commonly used method in some group members but
the production. indirect cost is the controlled transaction as it is useful incidentally provides benefits to
cost that are not specifically in instances where it is difficult to other group members, this also
attributable to a particular activity compare at gross profit margin would not be considered as intra-
but it relates to direct costs or the such as in a situation where group services and would not justify
process of the activity such as different accounting treatments are a charge to other group members.
utilities, rental and the other adopted. Moreover, information of lastly, on-call service is where a
overhead cost. When applying cost- comparable companies is easy to parent company or a group service
plus method, appropriate be obtained from CCM website. centre is on-hand to provide
adjustments should be made to the services such as financial,
data to ensure that the same type Intra-Group Services managerial, technical, legal or tax
of costs are used in each case to advice to members of the group at
ensure consistency. The main issue for intra-group any time. on-call service is
services is that whether the considered non-chargeable except
Profit Split Method services have actually been if an independent person in
provided. if the services have in comparable circumstances would
The profit split margin method splits fact been provided, then intra-group incur such charges to ensure
the group profit among the parties charges have to be determined for availability of the services when the
engaged in the intra-group such services to be in line with the need for them arises.
transaction based on the margins arm’s length principle. arm’s length
that independent companies would principle for these services shall in most cases, CuP method or
have agreed with under similar look at the provider and recipient’s cost-plus method are suitable to
circumstances. Those margins are point of view. From the perspective apply for intra-group services.
based either on comparable or of the service provider, would an
internal data of the companies, independent enterprise be willing to
such as costs or headcounts, and pay or perform the service itself?
www.micpa.com.my15 • F e a T u R e The Malaysian aCCounTanT
the characteristics to determine Company C's loan to Company B
debt or equity for intra-group for transfer pricing purposes would
Intra-Group Financing
Most of the companies in Malaysia financing: be a function of the maximum
offer interest-free loan to their amount that an unrelated lender
related companies for the reason of • Presence or absence of a fixed would have been willing to advance
helping them to raise working repayment date to Company B, and the maximum
capital or to finance a certain • obligation to pay interest amount that an unrelated borrower
project. according to s140a of iTa • Right to enforce payment of in comparable circumstances would
1967, the company is required to principal and interest have been willing to borrow from
charge interest for loan to its • status of the funder in Company C, including the
related company in accordance comparison to regular corporate possibilities of not lending or
with the arm’s length principle. in a creditors borrowing any amount.
situation where the interest rate • existence of financial covenants Consequently, the remainder of
imposed on a controlled financial and security Company C's advance to Company
assistance is not at arm’s length, • source of interest payments B would not be delineated as a loan
the DGiR may make an adjustment • ability of the recipient of the for the purposes of determining the
to reflect the arm’s length interest funds to obtain loans from amount of interest which Company
rate. adjustment will be made unrelated lending institutions B would have paid at arm’s length.
where: • extent to which the advance is
used to acquire capital assets as a caveat, iRBM has power to
(a) For the supply of financial • Failure of the purported debtor make adjustments under the law.
assistance, the consideration is to repay on the due date or to
less than the consideration that seek a postponement Reference
1. Malaysia Transfer Pricing
would have been received or
For example, consider a situation in Guidelines 2012
receivable in an arm’s length 2. OECD Transfer Pricing
arrangement which Company B, a member of an
Guidelines for Multinational
Mne group, needs additional Enterprises and Tax
(b) For the acquisition of financial funding for its business activities. in Administrations (July 2017)
assistance, the consideration is this scenario, Company B receives 3. OECD Transfer Pricing
an advance of funds from related Guidance on Financial
more than the consideration
Company C, which is denominated Transactions (February 2020)
that would have been given or
agreed to be given in an arm’s as a loan with a term of 10 years.
