Malta: introduction of transfer pricing rules

By: Daniela Psaila, Senior Manager, International & Corporate Tax Unit, Office of the Commissioner for Revenue, MALTA

As part of Malta’s Recovery and Resilience Plan that was agreed upon with the EU Commission in September 2021 and approved by ECOFIN in October 2021, Malta introduced a transfer pricing enabling provision through Article 51A of the Maltese Income Tax Act. The Transfer Pricing Rules, which were published on 18th November 2022, have been introduced in Malta through Legal Notice 284 of 2022.

These rules will come into effect as of 1st January 2024 for arrangements entered on or after this date, as well as for arrangements that have been entered into prior to this date and which are materially altered.

These rules will apply to cross-border arrangements entered into between a resident company and a non-resident company, a resident company with a permanent establishment located outside Malta, and a non-resident company with a permanent establishment in Malta.

These rules prescribe the requirement for applying the arm’s length principle for the pricing of transactions between associated enterprises falling within the scope of these rules, any adjustments thereto, and Advanced Pricing Agreements (APAs).  The requirement is a computational rule for the purposes of the Maltese Income Tax Acts.

The transfer pricing rules aim to provide a framework that is intended to grant certainty to taxpayers in relation to cross-border arrangements. In the meantime, a number of tax officials within the Office of the Commissioner for Revenue are currently undertaking targeted and intense training in relation to transfer pricing (both from an international as well as a domestic perspective] to ensure that the required expertise and knowledge is garnered in this area.