Are you ready for the implementation of the Transfer Pricing Rules in Malta?

Malta introduced the Transfer Pricing Rules on 18 November 2022 (L.N. 284 of 2022), which will take effect from 1 January 2024. These rules apply to agreements entered into on or after this date, including any material modifications made to agreements entered by 31 December 2023.

Furthermore, according to guidelines issued by the Malta Tax and Customs Administration, from 1 January 2027, arrangements that commenced before 1 January 2024 and have not been materially altered on or after this date will also fall within the scope of these rules. This implies that the grandfather provision has a three-year limitation.

Will your business be affected by these Rules?

• Micro and small to medium-sized enterprises (SMEs) are exempt from the scope of the Rules, as defined by the criteria set forth in Annex 1 of Commission Regulation (EU) No 651/2014.
• The Group, in its entirety, must be considered when determining if it qualifies as a large enterprise.

What arrangements fall under these Rules?

• A cross-border arrangement between associated enterprises is required, excluding securitisation transactions.

• For the rules to apply, the aggregate arm’s length value of all items of income and expenditure must exceed (in the year preceding the year of assessment):

             – €6,000,000 if revenue in nature; or
             – €20,000,000 if it is capital in nature.

What is a cross-border arrangement under these Rules?

• An arrangement between a Maltese-resident company and a foreign-resident company; or

• An arrangement between a Maltese-resident company and a permanent establishment (PE) situated outside Malta; or

• An arrangement having a permanent establishment in Malta and a foreign-resident company.

What is an associate enterprise under these Rules?

• Entities are considered associated enterprises when there is direct or indirect control through a holding of more than 75% of the voting rights, ordinary shares, or by virtue of any powers granted by the Articles of Association or similar documents.

• Additionally, a body of persons with common control of more than 75% will also fall under these Rules.

Is there any way I can get certainty about an arrangement?

• Under these Rules, an entity may request the issuance of a unilateral transfer pricing ruling or an advance pricing agreement.

• A unilateral transfer pricing ruling binds the Malta Tax and Customs Administration for a period of five (5) years from the effective date of the ruling. This is at the discretion of the CfR and subject to a non-refundable fee of €3,000.

• An advance pricing agreement is also binding for five (5) years but is between the Malta Tax and Customs Administration and the foreign competent authorities. This is at the discretion of both competent authorities and subject to a non-refundable fee of €5,000.