Unilateral Transfer Pricing Rulings
In terms of such Rules, the Malta Tax and Customs Authority (MTCA) may issue a unilateral transfer pricing ruling, i.e. a decision issued by the Maltese tax authority on how the Rules apply to a specific cross border arrangement. Such a Ruling would provide certainty on the application of the Rules to a specific cross-border arrangement and assist taxpayers in obtaining certainty on the arm’s length treatment of a transaction before, or while, it is being implemented.
The request must be made in writing by a party to the arrangement, or by its authorised representative.
Where the arrangement has already commenced, the scope of the request may also extend to earlier periods. Depending on the facts, this may cover transactions in the year preceding the year of assessment or, in some cases, transactions forming part of the arrangement during the previous three basis years.
In the absence of a primary adjustment initiated by another jurisdiction the Commissioner will only consider requests for unilateral rulings performing a downward adjustment subject to the following conditions:
| a | The adjustment must be consistent with the arm’s length principle, both in principle and in amount. |
| b | In the absence of the downward adjustment in Malta, the taxpayer must otherwise face double taxation. |
| c | The ruling must be spontaneously exchanged with the tax administration of the relevant jurisdiction, together with the factual and legal background needed to assess the adjustment. |
A request for a unilateral transfer pricing ruling is subject to a non-refundable fee.
A unilateral transfer pricing ruling can be an attractive option where a taxpayer is seeking certainty on the Maltese transfer pricing treatment of a specific cross-border arrangement. It helps to reduce uncertainty in relation to compliance and future interactions with the Maltese tax authorities. However, its limitations should also be considered as it binds only the MTCA and does not guarantee corresponding treatment in the other jurisdiction. As a result, the risk of double taxation may still remain where the foreign tax authority takes a different view.
Advance pricing agreements
Malta also provides for APAs. These are agreements between the MTCA and a relevant foreign competent authority under the applicable mutual agreement procedure provisions. An APA may be bilateral or multilateral. This makes it particularly relevant where the taxpayer is seeking certainty across more than one jurisdiction.
An APA request broadly follows the same procedural requirements as a unilateral ruling request. However, it must also refer to the relevant mutual agreement procedure provisions. An APA may apply for a period of up to five years from its effective date. It may also cover up to three basis years preceding the request, where this is specifically requested.
A request for an APA is also subject to a non-refundable fee.
These mechanisms are a welcome development in Malta’s transfer pricing landscape. They should help taxpayers manage uncertainty, support compliance, and reduce the risk of disputes. In the case of APAs, they may also help reduce the risk of double taxation through coordination with foreign tax authorities.
How can we help?
We can help assess whether a unilateral ruling or an APA is the more suitable route. We can also support with transfer pricing analysis, preparation of the request, review of supporting documentation, and engagement with the Maltese authorities and foreign competent authorities where relevant.
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