Industry Data in Transfer Pricing Comparability Analysis

Clear TP Policies Are Now a Strategic Necessity

|  Regulatory Developments in Malaysia and Vietnam

A transfer pricing (TP) policy defines how a business prices transactions between related entities, ensuring adherence to the “arm’s length” principle. This principle mandates that intercompany transactions be priced as if they occurred between independent parties under similar conditions. In Southeast Asia, particularly in Malaysia and Vietnam, TP regulations have evolved significantly, aligning closely with the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan, which requires company and industry data in the process.

In Malaysia, the Inland Revenue Board (IRB) has introduced the Transfer Pricing Guidelines 2024, which emphasize the necessity of contemporaneous TP documentation. Taxpayers with annual gross business income exceeding RM30 million and cross-border controlled transactions over RM10 million are required to prepare comprehensive documentation. Non-compliance can result in penalties ranging from RM20,000 to RM100,000 per year of assessment, along with a surcharge of up to 5% on the TP adjustment amount .

Vietnam has implemented Decree 132/2020/ND-CP, mandating a three-tiered TP documentation approach: Master File, Local File, and Country-by-Country Report. Taxpayers must prepare and maintain these documents by the annual corporate income tax finalisation deadline. Failure to comply can lead to adjustments and penalties during tax audits .

|  Aligning TP Policies with Broader Business Objectives

Beyond regulatory compliance, a well-structured TP policy aids in internal financial planning and risk management. It ensures that pricing strategies align with business objectives and cash flow considerations, while mitigating risks of double taxation and disputes during audits. Collecting high quality company and industry data, conducting analysis are integral to substantiating TP positions.

Reliable Financial and Industry Data Strengthen TP Analysis

|  Financial Data Provides the Quantitative Foundation

Transfer pricing documentation is only as defensible as the data underpinning it. In Southeast Asia, where tax authorities are tightening enforcement and increasing audit activity, particularly in Malaysia and Vietnam, businesses must rely on robust, verifiable information to support their transfer pricing positions. Two critical sources of such information are financial statements and industry reports, both of which are integral to justifying the arm’s length nature of intercompany transactions.

Financial statements provide a factual snapshot of the financial health and operational performance of the tested party or related entities. When preparing a local file or comparable analysis, companies must extract reliable financial ratios—such as operating margins, return on assets, or cost-plus mark-ups—from audited reports. In Malaysia, for example, the Inland Revenue Board often requires that comparable companies used in a benchmarking analysis be supported by publicly available financial data over a three-year average. Similarly, Vietnam’s tax authorities have begun requesting consistent financial transparency and economic justification, often rejecting related-party analyses that lack proper financial comparability.

|  Industry Reports Add Critical Market Context

However, financial data alone may not be sufficient. Industry reports complement this by offering broader contextualisation. These reports detail sector-specific pricing norms, regulatory changes, and demand-supply dynamics that may influence transfer prices. For instance, when assessing management fees or royalty payments, it is often necessary to explain pricing structures compared to industry practices. In Vietnam, where taxpayers must prepare both a local file and a master file under Decree 132, referencing reliable industry benchmarks and trends can help mitigate challenges during audit reviews.

Using both types of sources in tandem strengthens the credibility of TP documentation. Financial statements ensure internal consistency and transparency, while industry reports bridge the gap between internal data and external market realities. Together, they form the backbone of defensible transfer pricing analysis that can withstand scrutiny from tax authorities.

Detailed Data Points Are the Core of TP Defence

|  Transaction and Functional Data Establish the Analytical Foundation

To establish and defend a transfer pricing (TP) policy effectively, businesses must gather a precise set of data points that align with regulatory expectations and reflect economic reality. In Southeast Asia, particularly in jurisdictions like Malaysia and Vietnam where TP scrutiny has intensified, tax authorities require more than a broad explanation—they demand granular, structured, and defensible data.

Among the most critical data points are transaction-level details. These include the nature and scope of the controlled transactions, contractual terms, and actual pricing mechanisms used. Taxpayers must specify whether transactions involve tangible goods, services, intellectual property, or intercompany loans, and clearly explain how these were priced. For example, management fees must be supported by documentation showing the basis of allocation and benefits received. In Malaysia, the Transfer Pricing Guidelines emphasise the need to demonstrate economic substance, not just legal form—requiring businesses to show actual conduct that aligns with intercompany agreements.

