24 Nov 2022
On 18 November 2022 Malta published subsidiary legislation implementing Transfer Pricing Rules into Malta’s tax system ("Rules"). The Rules will apply on all transactions (referred to as “arrangements”) which are entered into on or after 1st of January 2024 as well as pre-existing transactions which are “materially” altered on or after that date. The Transfer Pricing Rules will apply when determining the tax base of a company derived from “cross-border arrangement” between “associated enterprises” having directly or indirectly more than 75% in the participating rights. With respect to constituent entities of a MNE group the percentage participation shall be 50%.
SMEs as defined in the State Aid Rules fall outside the scope of these rules.
MNE group for the purposes of these Rules is a group of companies which are tax resident or have a permanent establishment in more than one jurisdiction (including Malta) and have a total consolidated group revenue of at least €750 million yearly.
The Rules do not apply to cross-border transactions having an aggregate arm’s length value of Euro 6 million and Euro 20 million revenue and capital respectively. Securitisation transactions are excluded from the scope of these rules.
The Rules will apply to cross-border transactions and arrangements taking place between a resident and a non-resident company, a resident company having a permanent establishment situated outside Malta and a non-resident company dealing with a PE in Malta of another non-resident company to which the transactions are effectively connected in ascertaining the total income of the company.
The Rules provide for renewable unilateral transfer pricing rulings and bilateral and multilateral advance pricing agreements.
In ascertaining the total income of companies where any amount under a cross-border arrangement differs from the arm’s length amount the Rules provide under a deeming provision that the arm’s length amount has been incurred or derived instead of the actual amount.
It is expected that specific guidelines will be issued and will include reference to the OECD Transfer Pricing Guidelines among other things.