The OECD’s transfer pricing guidance on financial transactions : a Maltese perspective

Abstract

Purpose: The objectives of this research were to analyse the interpretation of Maltese tax advisors and taxpayers regarding the TPGFT and the impact it is expected to have. Also, the researcher analysed whether Maltese taxpayers are preparing TP documentation and, if not, whether they are considering starting to do so. Design: This research study took a qualitative approach, with the collection of primary data done by conducting 10 semi-structured interviews. The interviews were carried out with tax advisors from Big4 firms, finance and senior management of local subsidiaries and a representative from the IRD. Findings: The findings gave way for a knowledge gap between what can be found in the TPGFT and what is known by the interviewees. The researcher concluded that this issue may be due to the lack of regulations on TP locally. Another point highlighted throughout this study was that the TPGFT would bring no significant change in Malta, acting as clarity in those areas that are subject to misinterpretation. This research study provided that with the current CbCR threshold, very few subsidiaries are preparing TP documentation. Conclusion: To increase awareness of TP in the local scenario, there must be the introduction of detailed TP regulations in the near future. Furthermore, there is the great urgency to increase education/ training on TP. The researcher also concluded that the threshold for TP documentation must be changed for more subsidiaries to fall within such threshold. Value: Forming part of BEPS, TP caused significant problems at an international level. When considering that such an issue is not locally regulated, it was valuable to determine whether local tax advisors and tax payers are aware of the new guidelines the OECD published and the impact that this report may have on Malta. This study became more valuable considering that in the Budget Measures Implementation Act, power is given to the Minister of Finance to introduce detailed TP rules.