Extended Background

Malaysia’s export industries often rely on transfer pricing safe harbors through arms-length ranges (IQR). Sandakan Edible Oils, like many regional firms, set its reported profits within this range, even if not always at the median. Before BEPS/TP refinement, tax authorities were increasingly tempted to adjust results toward maximum revenue using the median alone.

Detailed Arguments

Taxpayer

• Cited both local and OECD rules affirming that any result within the IQR is compliant, not just the median.

• Supported its margins with full benchmarking and robust functional analysis.

Tax Authority

• Argued government revenue was best protected by always targeting the median, seeking higher assessed income.

Court Reasoning

• Clearly rejected the “median or bust” argument, stating the rules intend a range for a reason.

• Upheld that as long as margins are in-range, compliance is achieved.

Procedural Journey

• Assessment raised, litigated in court, with a full victory for the taxpayer, no upward adjustment applied.

Implications Beyond the Case

• Locked in the IQR as true safe harbor; authorities must accept any in-range result barring proof of manipulation.

• For MNEs: strong benchmarking can defend even non-median results.

Original Case Link:

Lee Hishammuddin Allen \& Gledhill