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On 22 December 2021, the Commissioner for Revenue issued draft Transfer Pricing Rules
for public consultation. The draft Rules prescribe the requirement
for the application of the arm’s length principle for the
pricing of cross-border transactions between associated enterprises
as defined and with permanent establishments. Essentially, the
arm’s length price is the amount that independent parties would
have agreed in relation to the arrangement had those independent
parties entered into that arrangement. The requirement will be an
income tax requirement and will not affect commercial arrangements
or other tax liabilities. Whilst it is envisaged that the OECD
Transfer Pricing Guidelines will constitute an important source of
reference in the application of the rules, the methodologies for
determining the arm’s length price are yet to be designated by
the Commissioner for Revenue in guidelines yet to be published.
The draft Rules specifically exclude micro, small or
medium-sized enterprises from scope. A de minimis
aggregate arm’s length value of all cross-border arrangements
shall also be set, below which the Rules will not apply.
Draft provisions around the issue of Unilateral Transfer Pricing
Rulings by the Revenue and Advance Pricing Agreements to be entered
into by the Revenue with one or more foreign competent authorities
are also included in the draft Rules.
The publication follows on Malta’s commitment to implement
specific Transfer Pricing rules in accordance with the current
global standards related to the arm’s length principle. With
such intentions, enabling provisions were introduced
in in the Budget Implementation Measures Act 2021
permitting such Rules. It is envisaged that the Rules will come
into force with effect from financial years commencing on or after
1 January 2024.
Interested parties are invited to submit feedback on the draft
Rules to the Revenue by 28 February 2022, including on the
direction of Transfer Pricing tax policy, alternative approaches
and any other Transfer Pricing issues.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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