Transfer Pricing Rules – Consultation Document

The Commissioner for Revenue (CfR) has recently published a proposed draft set of specific transfer pricing rules for consultation, which consultation ends on the 28th February 2022.  It is envisaged that the transfer pricing rules will come into force with effect for the financial years commencing on or after 1st January 2024. The transfer pricing rules shall […]

Written By Stephen Balzan

On January 2, 2022
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The Commissioner for Revenue (CfR) has recently published a proposed draft set of specific transfer pricing rules for consultation, which consultation ends on the 28th February 2022.  It is envisaged that the transfer pricing rules will come into force with effect for the financial years commencing on or after 1st January 2024. The transfer pricing rules shall be published by means of a legal notice during the last quarter of the year 2022.

Earlier on in 2021, Article 51A was introduced in the Income Tax Act, as an enabling provision which granted powers to the Minister of Finance to make rules in relation to transfer pricing generally.  Such rules are intended to provide for the determination of the arm’s length pricing of a transaction or a series of transactions, any adjustments in relation to such transactions as well as for Advance Pricing Agreements (‘APAs’). 

A brief description of the rules are as follows:

  • The rules shall be applicable to cross border arrangements entered between associated enterprises
  • The rules will also apply to dealings and arrangements between a company (or any other body of persons) and its permanent establishment
  • Micro, small or medium-sized enterprises shall be excluded from the scope of these rules
  • The rules shall also not apply where the aggregate’s arm’s length value of all cross border arrangements do not exceed a ‘de minimis’ threshold, an amount that is yet to be determined
  • The determination of the arm’s length amount will be made on the basis of transfer pricing methodologies to be designated by the CfR in guidelines still to be published.  The OECD Transfer Pricing Guidelines will constitute an important source of reference
  • The income chargeable to tax that fall within the scope of the rules shall be computed with reference to the arm’s length amounts.  The rules provide for corresponding adjustments to be made in computing the chargeable income
  • Companies falling within the scope of the rules must keep sufficient records to demonstrate that the total income of the company has been computed in accordance with such rules.  Further details will e included in the guidelines still to be published by the CfR
  • The rules also provide for a framework for the Unilateral Transfer Pricing Rulings as well as bilateral and multilateral APAs

How can we help?  

For further information, please contact one of the firm’s tax partners, Stephen Balzan on [email protected] or Elaine Camilleri [email protected]. ACT can help you understand the changes to the tax rules and how these can impact your business.  

Apart from its offices in St. Julian’s Malta, ACT operates from a second office in Gozo, which is situated in the capital city of Victoria.  For an appointment in our Gozo office, please call on +356 21378672 or send us an email on [email protected].