EY’s Gary Ling weighs in on Malaysia’s evolving business landscape

He puts a spotlight on how businesses are strengthening transfer pricing frameworks, audit readiness, and corporate tax governance.

Malaysia’s business environment stands at a pivotal juncture marked by resilient economic growth and strategic digital transformation, with the national economy projected to expand moderately, supported by robust domestic demand, sustained investment activity, and a diversified economic base. Efforts to enhance competitiveness and attract foreign direct investment have also strengthened the country’s attractiveness as a business hub.

This phenomenon is observed by Gary Ling, Transfer Pricing Partner from Ernst & Young Tax Consultants Sdn. Bhd., who currently leads the firm’s complex regional and global engagements covering transfer pricing compliance, advisory, and planning, with deep expertise in designing and implementing group-wide transfer pricing frameworks for both financial and non-financial intra-group transactions.

With over 20 years of experience in corporate tax and transfer pricing advisory, he specialises in Financial Services Transfer Pricing, advising both Malaysian-headquartered and multinational corporations across the Asia Pacific region. His diverse client portfolio includes financial institutions, information technology and business process outsourcing service centres, government-linked corporations, principal hubs, and companies in the automotive, FMCG, plantation, energy, and electronics sectors.

Speaking as one of the judges for the 2026 Malaysia International Business Awards and Malaysia National Business Awards, Ling provides his insights on Malaysia’s growing competitiveness as a regional hub and how organisations are dealing with the Inland Revenue Board audits and staying ahead of regulatory and tax developments.

How do you see Malaysia’s competitiveness as a regional hub evolving amidst rising costs, BEPS 2.0, and increased tax transparency across ASEAN?

Malaysia’s value proposition as a regional hub is evolving from a “low-cost centre” to a centre of excellence that delivers scale and quality through deep talent, resilient infrastructure and a mature operating ecosystem. As operating costs rise, location decisions are increasingly anchored on productivity, talent depth, digital infrastructure (including data centres), and the shared services ecosystem—not just unit cost.

The government recognises the significant impact that Pillar Two will have on both multinational groups and high-value projects anchored in Malaysia. Under BEPS 2.0 (Pillar Two), Malaysia’s competitive edge inevitably shifts from tax-rate arbitrage to outcome-based incentives under the New Investment Incentive Framework that reward job creation, CAPEX, technology transfer, and local value creation, coupled with faster, more predictable approvals. Companies will prioritise certainty and speed in the incentive process, alongside the ability to demonstrate real economic contribution.

Concurrently, ASEAN-wide tax transparency means hub structures must be “audit-ready by design.” That requires tighter transfer pricing (TP) alignment between returns and value creation; substance with decision-making authority and capacity to assume risks located where profits and intellectual property (IP) reside; and robust, consistent documentation and data trails that reconcile to filings and disclosures across jurisdictions.

By having greater transparency into investment activity and project execution, authorities are better positioned to provide clarity and consistency in the incentive process. This gives investors confidence that incentives will remain accessible where real economic value is created. In turn, this reinforces Malaysia’s attractiveness as a hub, particularly for businesses building technology capabilities, digital infrastructure, regional decision-making centres and high-skill talent functions. Put simply, Malaysia’s future competitiveness will be defined less by statutory rates and more by talent, reliability, and demonstrable substance that is also supported by outcome-based, Pillar Two–compatible policy tools.

In your experience, which industries in Malaysia face the highest transfer pricing risk and why?

In Malaysia, TP risk is less industry-specific and more profile-driven. Taxpayers are typically higher risk when their characteristics involve significant cross-border related-party transactions, especially in services, financing, IP and procurement; low or volatile margins that do not reflect functions, assets, risks, and value creation; persistent losses whilst transacting with related parties that are profitable; business restructurings that reduce profitability without a corresponding reduction in functions, assets or risks; post-incentive cliff effects where profitability declines when incentives expire; and material financial transactions (loans, cash pools, guarantees) and intangibles/key strategic functions allocations without clear support.