Functional analysis data is equally essential. This analysis dissects the roles performed, assets employed, and risks assumed by each party in the transaction. Known as the FAR (Functions, Assets, and Risks) profile, this is a core requirement for determining the most appropriate TP method, whether it be comparable uncontrolled price (CUP), resale price, cost-plus, transactional net margin (TNMM), or profit split. Vietnam’s Decree 132 further requires taxpayers to justify method selection with clear, objective criteria and to document why alternative methods were rejected.

|  Comparable Data Strengthens the Credibility of TP Methods

Comparability data also plays a central role. This includes selecting appropriate comparable companies or transactions from a relevant geographic and industry context. Businesses often rely on commercial databases to source this information, but local comparables are preferred by tax authorities. Vietnamese regulators, in particular, may challenge the use of foreign comparables unless strong justification is provided. Malaysian authorities also expect rigorous screening criteria and adjustments for size, scale, or risk differentials.

Free or Fragmented Data May Pose Compliance Risks

|  Inconsistent Data Undermines Comparable Analysis

While free or publicly accessible data sources may seem attractive due to cost considerations, they present considerable risks when used as the foundation for transfer pricing (TP) documentation. In Southeast Asia—where regulatory frameworks are becoming increasingly demanding—relying on fragmented or low-quality data often leads to audit exposure, failed documentation, and increased compliance costs. Malaysia and Vietnam are particularly notable for their insistence on consistent, verifiable data in TP audits and investigations.

One of the key challenges with free data is inconsistency. Public sources such as national company registries or financial filings may lack standardisation across jurisdictions, making cross-border comparisons unreliable. For instance, while Malaysia’s SSM (Companies Commission of Malaysia) provides some financial data, access is limited, and filings can be delayed or incomplete. In Vietnam, financial transparency among private companies remains uneven, with many firms either not publishing financials or doing so without adhering to international accounting standards. This undermines the comparability required for proper benchmarking.

|  Limited Filtering Hampers Quality Comparable Selection

Another issue is limited searchability and filtering capabilities. Unlike paid databases designed for TP purposes, free platforms often do not allow users to screen companies by revenue size, industry classification, or functional profile—essential criteria in identifying suitable comparables. This often results in the inclusion of companies that are functionally dissimilar, leading to skewed analysis and potentially incorrect TP conclusions. In practice, tax authorities in Vietnam and Malaysia frequently reject benchmarking studies built on questionable comparables or insufficiently explained selections.

Additionally, fragmented data sources make it difficult to maintain audit trails. TP documentation must not only be accurate at the time of filing but also defendable years later during audits. Data from unverified or inaccessible sources may not hold up under scrutiny, especially if the original source is no longer available or cannot be authenticated. This creates long-term risk, particularly in jurisdictions where retrospective audits and penalties are aggressively pursued.

Unified Databases Sharpen Benchmarking and Defence

|   Comprehensive Databases Offer Key Advantages

To meet the growing demands of transfer pricing (TP) compliance in Southeast Asia, businesses are increasingly turning to comprehensive databases that consolidate financial, transactional, and industry data into a single, reliable platform. In countries where authorities expect rigorous documentation supported by consistent and auditable evidence—the use of a structured, professional database significantly enhances a company’s ability to justify its TP positions and reduce audit risk.

Comprehensive databases offer several advantages over fragmented sources. First, they allow for precise peer screening and benchmarking using standardised filters such as industry codes (e.g. ISIC, SIC), company size, geography, and profitability metrics. This ensures that selected comparables meet both functional similarity and economic relevance criteria, as expected by tax authorities.

|   Supplementary Insights Strengthen Documentation and Context

Second, these platforms often include built-in audit trails, allowing users to trace data back to its source and justify their documentation even years after submission. This is especially important in jurisdictions like Vietnam, where tax authorities may reopen assessments within a five-year statute of limitations.

Moreover, many databases integrate proprietary industry research reports and macroeconomic indicators, enabling businesses to contextualise their pricing strategies. This helps align intercompany pricing with real-world business conditions, a factor that regulators are increasingly evaluating. For example, in Malaysia’s updated TP guidelines, demonstrating how broader market conditions affect profitability is encouraged when selecting or adjusting comparables.

Let Speeda Streamline Your Transfer Pricing Workflow

Accurate, structured data is the foundation of effective transfer pricing — and the right tools can make all the difference. Speeda is purpose-built to support businesses in Southeast Asia with their transfer pricing needs. With access to a comprehensive database of public and private companies across ASEAN, Speeda allows users to:

• Identify relevant comparables based on industry, region, and financial performance
• Access normalised financials and peer benchmarking
• Explore industry classifications and segment insights for stronger comparability analysis

Explore Speeda now—streamline your TP documentation, cut research time, and eliminate audit preparation uncertainty.