Transfer Pricing Rules, 2022

L.N. 284 of 2022

INCOME TAX ACT

(CAP. 123)

Transfer Pricing Rules, 2022

IN EXERCISE of the powers conferred by article 51A of the

Income Tax Act, the Minister responsible for finance has made the

following rules:-

(1)

The title of these rules is the Transfer Pricing Rules, Citation and

applicability.

2022. (2) These rules shall apply for basis years commencing on or

after 1st January 2024 in relation to any arrangement entered into on or

after that date, and for those arrangements entered into before that

date, these rules shall apply to those arrangements that are materially

altered on or after that date.

(1)

In these rules, unless the context otherwise requires

Interpretation.

"Act" means the Income Tax Act;

"advance pricing agreement" means an agreement entered

into between the competent authority and a relevant foreign

competent authority under the provisions for a mutual agreement

procedure found in

(a)

an arrangement as provided for in article 76 of

Act;

(b) the Convention on the elimination of double

taxation in connection with the adjustment of profits of

associated enterprises (90/436/EEC); or

(c) any rules or regulations made in accordance

with the provisions of article 52B of the Act,

which agreement determines in advance of cross-border

arrangements between associated enterprises, an appropriate set

of criteria for the determination of the transfer pricing for those

transactions or determines the attribution of profits to a

permanent establishment in line with the arm’s length standard

as developed through international tax standards;

"arrangement" means

(a) any transaction, agreement or dealing of any

kind, where, at the relevant time, the parties to such an

arrangement are associated enterprises. An arrangement

shall also include a series of transactions, agreements and

dealings of any kind; or

(b) any notional dealing between a body of persons

and its permanent establishment;

"associated enterprises" means bodies of persons where

(a) one (1) 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

seventy-five per cent (75%) 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 (2) or

more bodies of persons whether as a result of the fact that it

holds, directly or indirectly, a participation of more than

seventy-five per cent (75%) in the voting rights, or the

ordinary capital, of the two (2) or more bodies of persons or

by virtue of any powers conferred by the articles of

association or other document regulating the two (2) or

more bodies of persons

Provided that, for the purposes of paragraphs (a) and

(b) of this definition, where such bodies of persons are

constituent entities of a MNE group as defined in item 3 of

Section I of Annex III of the Cooperation with Other

Jurisdictions on Tax Matters Regulations the percentage interest

in the voting rights or the ordinary capital referred to therein

shall be fifty per cent (50%);

"company" has the meaning as is assigned to it in article

2(1) of the Act

Provided that the term "company" shall not include

any micro, small or medium-sized enterprise;

"competent authority" means the Minister or his authorised

representative. An authorised representative shall be the

competent official that is identified as such and whose name and

designation are published on the website of the Commissioner;

"cross-border arrangement" means an arrangement between

associated enterprises where any one (1) of the following

conditions is satisfied

(a) at least one (1) party to the arrangement is not

resident in Malta and at least one (1) party to the

arrangement is a company resident in Malta and the

arrangement is relevant in ascertaining the total income of

that company;

(b) at least one (1) party to the arrangement

maintains a permanent establishment situated outside Malta

to which the arrangement is effectively connected and at

least one (1) party to the arrangement is a company resident

in Malta and the arrangement is relevant in ascertaining the

total income of that company;

(c) at least one (1) party to the arrangement is not

resident in Malta and at least one (1) other party, not being

resident in Malta, is a company which maintains a

permanent establishment situated in Malta to which the

arrangement is effectively connected, or otherwise derives

income or gains arising in Malta, and the arrangement is

relevant in ascertaining the total income of that company;

"micro, small or medium-sized enterprise" means

undertakings fulfilling the criteria laid down in Annex I of

Commission Regulation (EU) No 651/2014 of 17 June 2014

declaring certain categories of aid compatible with the internal

market in application of Articles 107 and 108 of the Treaty, as in

force at the relevant time;

"relevant material change" means

(a) a change of facts from those described in the

request for the relevant unilateral transfer pricing ruling or

advance pricing agreement, including any other

communication connected thereto, and on which the

substance of the unilateral transfer pricing ruling or

advance pricing agreement, or any other matter that is not

trivial in connection thereto, was based

Provided that such change has occurred after

the date of the request of the said unilateral transfer pricing

ruling or advance pricing agreement;

(b) a change in the relevant legislation on which the

substance of the unilateral transfer pricing ruling or

advance pricing agreement, or any other matter that is not

trivial in connection thereto, was based

Provided that such change has occurred after

the date of the said unilateral transfer pricing ruling or

advance pricing agreement; or

(c) a decision of the directly interested party to

withdraw the unilateral transfer pricing ruling;

"relevant time" means the earlier of

(a) the date on which the arrangement becomes

binding on the parties thereto; or

(b) the date of commencement of the execution of

the arrangement

Provided that this definition shall be subject to such

other methodology as may be determined by means of guidelines

issued in accordance with article 96(2) of the Act.

