Malta Lays the Groundwork for Transfer Pricing Regulations11th January 2022
Transfer pricing rules are one step closer to becoming law in Malta—though there still seems to be a long road ahead. In December, Malta opened its draft transfer pricing rules to public consultation—you can voice your support or opposition until February 28, 2022. Malta has enacted a country-by-country report requirement but hasn’t adopted the master and local files into law. However, the draft legislation lays the groundwork for more documentation requirements—and if Malta takes a nod from other EU countries, then more stringent documentation requirements could come later. For now, Malta’s draft legislation would adopt the OECD’s definition of arm’s-length pricing—meaning the pricing that independent parties would have agreed to in a similar arrangement—and steer taxpayers to OECD Guidelines in terms of how transfer pricing rules should be applied. However, Malta hasn’t declared which transfer pricing methods can be used to determine arm’s-length pricing. The draft legislation notes that micro, small, or medium-sized companies will be excluded from having to adhere to the transfer pricing rules and it lists provisions about the scope of advanced pricing agreements. While the move is a big step forward for Malta, the rules themselves are hardly remarkable. However, when you consider that even the tiny island nation of Malta—the smallest country in the EU—has put transfer pricing compliance on its priority list, well, that certainly tells you something, now doesn’t it?