Further, the Malaysian tax authorities are increasingly focused on value chain alignment and financial transactions. As a result, taxpayers with complex intercompany footprints but insufficient substance or documentation attract heightened scrutiny regardless of sector.

How prepared are Malaysian organisations for the increasing sophistication of the Inland Revenue Board (IRB) audits, particularly around financial transactions and value chain alignment?

Preparedness varies, but leading Malaysian organisations are building tax corporate governance frameworks that anchor positions to tax law and the group’s commercial strategy, supported by contemporaneous TP documentation and end-to-end data integrity.

The IRB’s focus areas include financial transactions such as the pricing of intercompany loans, cash pooling, guarantees, and hedging, assessed for consistency with funding capacity, credit ratings, and business purpose. It also reviews the value chain and Development, Enhancement, Maintenance, Protection, and Exploitation to determine whether decision-making and risk control align with where returns and intangibles are recorded. In addition, the IRB evaluates data coherence through reconciliations from agreements to management accounts, statutory accounts, tax returns, and transfer pricing documentation. Organisations that lack sufficient documentation, data, and substance are likely to face challenges in an IRB audit.

What factors and practices contribute to successful audit defence outcomes, and how do these differ from unsuccessful ones?

Successful tax audit outcomes typically feature strong tax corporate governance with defined roles, escalation paths, and a tax audit playbook, supported by robust contemporaneous documentation that is readily retrievable, consistent across filings, and clearly explains commercial rationale, method selection, and benchmarking. They also involve timely and complete cooperation with the IRB through open and professional dialogue to narrow issues early, a coordinated management approach with experienced advisors engaged early on complex technical matters such as financial transactions and intangibles, and, where appropriate, the use of advance pricing agreements or Mutual Agreement Procedures to resolve or prevent disputes.

In contrast, unsuccessful tax audit outcomes often involve structures or policies that lack commerciality or are misaligned with the people, assets, and risks where profits are booked, along with inconsistent narratives or data gaps across agreements, accounts, returns, and transfer pricing files. These outcomes are further characterised by late, partial, or non-responsive submissions; reactive documentation such as retroactive intercompany agreements or cherry-picked benchmarking with weak technical support; and poor internal coordination that results in mixed messaging and avoidable delays.

What capabilities should Malaysian companies invest in to stay ahead of regulatory and tax developments?

The capabilities that Malaysian companies should invest in are talent with a strong grasp of technical tax matters and the ability to apply technology to deliver efficient, accurate, and effective tax reporting, whilst remaining adaptable to a rapidly changing regulatory and tax environment. It also involves the use of technology and digitalisation, not only to streamline operations and explore new revenue opportunities but also to keep pace with evolving tax requirements such as the global minimum tax and e-invoicing. In addition, strong governance and controls are needed, with a Tax Corporate Governance framework embedded consistently across finance, tax, treasury, and procurement processes, grounded in commercial rationale and supported by clear controls, accountability, and documentation.

As a judge for the Malaysia International Business Awards and Malaysia National Business Awards 2026, how should the nominees demonstrate their capacity for future growth and long-term relevance in a rapidly evolving global economy?

Strong nominees will demonstrate both performance and purpose through measurable and enduring impact, reflected in an entrepreneurial spirit with a founder mentality, speed to opportunity, disciplined scaling, and examples of market creation or rapid pivots. They will show clear value creation through profitable growth, cash generation, productivity improvements, and export or ecosystem spillovers such as supplier upgrading or local capability building, supported by a strong strategic direction with coherent internationalisation plans, disciplined capital allocation, and risk management aligned to macroeconomic and regulatory changes. In addition, strong nominees will have meaningful national and global impact through contributions to talent development, local innovation, and Malaysia’s global positioning, alongside demonstrable innovation, including R&D intensity, protected intellectual property, digital adoption, and rapid product or service refresh cycles. This is reinforced by purpose-driven leadership, evidenced by a clear mission, strong governance and integrity, and tangible environmental, social, and governance outcomes such as decarbonisation efforts, workforce upskilling, and inclusion initiatives.