"unilateral transfer pricing ruling" means a ruling issued by

the Commissioner that determines, in advance of an

arrangement, an appropriate set of criteria for the determination

of the transfer pricing for that arrangement. The said criteria

include the method used to arrive at the transfer pricing,

comparables and appropriate adjustments thereto and critical

assumptions as to future events;

(2) Any terms not defined in sub-rule (1) shall, unless the

context otherwise requires, have the meaning assigned to them in the

Act.

In ascertaining the total income of any company in

accordance with the Act

(a) where any amount incurred or due in the year

preceding the year of assessment under any cross-border

arrangement to which these rules apply differs from the arm’s

length amount, it shall be deemed that the arm’s length amount

was incurred or due instead of the actual amount incurred or due;

(b) where any amount accrued or derived in the year

preceding the year of assessment under any cross-border

arrangement to which these rules apply differs from the arm’s

length amount, it shall be deemed that the arm’s length amount

was accrued or derived instead of the actual amount accrued or

derived

Provided that any adjustment made in terms of paragraphs

(a) or (b) shall apply exclusively for the purpose of ascertaining the

total income of one (1) or more parties to the cross-border arrangement

as the case may be and shall not affect any other person.

For the purposes of these rules the "arm’s length amount" Definition of

in relation to an arrangement is the amount that independent parties arm’s

amount.

would have agreed to in relation to the arrangement had those

independent parties entered into that arrangement in comparable

circumstances.

The arm’s length amount shall be determined on the basis Transfer pricing

of such methodologies as shall be designated by the Commissioner in methods.

guidelines issued in terms of article 96(2) of the Act.

A company, in relation to an arrangement to which these Records.

rules apply, shall prepare on a timely basis and retain such records as

may reasonably be required for the purposes of determining whether,

in relation to the arrangement, the total income of the company has

been ascertained in accordance with the provisions of these rules.

Where

Use of the arm’s

length amount.

(a) the total income of a person liable to tax in Malta is

computed such that, instead of the actual amount incurred, due,

accrued or derived under the terms of an arrangement, the arm’s

length amount in relation to that arrangement were incurred, due,

accrued or derived as the case may be; and

(b) any other party to the arrangement is liable to tax in

Malta and the arrangement is relevant in ascertaining the total

income of that person,

then, subject to this rule, the total income of any person referred

to in paragraph (b) shall be computed as if, instead of the actual

amount incurred, due, accrued or derived under the terms of the

arrangement, the arm’s length amount in relation to that arrangement

were incurred, due, accrued or derived as the case may be.

Without prejudice to the provisions of any other law, any Relevance of

adjustments made in furtherance of the requirements of these rules these rules.

shall be relevant only for the purposes of the Income Tax Acts.

These rules shall not apply where

Exceptions.

(a) the arrangement comprises a securitisation

transaction in terms of the Securitisation Transactions S.L. 123.128.

(Deductions) Rules; or

(b) (i) the aggregate arm’s length value of all items of

income and expenditure of a revenue nature forming part

of cross-border arrangements in the year preceding the

year of assessment, does not exceed six million euro

(€6,000,000); and

(ii) the aggregate arm’s length value of all items of

income and expenditure of a capital nature forming part of

cross-border arrangements in the year preceding the year of

assessment, does not exceed twenty million euro

(€20,000,000)

Provided that where the parties to cross-border

arrangements referred to in paragraphs (a) and (b), make a request in

writing to the Commissioner for the issuance of a determination

stipulating that the provisions of these rules shall apply and the

Commissioner issues such a determination, the provisions of these

rules shall apply as may be determined.

(1) For the purpose of ascertaining the total income of

any body of persons not resident in Malta, where such body of persons

maintains a permanent establishment situated in Malta, these rules

shall apply, mutatis mutandis, to the arrangements between the

permanent establishment and the body of persons.

(2) For the purpose of ascertaining any income derived by a

company registered in Malta which is attributable to a permanent

establishment situated outside Malta, these rules shall apply, mutatis

mutandis, to the arrangements between the permanent establishment

and the company registered in Malta

Provided that for the purposes of this rule

(a) the term "associated enterprises" shall be construed as

including the relationship between a permanent establishment

and the company;

(b) the term "cross-border arrangement" shall be

construed as including an arrangement, as defined in this rule,

between a non-resident company and its permanent

establishment situated in Malta and between a company

registered in Malta and its permanent establishment situated

outside Malta; and

(c) a "permanent establishment" shall be treated as if it

were a separate and independent enterprise engaged in the same

or similar activities under the same or similar conditions

Provided further that this rule shall be construed,

interpreted and applied to ensure, as far as practicable, consistency

between the effect which is to be given to this rule, and the 2010

Report on the Attribution of Profits to Permanent Establishments

approved on 22 June 2010 by the Committee on Fiscal Affairs and by

the OECD Council on 22 July 2010, as supplemented, modified,

revised or otherwise replaced, as may by notice be designated by the

Minister responsible for Finance for the purposes of this rule.

