BOD of Group 12- discussing about the transfer pricing issue,

Content :
Intro - Darwisyah
Finding/Discussion - Everyone (Based On Your Part)
Conclusion - Minru

Roles In BOD
ALL
Puspa-Executive Director
Wishah-Treasurer
Shiying- Assistance Treasurer
Amzar-committee
Minru- Chairman

Minru: A very good day ladies and gentlemen. I'm Cheng Min Ru, the chairman of this
meeting. I’m glad to welcome all of you to our first Intel Company ABC Group 12
Board Of Directors meeting. Thank you all for coming to this meeting. So now,
Nur Darwisyah, our treasurer, will explain why we have this meeting.

wisyah: Hi, I’m Nur Darwisyah. As we have found that Transfer pricing is a hot topic now
in Malaysia because it relates to the government's income tax and the obligation of
a business in obeying the regulation and requirements set by the government. Thus
we hold this meeting to……obj 1-5
The objectives of this meeting ;
1. To identify the importance of transfer pricing.
2. To identify the implications if the related party transaction does not comply with
the arm’s length principle.
3. To know the calculation and double entries of transfer pricing.
4. To suggest the appropriate recommendation that helps to reduce the overall tax
liability of the company.
5. To suggest the appropriate improvement when transfer pricing operations are
decentralized, and processes are manual.

So before we further discuss, I would like to directly explain to you all what
transfer pricing is. TP is a method of accounting and taxes that permits pricing
transactions between subsidiaries that have common control or ownership as well
as within a company.

The country set the standards and rules based on the arm's length concept to
determine the transfer price of related-party transactions.

Minru: Thank you Darwisyah. So now we shall proceed to discuss why we should apply
transfer pricing in our company. Can someone voice out your opinion?
Shiying: Yes, Ms Chairman, Hello everyone, I'm Wang Shiying. I would like to voice out
the importance of transfer pricing to our company. Transfer pricing plays a very
important role in the analysis of connected transactions and in the formulation and
verification of whether connected transactions between enterprises conform to the
principle of fair transactions.

The first point is that when conducting related transaction analysis, different
transfer pricing methods may lead to great differences in the verification results.
The second point is that different types of affiliated exchanges apply different
transfer pricing methods. The Measures mainly explain the application of transfer
pricing methods by different types of connected transactions, and different types of
connected transactions need to investigate different priorities.

Comparability analysis and reliability and consistency of information sources are

very important for the selection of transfer pricing methods, which are also certain
basis and key indicators for enterprises to select appropriate transfer pricing
methods when formulating pricing policies of related transactions and tax
authorities to review or adjust them.

Let me pass to Amzar to make it clear on what will happen if our Transaction
Does Not Comply to Arm’s Length Principle.

Amzar: Hi my name is Amzar. So, there are few consequences if our business does not
comply to the arm’s length principle. The first is one it will affect our company for
sure. This is because the price that our business put for the product is lower than
the market value and it directly affect our profit to be reduced.

The second one is our clients. We really need to take care of our clients because
they are our capital contributors and they are also the owner of our company.
When our company does not perform wella and the profit also is not really good,
they will stop investing in our company and that will trouble us.

Last but not least, our non-compliance to that principle will cause us to be charged
and penalized by the Inland Revenue Board because it is against the law. The law
mentioned that every business that adopts transfer pricing must follow the arm’s
length principle which means that the price that both parties agreed must at market
value and not at their decided price. Our company will be will be fined between
RM 20,000 and RM 100,000 and/or imprisonment for up to six months.

Minru: Thankyou Shiying and Amzar. I think all of us already know the importance and
impact of Transfer Pricing if we don't comply with Arm’s Length Principle. So I
would like to pass back to our treasurer, Darwisyah, to show our Computation of
Revenue, Expenses (X, Y, Z) , and the Double Entries to Capture Transfer Pricing
Transactions in our company and its Subsidiaries for the Marketing Support
Activities.
Wisyah: As you can see, this is the computation of Intercompany Revenue and Expenses
(X, Y, Z) for the Company ABC and its subsidiaries

i. Intercompany revenue (subsidiaries B & C)

TP (Y) = cost x (1 + cost plus mark-up)

= 20 x (1 + 15%)
Y = 23

TP (Z) = cost x (1 + cost plus mark-up)

= 80 x (1 + 15%)
Z = 92

Intercompany revenue (Y + Z) = RM115

ii. Intercompany expenses (company ABC)

Intercompany expenses
= Revenue + Intercompany revenue - COGS - Operating expenses - Operating
income
= 1500 + 115 - 800 - 300 - 285

Intercompany expenses (X) = 230

Next, the Double Entries to Capture Transfer Pricing Transactions in the company
ABC and its Subsidiaries for the Marketing Support Activities.

