RESTRICTION ON DEDUCTIBILITY OF INTEREST [SECTION 140C INCOME TAX ACT 1967]
Restriction On Deductibility Of Interest under Section 140C of the Income Tax Act 1967 and Income Tax (Restriction On Deductibility Of Interest) Rules 2019 [P.U.(A) 175] has been introduced to restrict deductions for interest expenses or any other payments which are economically equivalent to interest, to ensure that such expenses commensurate with the business income. This legislation on interest restriction is based on The Base Erosion and Profit Shifting (BEPS) Action 4 of the Organisation for Economic Cooperation and Development (OECD), where the aim is to prevent base erosion, through the use of excessive interest expense or any payments which are economically equivalent to interest claimed by businesses. Part of this legislation has been adopted directly from the OECD BEPS Action 4, and there are parts which have been customised to ensure adherence to the Act and Inland Revenue Board of Malaysia's (IRBM) procedures as well as domestic circumstances.
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Examples in these Guidelines are provided for illustration purposes only. It should not be used as a justification for any disputes as the facts in those examples might be different from the actual cases.