(1) The Commissioner may issue a unilateral transfer Unilateral

pricing ruling in order to provide certainty in relation to the application transfer

rulings.

of these rules to a cross-border arrangement.

(2) A request for a unilateral transfer pricing ruling shall be

made by a party to the arrangement or his authorised representative

(hereinafter in this rule referred to as "directly interested party"). Such

a request shall

(a)

be made in writing;

(b) be made in relation to a specific cross-border

arrangement;

(c)

include a reference to these rules;

(d) disclose the identities of the directly interested parties

and all other persons involved in the relevant arrangement

including the direct and ultimate beneficial owners of such

persons. Where any of such parties or persons are not in

existence at the time of the request, the request shall indicate this

fact, and the details shall be provided as soon such persons come

into existence including all the relevant details of the relevant

arrangement; and

(e) any other details as determined by guidelines issued

under the Income Tax Acts.

(3) A request for a unilateral transfer pricing ruling may be

made in connection with the tax treatment of a cross-border

arrangement commencing on or after the date that the request was

made

Provided that where the relevant arrangement had already

commenced on the date when the said request was made, the scope of

the request may be extended as follows

(a) in the case of a cross-border arrangement which does

not consist of a series of transactions, agreements and dealings to

transactions, agreements and dealings taking place in the year

preceding the year of assessment in which the request was made;

and

(b) in any other case, to transactions, agreements and

dealings that took place within the three (3) previous basis years

and that form part of that arrangement.

(4) A unilateral transfer pricing ruling may only be issued once

all the necessary information, including all the identification details

and any other relevant information requested by the Commissioner has

been provided and the applicable fees have been paid by the directly

interested party.

(5) A unilateral transfer pricing ruling shall specify that it has

been issued under the provisions of these rules.

(6) The Commissioner shall not unreasonably withhold the

issuing of a unilateral transfer pricing ruling. The Commissioner may,

however, decline to issue a unilateral transfer pricing ruling where the

Income Tax Acts, and any rules, regulations and guidelines made or

issued thereunder, clearly provide sufficient certainty with regard to

the tax treatment of the relevant arrangement. When the Commissioner

declines to issue such a ruling on this basis, he shall issue a notice in

writing that includes a reference to the provisions that provide such

certainty. The Commissioner may withhold the issuing of a unilateral

transfer pricing ruling where the interested party is not up-to-date in

relation to the obligations in relation to tax returns at the time that such

request is made.

(7) A non-refundable fee of three thousand euro (€3,000) shall

be paid when making a request for a unilateral transfer pricing ruling.

(8) A unilateral transfer pricing ruling shall remain binding on

the Commissioner for a period of five (5) years from the date the

unilateral transfer ruling takes effect

Provided that the Commissioner may, when issuing a

unilateral transfer pricing ruling and after considering the

circumstances of the request, stipulate that such ruling shall only

remain binding for a shorter period, which period shall be indicated in

the ruling itself

Provided further that a unilateral transfer pricing ruling

may also cover the period referred to in the proviso to sub-rule (3)

where a request has been made to this effect by the directly interested

party. The provisions of this proviso shall not affect the operation of

any provision relating to interests and penalties provided for in the

Income Tax Acts.

(9) A directly interested party shall notify the Commissioner of

any relevant material change within thirty (30) days from the later of

the date of its occurrence or the date from when such party becomes

aware thereof. Where such notification includes a request for a

modification of the relevant unilateral transfer pricing ruling, such a

request may be considered to be a new request for a unilateral transfer

pricing ruling, as the Commissioner may deem fit.

(10) A unilateral transfer pricing ruling shall have no effect as

from the date on which the Commissioner notifies the directly

interested party that a relevant material change has taken place.

(11) A unilateral transfer pricing ruling shall be null and void

where the notification referred to in sub-rule (9) has not been made or

where the unilateral transfer pricing ruling issued by the

Commissioner was based on a misrepresentation or the withholding of

any relevant facts.

(12) (a) A directly interested party that has made a request

under the provisions of sub-rule (2) may refer a matter relating to that

request to the Administrative Review Tribunal established by article 5

of the Administrative Justice Act, hereinafter in these rules referred to Cap. 490.

as "the Tribunal". Such reference may only be made in relation to

matters that had been first raised in correspondence with the

Commissioner within the parameters of this rule.