Ms H'ng Yee Ling is Assistant
length arrangement assume that, in light of all good-
Manager of Mazars Malaysia and
faith financial projections of
Kang Suit Gim is Senior Associate
(c) no consideration has been Company B for the next 10 years, it
of Mazars Malaysia. The above
charged to the associated is clear that Company B would be
views are their own and do not
person for the supply of the unable to service a loan of such an
necessarily reflects the views of
financial assistance amount. Based on facts and
Mazars. They can be contacted via
circumstances, it can be concluded email at yee-ling.hng@mazars.my
it is also important to differentiate that an unrelated party would not and suit-gim.kang@mazars.my
the loan as debt or equity. if the be willing to provide such a loan to
loan is a capital loan, interest on Company B due to its inability to
the loan to related companies is not repay the advance. accordingly, the
required to be imposed. Below are accurately delineated amount of
July - august 2021The Malaysian aCCounTanT F e a T u R e • 16
How to Build a High-Performance Team
D
Forget KPIs and bonuses. If you want to drive productivity, you need to
jettison outdated ideas of what motivates people.
By Johanna Leggatt
ave sewell has seen first- and he told me that he was the Ceo achieve genuine work-life balance,
hand how poor leadership and he could behave how he and boosting a team’s agility and
can devastate workplace wanted.” resilience.
teams. some six years ago, the new
Zealand-based neuro-leadership “i pulled him out of the “i realised that many of the
researcher and author of Safe room and told him he leadership practices around today
couldn’t behave that way,
Leadership: Beating Stress to Drive are based on operational factors,
Performance ran his own business such as how to delegate properly,
consultancy. But he was forced to and he told me that he was how to communicate effectively,
drop two clients in two months the Ceo and he could and how to manage your day,” he
because of bullying behaviour. behave how he says.
wanted.”Dave sewell,
“one of my clients was particularly leadership coach “But i had not come across a
horrific and shamed his international leadership program that tells you
sales manager in front of me and his how to talk to an upset employee,
That bruising encounter prompted
executive team. he called her how to stop upsetting your
sewell to embark on a new career
names and she broke down in employees, and how to create a
as an executive leadership coach.
tears,” says sewell. psychologically safe environment
his focus was on improving the
where your employees aren’t
relationship between leaders and
“i pulled him out of the room and told scared to share their opinions.”
their teams, allowing employees to
him he couldn’t behave that way,
www.micpa.com.my17 • F e a T u R e The Malaysian aCCounTanT
he argues that teams thrive on productivity, perhaps we can look
clear goals and direction. within our four walls and ask, ‘am i
Safe leadership equals
running the most efficient and the
great teamwork
sewell devised a nine-month “in the close to 200 companies i most engaged team that i can?’”
program for new Zealand have worked with during the past Davidson defines high-performing
workplaces to help managers decade, almost none of them had teams as those that achieve the
connect with their teams via his offered clear enough outcomes for “goals they set for themselves
concept of “safe leadership”. each of their employees or teams to without doing damage along the
achieve each day,” he says. way to the people in the team or to
“When someone is under threat or their clients”.
afraid [of their boss], they don’t look sewell explains that clear
after the team, they tend to look expectations and boundaries – “and this ends up being the most
after themselves,” says sewell. somewhat ironically – allow for economically rational thing a
enormous freedom, agility and greater company can do,” he explains.
“When someone is under work-life balance and flexibility. But there is a common mismatch
threat or afraid [of their
between the mechanisms leaders
“if the company knows what each use to try to drive performance in
boss], they don’t look after employee needs to achieve from an organisations, and the things that are
the team, they tend to look outcome perspective, it really genuinely effective, says Davidson.
after themselves.”Dave doesn’t matter if that work gets
sewell, leadership coach done at six o’clock in the morning “almost everything we think of as
or 8pm at night,” he notes. driving high performance in a typical
“Conversely, a safe leader allows all organisation actually works against
team members to say basically What are the right sustainable, long-term performance.”
what’s on their mind at any given
time. it’s really as simple as that.” For example, some managers think
drivers?
late in 2020, scott Wagenvoord, Ca providing extrinsic rewards for
as sewell notes, a psychologically anZ’s regional manager for new professionals, such as a financial
safe team is significantly more Zealand’s south island, asked bonus, is highly motivating.
