In an ever-changing global economy, transfer pricing has emerged as a key tax issue for companies involved in cross border arrangements. Transfer Pricing is a term used to describe intragroup pricing arrangements relating to transactions between related entities. These can include transfers of intellectual property, tangible goods, services, and loans or other financing transactions.
With the introduction of Transfer Pricing Rules in Malta as from 1 January 2024 and foreign tax authorities becoming more active in the transfer pricing arena, it is increasingly important for Maltese entities with intragroup cross border activities to manage their transfer pricing risk. If an entity fails to comply with the regulations, it runs the risk of potential inquiries from the tax authorities, penalties and questions from stakeholders such as auditors and shareholders.
Higher penalties, increased exchange of information and more tax audits pose significant risks for the unprepared.
Performing a Transfer Pricing health check involves a detailed review of a group’s transactions to determine the nature of intragroup transactions.
A Transfer Pricing health check will highlight the transfer pricing risks to which the Maltese entities could be exposed.
Such a Transfer Pricing health check becomes more relevant in the below instances, just to mention a few:
When new rules come into force, as is the case in Malta;
When inter-company agreements are not in place or need updating;
When an entity has never prepared or filed any transfer pricing documentation;
When an entity has new cross border transactions involving another jurisdiction;
When the group has been subject to restructuring or a reorganisation; and
When there are material intragroup transactions.
PwC can help you review and evaluate your current transfer pricing position and provide practical recommendations to manage risks and realise opportunities. We can also conduct a Transfer Pricing health check as part of a broader income tax ‘health check’.
For more information on our services, please reach out to one of our contacts below.
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