Navigating Malta's New Transfer Pricing Rules: A Guide for Businesses

With the introduction of the Transfer Pricing Rules, Subsidiary Legislation 123.207 (‘Local TP Rules’), Malta has aligned its tax regulations with international standards, particularly those established by the Organisation for Economic Co-operation and Development (‘OECD’) and its Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (‘OECD Guidelines’). These new rules bring additional compliance requirements for businesses, while also offering greater clarity and predictability when pricing transactions between associated enterprises.

As tax advisors, our mission is to help you understand these regulations, assess their impact on your business, and guide you in maintaining compliance while optimising your tax strategies. This guide covers the key aspects of Malta’s transfer pricing regime and provides practical insights to help you meet your obligations efficiently, without disrupting your operations.



𝐖𝐡𝐲 𝐓𝐫𝐚𝐧𝐬𝐟𝐞𝐫 𝐏𝐫𝐢𝐜𝐢𝐧𝐠 𝐌𝐚𝐭𝐭𝐞𝐫𝐬

Transfer pricing regulates how goods, services, and intellectual property are priced between companies within the same multinational group. The intent is to ensure that profits are accurately allocated across different jurisdictions and taxed fairly. Malta’s transfer pricing rules are based on the arm’s length principle, which mandates that transactions between related parties be priced as if they were conducted between independent, unrelated entities.

Failure to comply with these rules can lead to significant tax penalties, adjustments, and reputational damage. As transfer pricing becomes more scrutinised by tax authorities worldwide, it’s essential to have clear policies and documentation in place.



𝐌𝐚𝐥𝐭𝐚’𝐬 𝟐𝟎𝟐𝟒 𝐓𝐫𝐚𝐧𝐬𝐟𝐞𝐫 𝐏𝐫𝐢𝐜𝐢𝐧𝐠 𝐑𝐮𝐥𝐞𝐬: 𝐊𝐞𝐲 𝐇𝐢𝐠𝐡𝐥𝐢𝐠𝐡𝐭𝐬

The Local TP Rules apply from basis years commencing on or after 1 January 2024, in relation to arrangements entered into on or after such date and arrangements entered into prior to 1 January 2024 that are materially altered on or after that date. The rules are designed to align with international standards the framework for pricing intra-group cross-border transactions by multinational enterprises.

a) Arm’s Length Principle

Malta’s transfer pricing regime requires that all transactions between associated enterprises be priced as if they were between unrelated, independent companies. This principle applies to goods, services, financing, royalties, and intellectual property transfers.

b) Scope and Applicability

Malta’s transfer pricing rules apply to cross-border transactions involving associated enterprises where at least one entity is subject to Maltese tax. The application of transfer pricing rules in Malta are subject to certain thresholds, which ensures that only significant, high-risk transactions are subject to detailed analysis.

c) Small and Medium Enterprises (‘SMEs’) Exclusion

SMEs are excluded from the scope of the Local TP Rules. The rules are specifically aimed at "Large" enterprises, which exceed the SME thresholds (Annex I of Commission Regulation (EU) No 651/2014). These thresholds are assessed at the group level, meaning that companies must consider the size of the entire group, including entities outside of Malta, rather than assessing each entity in isolation.

d) Transfer Pricing Documentation

To demonstrate compliance with the arm’s length principle, businesses must prepare and maintain appropriate transfer pricing documentation in line with the OECD Guidelines. These include:

- Master File: Provides an overview of the group’s international business operations, overall transfer pricing policies and cross-border economic activity.

- Local File: Corroborates information pertaining to a specific jurisdiction involving the transfer pricing analysis related to transactions taking place between all local members of the group and associated enterprises in other jurisdictions.

- Country-by-Country Reporting (‘CbCR’): Applies to Multinational Enterprises (‘MNEs’) with global consolidated revenues exceeding €750 million. CbCR provides an overview of the group’s income, taxes, and economic activity in every jurisdiction where it operates.

e) Transfer Pricing Methods

Local TP Rules adopt the methods outlined in the OECD Guidelines, which include:

- Comparable Uncontrolled Price (‘CUP’) Method: Compares the price of a controlled transaction with the price of a similar transaction between unrelated parties.