Company ABC
Debit Credit $ (MIL) $ (MIL)
Intercompany 230
expenses
Company ABC 230

Subsidiaries B
Debit Credit $ (MIL) $ (MIL)
Subsidiaries B 23
Intercompany 23
revenue

Subsidiaries C
Debit Credit $ (MIL) $ (MIL)
 Subsidiaries C 92
Intercompany 92
revenue

Debit Credit $ (MIL) $ (MIL)

Profit & loss 285
Balance sheet 285

Minru: Thank you Darwisyah, so any suggestions on the floor? We shall proceed to
discuss how our company overcomes the problems to reduce the overall tax
liability of the company.

Puspa: Greetings my name is Pusparajan. Tax liability is not only a problem for our
company but also for probably every existing company. Saying that it is the
company’s responsibility but there are various ways to ensure we can keep tax
liability in check. One of the ways our company can reduce its overall tax
liability is by ensuring its taxes are accurate and filed on time. To lessen the
likelihood that the IRB and state tax agencies may impose fines and interest, it
is crucial to ensure that our company’s tax returns are written correctly and
submitted on time. In this situation, an accountant would help identify
deductible charges and ensure that their outgoing costs are appropriate for their
business. Next is to claim all possible tax deductions because deductions from
taxes lower our taxable income. And so we can utilize all available tax breaks
to reduce the company's tax burden. Another recommendation would be to
take advantage of the tax incentives provided for companies in Malaysia.
There are various tax incentives and tax exemption programmes available for
businesses. Lastly would be, donating to charity. Donating not only helps to
heighten the social status of our company in the eyes of customer and
shareholders but does also help lower the tax liability.

Minru: As our executive director, Puspa shared just now, we are able to leverage transfer
pricing strategies to optimize our business operations. Since our company transfer
pricing operations are decentralized and processes are manual. I would like to add
on what our company can do to improve the opportunities.
I suggest that we can Streamline processes and automate manual tasks which
involve implementing automated software solutions, such as a document
management system or workflow automation. These can help reduce time spent on
administrative tasks, improve accuracy and efficiency in the transfer pricing
process, and ensure that all documentation is stored securely.

Next, we can implement new technologies such as blockchain and artificial

intelligence (AI) to enhance our transfer pricing operations. Blockchain
technology can help increase transparency while AI can enable the automation of
 processes like data reconciliation or invoice processing. This can help minimize
the risk associated with transfer pricing activities while providing greater visibility
into operations across the organization

Furthermore, we can improve communication between corporate headquarters and

local transfer pricing teams. This can ensure all parties involved are on the same
page with respect to company policies and procedures, avoids misunderstandings,
improves efficiency, and has better risk management.

Lastly, we can simplify our transfer pricing system by using business intelligence
and analytics tools. It is a useful resource for managing transfer pricing data to
gain insights into market trends, customer preferences, and other factors that can
help inform decision-making.

Minru: Alright, We’re getting close to the end of our time together. If there are no
objections, we will adjourn the meeting after the conclusion is made.

ALL: Yes, we agree on it

Minru: Hearing no objection, So, in conclusion, we can say that it is very important for us
to follow the Transfer pricing arm’s length approach which was adopted by IRBM
to minimize the possibility of double taxation. It is very important for us to operate
transfer pricing and comply with the principle. Some implementations are needed
to improve the transfer pricing operations while also providing more value to
customers and stakeholders.
Well, our first Intel Company ABC Group 12 Board Of Directors meeting is now
adjourned. Thank you all for coming, we really do appreciate your interest in this
very important issue. Bye~