(b) A reference to the Tribunal in accordance with

paragraph (a) shall be made by means of an application which

shall state clearly all the facts relevant to the matter and the

manner in which, in the opinion of the applicant, that matter

should be determined. A copy of the correspondence with the

Commissioner referred to in paragraph (a) shall form part of the

reference to the Tribunal made by the directly interested party.

(c) The reference to the Tribunal in accordance with

paragraph (a) shall be made not later than one hundred and

eighty-three (183) days from the date that establishes any of the

following instances

(i) where the Commissioner has issued the

unilateral transfer pricing ruling or a refusal in terms of

sub-rule (6), the date of such ruling or refusal, as the case

may be;

(ii) where the Commissioner has not issued the

unilateral transfer pricing ruling or a refusal in terms of

sub-rule (6), the date when a period of one hundred and

eighty-three (183) days have lapsed from the date that the

Commissioner received the request for a unilateral transfer

pricing ruling or such other longer period as agreed

between the Commissioner and the directly interested

party;

(d) Where a directly interested party institutes a

reference to the Tribunal in accordance with this sub-rule, article

34 of the Income Tax Management Act shall apply, mutatis

mutandis.

(e) A decision by the Tribunal and by any subsequent

Court of Appeal on a reference made under this sub-rule shall be

binding on the Commissioner and the directly interested person

with respect to the specific matter referred to it

Provided that such decision shall be so binding only if the

relevant facts have been correctly stated in the application or otherwise

recorded in the records of the case and shall remain binding only as

long as there has not been a relevant material change.

(13) A directly interested party may request a renewal of a

unilateral transfer pricing ruling dealing with an ongoing cross-border

arrangement under the same conditions as prescribed in this rule where

there has not been a relevant material change since the date of its issue.

A request for such renewal shall be made in writing to the

Commissioner during the six (6) months preceding the expiry of the

relevant unilateral transfer pricing ruling. A non-refundable fee of one

thousand euro (€1,000) shall be paid when making a request for a

renewal of a unilateral transfer pricing ruling. Except for the

provisions of sub-rule (7), the provisions of this rule shall also apply to

a request for a renewal of a unilateral transfer pricing ruling.

(1) The competent authority may enter into an advance

pricing agreement with the relevant foreign competent authority. An

advance pricing agreement may be of a bilateral or multilateral nature.

(2) A request for an advance pricing agreement may be made

in connection with the tax treatment of a cross-border arrangement

commencing on or after the date that the advance pricing agreement

takes effect

Provided that, where the arrangement has already

commenced on the date of the request, the scope of the request may be

extended to such transactions that took place during the previous three

(3) basis years.

(3) The provisions of rule 11(2), (4) and (5) shall apply, mutatis

mutandis, to a request for an advance pricing agreement

Provided that, with respect to a request under this rule, the

requirements under rule 11(2)(c) shall also include a reference to the

relevant provision concerning the mutual agreement procedure.

(4) A non-refundable fee of five thousand euro (€5,000) shall

be paid when making a request for an advance pricing agreement.

(5) An advance pricing agreement may be entered into for a

duration of a period not exceeding five (5) years from the date the

advance pricing agreement takes effect as determined during the

relevant mutual agreement procedure.

(6) In addition to the period provided for in sub-rule (5), an

advance pricing agreement may also cover a period not exceeding

three(3) basis years preceding the date of the request for the advance

pricing agreement where a request has been made to this effect by the

directly interested party.

(7) A directly interested party shall notify the competent

authority of any relevant material change within thirty (30) days from

the date of its occurrence or the date from when such party becomes

aware thereof. Where such notification includes a request for a

modification of the relevant advance pricing agreement, such a request

may only be considered to be a new request for an advance pricing

agreement if the competent authority and the other competent

authorities so agree.

(8) An advance pricing agreement shall have no effect as from

the date on which the competent authority notifies the directly

interested party that a relevant material change has taken place. The

competent authority shall obtain the agreement of the other competent

authorities involved before issuing such notification.

(9) An advance pricing agreement shall be null and void where

the notification referred to in sub-rule (7) has not been made or where

it is based on a misrepresentation or withholding of any relevant facts

Provided that the provisions of this sub-rule shall only

apply where there is agreement to this effect with the other foreign

competent authorities involved.

(10) A directly interested party may request a renewal of an

advance pricing agreement under the same conditions as prescribed in

this rule where there has not been a relevant material change since the

date of its issue. A request for such renewal shall be made in writing to

the competent authority during the six (6) months preceding the expiry

of the relevant advance pricing agreement. The competent authority

shall obtain the agreement of the other competent authorities involved

before confirming such a renewal. A non-refundable fee of two

thousand euro (€2,000) shall be paid when making a request for a

renewal of an advance pricing agreement. Except for the provisions of

sub-rule (4), the provisions of this rule shall also apply to a request for

a renewal of an advance pricing agreement.

€1.08