Following the introduction of Article 51A of Income Tax Act as an enabling provision for the introduction of the transfer pricing and Advance Pricing Agreements, the Office of the Commissioner for Revenue published the draft Transfer Pricing Rules for public consultation. 


The following are the highlights of the draft Transfer Pricing Rules:


  • It is proposed that the rules will be applicable to cross-border arrangements entered into between associated enterprises on or after 1 January 2024 or are entered into before 1 January 2024 but are materially altered on or after that date;


  • Bodies of persons are anticipated to fall within the ambit of associated enterprises when there is a direct or indirect control through a minimum holding of more than 50% of voting rights or ordinary share capital or by virtue of any powers contained in the articles of association or document regulating the controlled body of persons.


  • The proposed rules will also contain specifics provisos for permanent establishments both in Malta and outside Malta;


  • The rules will only apply for large companies having cross border arrangements. A de minimis threshold which is yet to be determined, will also apply for such arrangements;


  • It is expected that that methodology applied by the Commissioner for Revenue for the ‘arms’ length amount’ will be based on the OECD Transfer Pricing Guidelines;


  • The concept of ‘arrangement’ means any kind of transaction entered into by associated enterprises including modifications to existing arrangements.


  • A Company will be expected to keep proper records in connection with the determination of whether the total income of the company is in line with the Transfer Pricing Rules.


  • The Commissioner for Revenue may also issue Unilateral Pricing Rulings in order to provide certainty in relation to the application of these rules to a transaction or a series of transactions. Such rulings will be subject to a non-refundable fee which is yet to be determined.   The ruling will remain binding for a period of five years unless indicated otherwise. 


  • The proposed rules also cater for the possibility obtain Advance Pricing Agreements. The Competent Authorities may enter into an Advance Pricing Agreement with the relevant foreign competent authority which may be of a bilateral or multilateral nature.    Such agreements may be entered into for a period not exceeding five years.


The Transfer Pricing Rules were issued on the 18 November 2022.