productive than one that’s scared of sewell to join forces with Carl “in fact, it will do the opposite,” says
getting in trouble. Davidson, director of strategic Davidson, who notes that most high-
insights agency Research First, to performing professionals are already
“it’s actually highly prudent from a talk to Ca anZ members about inherently motivated to do a good job.
bottom-line perspective to be building high-performing teams.
psychologically safe,” he says. The duo dispelled numerous myths “Most professionals care about their
about what is required for improved craft, they care about performing
“if you have team members that team productivity, Wagenvoord says. well for the people around them,
don’t harbour grudges, that are and if you set them up to compete
openly making suggestions and “Members will often say they need with one another, you will
giving feedback without fear, then more headcount, but i have an undermine the team dynamic as
the team is really humming along. absolute belief that you can build well as their performance,” he says.
capacity within your existing
“lots of great conversations and work headcount if you build a high- Aim for a collegial
happens when people are happy.” performance team. atmosphere
“We have technology that will Davidson advises managers to
create an intrinsic reward culture
Clear goals allow more
provide efficiencies, we have
that “supports and acknowledges
flexibility
offshoring for more transactional
This doesn’t mean sewell endorses work. so when it comes to performance, rather than sets out to
laissez-faire management; in fact, reward it”.
July - august 2021The Malaysian aCCounTanT F e a T u R e • 18
“i am not saying that people should them that there is no such thing as “and make sure it’s really clear
not be paid well – they should – but a toxic employee,” says sewell. what the meeting is about
there is research that says that beforehand and who is agreeing to
once people reach a certain level, “i tell them that that employee is what afterwards.”
money ceases to be as motivating clearly stressed because you, as
for them,” he explains. the leader, have not figured out it’s also worth establishing rules
what is actually wrong and helped about how people should behave in
importantly, this intrinsic reward remove that stressor.” meetings.
approach doesn’t have to be a
formal procedure for it to be How to make a “For instance, if someone suggests
effective. meeting really work an idea, you are not allowed to say
it’s dumb and you are not allowed
“an environment with lots of Most professionals at some point to say no to it. you have to say, ‘yes
laughter, a bit of levity and liberty, is have endured soul-sapping and’ so you accept the idea and
much better than what we were all meetings that achieve very little. To build on it.”
taught to believe: that we need to avoid this, it’s important that teams
treat performance as a serious establish processes to train the hierarchical politics are likely to
thing driven by KPis,” Davidson group’s focus on what truly matters. influence teamwork and, again, this
says. is where rules can help.
Wagenvoord reports a great “a-ha
sewell adds that a raft of outdated moment” for Ca members was “you can have a rule that the most
assumptions work against our in- sewell and Davidson’s concept of senior person in the room speaks
built tendency towards congenial working in periods of focus rather last,” Davidson suggests.
collaboration. than blocks of time, and then
tailoring these focus periods to the “you can have a rule that
the most senior person in
“one of the big myths is that team members’ work cycles.
bosses can’t be friends with staff,”
says sewell. “some people are early-morning the room speaks last.”Carl
people, others are late-morning, so Davidson, Research First
“i am not saying that they have to we need to look at where staff
go and drink with employees, but members’ strengths lie, and at what “or when a decision needs to be
you can and should be friendly time they work best,” says made, people could write down
towards staff.” Wagenvoord. their preference before [the senior
person speaks] and, therefore, they
“once people reach a “in general, 3pm is most people’s will not be swayed by the politics in
certain level, money low point so it’s best not to organise the room.”
ceases to be as motivating
a team pitch for important business
at that time in the afternoon.”
for them.”Carl Davidson,
Research First
The ‘in group’ versus
Davidson says employers can the ‘out group’
“hack” meetings so they energise
another collaboration myth is the the team members rather than Teams cannot be successful
notion that the “punishment comes deplete them. without a strong sense of belonging
before the reward” and that some and this is where the psychological
team members are simply not “have meetings standing up to notion of the in-group and the out-
“team players”. ensure they don’t go on for too group can be leveraged.
long,” he advises.
“some leaders will tell me that a “People are tribal in nature, and it’s
certain employee is toxic, and i tell important they bond through a
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