The Income Tax Return for Year of Assessment 2026 introduces an additional disclosure requirement whereby the taxpayer filing the return has to declare whether the company was involved in any transactions with any associated enterprises.
More specifically, the question reads: has an arrangement with an associate enterprise where at least one party is not resident in Malta, or one party maintains a permanent establishment situated outside Malta or maintains a permanent establishment situated in Malta.
An arrangement is a transaction, agreement or dealing of any kind (including notional), where, at the relevant time, the parties to such an arrangement are associated enterprises.
The Transfer Pricing Rules, S.L. 123.207, define ‘associated enterprise’ as a body of persons where:
(a) one of the bodies of persons controls the other body of persons whether as a result of the fact that it holds, directly or indirectly, a participation of more than 75% (or 50%, if MNE) in the voting rights, or the ordinary capital, of the other body of persons or by virtue of any powers conferred by the articles of association or other document regulating the other body of persons; or
(b) the same person or persons controls two or more bodies of persons whether as a result of the fact that it holds, directly or indirectly, a participation of more than 75% (or 50%, if MNE) in the voting rights, or the ordinary capital, of the two or more bodies of persons or by virtue of any powers conferred by the articles of association or other document regulating the two or more bodies of persons.
This implies that taxpayers should identify the existence of any transactions with associated enterprises even when the Company falls outside scope of the Transfer Pricing Rules, either by way of the Group being Small-Medium in size or by way of the arm’s length value of the transactions being below the deminimis thresholds contained in Article 9 of the Transfer Pricing Rules. This therefore raises the question as to whether the question is actually targeting transactions in scope of transfer pricing.