The Maltese government is committed to implement specific transfer pricing rules in accordance with the current global standards related to the arm’s length principle. During 2021, an enabling provision (Article 51A) has been introduced into the Income Tax Act enabling the making of rules in relation to transfer pricing and Advance Pricing Agreements (APAs).
The requirement is a computational rule for the purposes of the Income Tax Acts and does not propose to impact the actual commercial arrangements between the parties. The prescribed methodology is based on the internationally recognised arm’s length principle which essentially seeks to establish what the price would have been had the transactions been carried out under comparable conditions by independent parties.
The Malta Transfer Pricing Rules Consultation
The Malta transfer pricing rules shall be applicable to cross-border arrangements entered into between associated enterprises. Bodies of persons will fall within the purport of associated enterprises when there is a direct or indirect control through a minimum holding of more than 50% of the voting rights or ordinary share capital or by virtue of any powers conferred by the articles of association or other document regulating the controlled body of persons. Bodies of persons subject to common control by virtue of the above-mentioned thresholds will also be within the scope of the rules.
Micro, small or medium-sized enterprises shall be excluded from scope. The Malta transfer pricing rules shall also not apply where the aggregate arm’s length value of all cross-border arrangements do not exceed a de minimis threshold that is yet to be determined.
The proposed transfer pricing rules shall come into force with effect for financial years commencing on or after the 1st January 2024. The consultation period will end on the 28th of February 2022. It is expected that the legal notice will be published during the last quarter of 2022.
Learn more on the Malta Transfer Pricing Rules.
