Companies that lend money to related companies within the same group must now pay closer attention to a new set of rules from LHDN. On 30 July 2026, LHDN released a new guideline called the Malaysia Transfer Pricing Guidelines: Controlled Financial Transactions - Intra-Group Loans, which explains how the interest charged on such loans should be worked out, and what happens if it is not done correctly.

The first question LHDN looks at is whether the loan is a real loan at all. Simply calling something a loan is not enough. If there is no fixed repayment date, no real obligation to repay, and no right to demand payment, LHDN may decide the arrangement is actually a form of capital investment rather than a loan. If this happens, the interest expense claimed by the company can be disallowed, and additional tax and penalties may follow.

If the loan is accepted as genuine, the next step is checking whether the interest rate charged is fair, meaning similar to what an independent bank would charge. This depends on the borrowing company's financial strength and credit history. Being part of a larger group can help improve this credit standing, and no extra payment is needed just because of this benefit.

To work out a fair interest rate, businesses can compare against market rates, calculate the actual cost of funds, or in many cases, simply use rates published by Bank Negara Malaysia. This simplified option is available to companies that are not in the lending business, whose loans are in Ringgit Malaysia, and whose loans do not exceed RM50 million a year. For loans within Malaysia, there is an additional requirement that the other company must also be based in Malaysia.

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