![]() Rule 3 of the TPR is the primary rule governing a taxpayer’s obligation to determine its total income in accordance with the arm’s length principle. Condition 5: The de minimis thresholds are exceeded by the taxpayer in a particular basis year.Ĭandidates should note that there is a further condition relating to securitisation transactions however this condition is not examinable because securitisation transactions are an excluded topic at ATX-MLA level.Ĭondition 1: The taxpayer is a covered taxpayer Condition 4: The tested arrangement is not grandfathered, andĮ. Condition 3: The tested arrangement is a cross-border arrangementĭ. Condition 2: The tested arrangement is entered into between associated enterprisesĬ. Condition 1: The taxpayer is a covered taxpayerī. For the purposes of ATX-MLA, the rights and obligations emanating from the TPR would only find application upon the satisfaction of the following five conditions cumulatively:Ī. Not all taxpayers or types of arrangements are affected by the legislation. Unilateral transfer pricing rulings and advance pricing agreements are not examinable in ATX-MLA. They provide for a transfer pricing ruling framework, both unilateral (unilateral transfer pricing rulings) and multilateral (advance pricing agreements). They oblige affected taxpayers to prepare and retain transfer pricing documentation that can support the arm’s length amount asserted in the determination of their total income.Ĭ. The affected taxpayer must adjust its own profits under self-assessment.ī. They require affected taxpayers, in determining their total income, to substitute the arm’s length amount for the amount incurred, due, accrued or derived by said taxpayers under a cross-border arrangement where the latter amount is not in accordance with the arm’s length principle. Notwithstanding the absence of an express domestic provision to this effect, in terms of Maltese law it is generally expected that associated enterprises transact with one another in accordance with the arm’s length principle. Profit shifting may result from related party pricing policies that depart from those that would be expected between independent enterprises. ![]() Its principal objective is to safeguard against the artificial shifting (generally cross-border) of profits in controlled transactions. The arm’s length principle refers to the price which might have been expected if the parties to a transaction or arrangement had been independent persons dealing with each other in a normal commercial manner unaffected by any special relationship between them. The arm’s length principle and the Income Tax Act
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