On 18 November 2022, Malta published Legal Notice 284 of 2022 in the Official Gazette implementing transfer pricing rules into Malta’s tax code. These rules shall apply for basis years commencing on or after 1 January 2024 in relation to any arrangement entered into on or after that date, and for those arrangements entered into before that date, these rules shall apply to those arrangements that are materially altered on or after that date.
Scope of transfer pricing rules
The Transfer Pricing Rules will apply to associated enterprises having directly or indirectly more than 75% of participating rights, and 50% for constituent entities of Multinational Enterprises within the scope of country-by-country (CbC) reporting.
The rules will be applicable to the cross-border arrangements between associated enterprises after meeting one of the following conditions:
- an arrangement between a resident and a non-resident company;
- an arrangement between a resident company and a company having a permanent establishment (PE) outside Malta and the arrangement is relevant in ascertaining the total income of that company;
- an arrangement between a non-resident company and a PE of a non-resident company in Malta and the arrangement is relevant in ascertaining the total income of that company.
Exceptions
The transfer pricing rules shall not apply where:
- the arrangement comprises a securitization transaction in terms of the securitisation transactions;
- cross-border transactions do not exceed aggregate arm’s length value of EUR 6 million revenue and EUR 20 million capital; and
- any micro, small or medium-sized enterprise having less than 250 employees, annual turnover does not exceed EUR 50 million and/or annual balance sheet total does not exceed EUR 43 million.
Advance pricing agreements
The competent authority may enter into an advance pricing agreement with the relevant foreign competent authority. An advance pricing agreement may be of a bilateral or multilateral nature.
