The implementation of transfer pricing in Malta will be effective as from the 1st January 2024. The transfer pricing rules will apply to any related party arrangement entered on or after this date. It includes any arrangements entered previously but materially altered on or after that date.

The Rules lay out applicable definitions in relation to the interpretation of the said rules, ascertaining the total income of companies, definition and use of the arm’s length amount, transfer pricing methods, exceptions, ascertaining the total income of permanent establishments, the issuance of unilateral transfer pricing rulings and their renewals, and advanced pricing agreements.

The Rules will be applicable to cross border arrangements between associated (related) enterprises, defined as ‘bodies of persons’ controlling one or more body of persons, and holding a direct or indirect participation of 75%. Where the bodies of persons form part of a MNE enterprise falling in scope of the Country-by-Country reporting, the holding shall be of 50%. The Rules are not applicable to micro, small or medium sized enterprises.

A cross border arrangement is defined by the Rules as transactions or arrangements between a resident party to an arrangement and a non-resident party; or effectively connected to a permanent establishment (PE) situated outside of Malta and a resident party; or between a non-resident party to an arrangement and the PE of another non-resident party in Malta to which the transaction is effectively connected.