Malta’s Transfer Pricing Rules (S.L. 123.207), ‘TP Rules’, became effective for basis years commencing on or after 1 January 2024 and generally apply to cross-border arrangements between associated enterprises, subject to certain exclusions and de minimis thresholds. The TP Rules are based on the arm’s length principle and require taxpayers to maintain adequate transfer pricing documentation supporting the pricing of intercompany transactions.
Maltese companies falling within the scope of the TP Rules are required to prepare on a timely basis and retain such records as may reasonably be required for the purposes of determining whether (in relation to the in-scope arrangements), the total income of the company has been ascertained in accordance with the provisions of these rules, implying adherence to Chapter V of the OECD Transfer Pricing Guidelines, titled ‘Documentation’. The “three-tiered approach” suggested therein, consists of the following three files:
- Master file
- Local file
- Country-by-Country Report
With the recent addition to the statutory annual income tax return, Malta’s transfer pricing framework continues to evolve as we see the Malta Tax and Customs Administration (“MTCA”) going a step further than the standard transfer pricing reporting obligations.
TRA 135 requires all taxpayers to disclose detailed information relating to in-scope cross-border related-party transactions directly within the corporate tax return process, including:
- Details of the associated enterprise;
- The arrangement amount versus the arm’s length amount; and
- The methods used to arrive at the arm’s length amount.
Where a taxpayer falls outside the scope of TP Rules, such taxpayer is required to disclose the applicable exclusion.
The introduction of TRA 135 represents an important shift from a documentation-only framework towards enhanced reporting and transparency, effectively embedding transfer pricing into the annual tax compliance cycle and increasing the visibility of taxpayers’ transfer pricing positions to the MTCA.
As a result, businesses should ensure that intercompany agreements, financial outcomes, and transfer pricing documentation are aligned and adequately supportable. Taxpayers with in-scope arrangements may therefore need to revisit existing transfer pricing policies, undertake benchmarking analyses, and assess whether year-end transfer pricing adjustments are required prior to filing the YA 2026 corporate tax return.
How Can We Help
Preparing comprehensive and compliant documentation can be complex, requiring detailed analysis of business functions, financial data, and applicable regulations. Given these challenges, at BDO Malta we can support businesses through the documentation process ensuring accuracy and compliance with Maltese and international standards.
At BDO Malta, we assist groups with the design and review of benchmarking studies tailored to their operations. Whether supporting ongoing documentation or responding to tax authority questions, we ensure your analysis is reliable, relevant, and clearly presented.