Draft Transfer Pricing Rules – Public Consultation – Transfer Pricing
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On December 22, 2021, the Commissioner of Revenue published draft transfer pricing rulesfor public consultation. The draft rules prescribe the requirement to apply 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 accepted in respect of the arrangement if those independent parties had entered into the arrangement. The requirement will be a tax requirement and will not affect trade agreements or other tax obligations. While it is expected that the OECD Transfer Pricing Guidelines will be an important source of reference in applying the rules, the methodologies for determining the arm’s length price have yet to be designated by the Revenue Commissioner. in guidelines yet to be published.
The draft rules specifically exclude micro, small or medium enterprises from the scope. A de minimisthe aggregate arm’s length value of all cross-border agreements must also be set, below which the rules will not apply.
Draft provisions regarding the issue of unilateral revenue-based transfer pricing decisions and advance pricing agreements to be entered into by revenue with one or more foreign competent authorities are also included in the draft rules.
The publication follows Malta’s commitment to implement specific transfer pricing rules in line with current global standards related to the arm’s length principle. With such intentions, enabling provisions have been introduced in Budget Implementation Measures Act 2021permitting such rules. The Rules are intended to come into force with effect from financial years beginning on or after January 1, 2024.
Interested parties are invited to submit their comments on the draft rules to the tax authorities by February 28, 2022, including on the transfer pricing tax policy direction, alternative approaches and any other transfer pricing issue.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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