- Resale Price Method: Looks at the price at which a product purchased from a related party is resold to an independent entity.

- Cost Plus Method: Adds an appropriate profit margin to the costs incurred by the supplier in a related-party transaction.

- Transactional Net Margin Method (‘TNMM’) and Profit Split Method: Typically applied to more complex transactions where traditional methods may not yield accurate results.

f) Advance Pricing Agreements and Unilateral Transfer Pricing Rulings

One effective way to manage uncertainty is through Advance Pricing Agreements (‘APAs’). An APA enables businesses to agree in advance with tax authorities on a suitable transfer pricing method for specific transactions. This proactive approach provides greater certainty, minimises the risk of future disputes, and ensures that the agreed pricing method aligns with both local and international regulations. Additionally, unilateral transfer pricing rulings can offer further clarity and security for businesses engaging in cross-border transactions.

g) Consequences of Non-Compliance

Failing to comply with transfer pricing obligations can lead to penalties, tax adjustments, and potentially further investigations. Ensuring that documentation is accurate and prepared in a timely manner is crucial. Under the Local TP Rules, it is our understanding that the Maltese tax authorities are likely to adopt a collaborative approach. However, businesses should always be prepared to demonstrate compliance and maintain robust transfer pricing documentation to avoid any issues.



𝐇𝐨𝐰 𝐂𝐚𝐧 𝐑𝐚𝐝𝐢𝐱 𝐇𝐞𝐥𝐩 𝐘𝐨𝐮𝐫 𝐁𝐮𝐬𝐢𝐧𝐞𝐬𝐬

The new transfer pricing rules may seem intimidating, but with the right guidance, your business can remain compliant while also leveraging opportunities for strategic tax planning. Here’s how we can help you navigate these changes effectively.

1) Transfer Pricing Documentation

Every business is unique, and so are its transactions. We will collaborate with you to develop transfer pricing documentation tailored to your specific needs, ensuring it is not only compliant but also optimised for your business operations. Our focus will be on preparing clear and concise Master and Local Files that are aligned with your global strategy.

2) Risk Assessment and Planning

Radix will conduct a detailed review of your related-party cross-border transactions and agreements to identify any potential transfer pricing risks and issue a report with actionable recommendations. Together, we’ll evaluate your pricing policies and ensure that they adhere to the arm’s length principle, which in turn will help to avoid any potential disputes and penalties.

3) Advance Pricing Agreements and Unilateral Transfer Pricing Rulings

We can assist you in negotiating APAs and Unilateral Transfer Pricing Rulings with the Maltese tax authorities. This ensures that your transfer pricing policies are pre-approved, significantly reducing the likelihood of audits or disputes.

4) Ongoing Compliance Support

Given that transfer pricing rules are dynamic, and the economic environment is constantly evolving, at Radix we strive to keep you updated on any changes to local or international transfer pricing regulations and offer our ongoing services to update and maintain documentation compliant. We also offer support to defend your transfer pricing policies with the tax authorities during a risk assessment or audit.



𝐘𝐨𝐮𝐫 𝐓𝐫𝐮𝐬𝐭𝐞𝐝 𝐏𝐚𝐫𝐭𝐧𝐞𝐫 𝐟𝐨𝐫 𝐓𝐫𝐚𝐧𝐬𝐟𝐞𝐫 𝐏𝐫𝐢𝐜𝐢𝐧𝐠 𝐂𝐨𝐦𝐩𝐥𝐢𝐚𝐧𝐜𝐞

Malta’s new transfer pricing rules mark a significant shift in how multinational transactions are examined and taxed. By staying ahead of these changes and working closely with a tax advisor, you can ensure full compliance while strategically positioning your business to optimise its tax planning.

Radix are committed to making this process smooth, transparent, and beneficial for your business. Together, we can ensure that your transfer pricing policies are not only compliant but also robust and aligned with your overall business objectives. Let’s collaborate to navigate these changes and capitalise on the opportunities they bring.