As Malta continues to align its tax framework with international standards, following the introduction of transfer pricing legislation with effect from 1st January 2024, the Commissioner for Tax and Customs has now released the 2024 tax return (Year of Assessment 2025), which now requires  taxpayers to declare whether they have any cross-border arrangements that fall within the scope of the Transfer Pricing Rules (SL 123.207).


A new era of tax compliance

The YA2025 tax return requires taxpayers to determine whether they meet the SME thresholds as defined in Annexe I of Commission Regulation (EU) No 651/2014 and assess whether their dealings with related parties fall within the scope of transfer pricing legislation in page  2 of the tax return. 

Case-by-case assessment: A strategic imperative

While multinational enterprises (MNEs) meeting the €750 million revenue threshold are clearly within the scope of the TP rules, a one-size-fits-all approach to compliance may  not suffice. We advocate for a granular, case-by-case assessment of each entity within the group. This ensures that only those entities falling within the scope of the TP rules are taken into consideration, particularly in light of the nuanced definition of “associated enterprises.”

This is a critical distinction, as Malta’s TP rules apply exclusively to entities classified as large enterprises - those with:

  • More than 250 employees, or
  • Annual turnover exceeding €50 million, or
  • A balance sheet total above €43 million.

It is worth noting that these thresholds are assessed at the group level, encompassing both domestic and international group entities. This holistic approach ensures that taxpayers are appropriately captured within the scope of the legislation.

Enhanced disclosure requirements

Entities within scope will now be required to assess relevant  intercompany transactions, including:

  • Whether any new arrangements with related parties were entered into on or after the 1st January 2024.
  • Whether any pre-existing arrangements were materially altered - a concept that demands careful legal and functional analysis.

De Minimis thresholds and simplified approaches

Since the rules introduce de minimis thresholds - €6 million for revenue transactions and €20 million for capital transactions, taxpayers should assess whether they fall within the scope of  such thresholds. Entities falling below these thresholds may be exempt from full TP documentation requirements; however, it is advisable to carry out the necessary assessments to ensure that the correct approach is taken. Additionally, companies can opt for the simplified approach for low-value-adding intra-group services, as outlined in the OECD Transfer Pricing Guidelines, offering a more streamlined compliance path for routine intra-group transactions.

While at this stage, taxpayers are not being required to disclose additional details in relation to the cross-border arrangements that fall within the scope of the Rules, it is advisable to ensure that an assessment is carried out to determine the applicability of the legislation, and also identify any relevant transactions. Taxpayers within the scope of the Rules should also ensure that they maintain their local files up to date and review them on an ongoing basis.

Conclusion

Malta’s introduction of formal transfer pricing rules represents a significant shift in the tax compliance landscape, marking a crucial move in reinforcing Malta’s position as a transparent and compliant jurisdiction in international taxation. For businesses operating within or through Malta, this is not just a compliance exercise - it is a strategic opportunity to align internal processes, enhance transparency, and mitigate tax risks.

As the rules evolve, proactive engagement, robust documentation, and tailored assessments will be key to navigating this new terrain effectively.

RSM Malta is committed to supporting you in navigating the complexities ahead with expert guidance tailored to your needs.