The guidelines to the TP Rules provide examples of what should and what should not constitute a “materially altered arrangement”. In summary, the guidelines suggest a case-by-case analysis which must consider the substance of the arrangement by reference to the functions performed, assets used, and risks assumed by each of the parties to the arrangement (not necessarily the form of the arrangement). Changes to the consideration, rights/ obligations or the duration of the arrangement would constitute a material alteration.
The application of the TP rules precedes the application of the Notional Interest Deduction (“NID”) Rules. This means that before determining the risk capital of an entity that falls within the scope of the TP Rules, consideration must be given to whether loans or other debt should bear interest in line with the TP Rules. Any tax attributes brought forward from previous years (e.g., unabsorbed losses or unabsorbed NID), in respect of arrangements that were outside scope, are not required to be restated.
With respect to the methodology to be adopted to determine the arm’s length price, the guidelines refer to those set out in Chapter II of the OECD Transfer Pricing Guidelines. Other methods may also be accepted by the Malta Tax and Customs Administration (“MTCA”) in accordance with the OECD Transfer Pricing Guidelines.
The arm’s length consideration for low value-adding intra-group services may be determined in accordance with the OECD Transfer Pricing Guidelines and the EU Joint Transfer Pricing Forum guidelines.
The guidelines to the TP Rules also provide insight with respect to records that are to be retained by those entities within the scope of the Rules. The documentation requirements set out in Chapter V of the OECD Transfer Pricing Guidelines (i.e., including both a master file and a local file) apply. Such documentation must be made available to the MTCA upon request, within a reasonable timeframe.
Furthermore, more guidance is provided in relation to Rule 9 of the Maltese TP Rules. The guidelines elaborate that dividends paid to an associated enterprise should not be included in determining the mentioned thresholds, however, a distribution in kind may need to be considered.
Finally, in relation to Unilateral Transfer Pricing Rulings, the guidelines set out that in the absence of a primary adjustment initiated by another jurisdiction, the Commissioner will only consider requests for the issuance of a Unilateral Transfer Pricing Ruling performing a downward adjustment, only if certain conditions are met.
Mutual Agreement Procedures (MAPs) play a crucial role in resolving transfer pricing disputes, which arise when multinational enterprises allocate profits among their various subsidiaries in different jurisdictions. These disputes often occur because tax authorities in different jurisdictions may have conflicting views...
Amount B is a concept introduced by the OECD as part of its ongoing efforts to simplify and standardize transfer pricing rules, particularly for low-value-adding intra-group services. The primary objective of Amount B is to provide a fixed return for certain routine distribution activities. The simplified and...
The EU's Public CbCR Directive, effective in Malta from June 2024, requires MNEs with annual revenues over €750m to disclose tax-related information publicly. This includes taxes paid, profits, and employee numbers for each EU Member State. Exemptions and specific reporting obligations apply, with penalties for...
Malta's Transfer Pricing Guidelines, issued in January, simplify pricing for low-value-adding intra-group services, aligning with OECD and EU standards. These services are supportive but not core to the group's business, encompassing routine financial, HR, administrative, and IT tasks. The simplified pricing method...
On 18 November 2022, Transfer Pricing Rules (the Rules) were introduced in Malta. Initially, the Rules will apply in relation to any arrangement entered into on or after 1 January 2024 and arrangements entered into before that date that are materially altered on or after that date. As from 1 January 2027,...
The Malta Tax & Customs Administration has updated the Transfer Pricing Rules (TP Rules) with a sunset clause, making all agreements, regardless of when they were entered into, in scope from 1 January 2027. The TP Rules precede the Notional Interest Deduction (NID) Rules, and the guidelines provide insight into...
Amid the evolving global economy, Transfer Pricing is critical for companies in cross-border dealings. Malta's new rules, effective from 2024, intensify the need for Maltese entities to manage transfer pricing risks. PwC offers Transfer Pricing health checks, crucial for compliance, agreement updates, documentation...
Transfer pricing rules (the Rules) have been introduced in Malta through Legal Notice 284 of 2022 published on 18 November 2022. The Rules are based on the draft rules that were included in the document issued for public consultation by the Commissioner for Revenue (CfR) in December 2021.
