Fun with Transfer Pricing

[JustAnotherNomad]

I think it was @Marzio who mentioned that Malta's transfer pricing rules only kick in from quite high revenue thresholds.
Cyprus also seems to have a requirement of at least 1M or so in transfers before transfer pricing rules kick in.
Is that correct?

If yes, are there other reputable countries that have such a weak transfer pricing regime?

 

[aniglo22]

This is pretty similar to the arm length principle︃ and you are not exempted from it .
And also in Rule 9 - Exceptions︄ it says :
This won’t work because your transactions must be valued at arm’s length to qualify︇ for the exemption.

 

[JustAnotherNomad]

I don't get it - why have a‍ threshold for transfer pricing rules at all then?

 

[aniglo22]

Because it lowers the compliance burden and the associated‍ costs for SME's .

 

[JustAnotherNomad]

So it's only about documentation?

 

[Xshore]

In the UK, SME's are exempt from transfer pricing when trading with companies in countries‌ that the UK has a tax treaty with and which contains a nondiscrimination article.

 

[aniglo22]

You still have profit fragmentation rules ..
And also UK follows⁠ OECD guidelines this means arm's length principle, Master file, Local File , CBC etc.....
You are just exempted from documentation (Master File , Local File , CBC ) as it's⁤ really expensive especially for SME, NOT from arm's length principle

 

[Xshore]

What does this‌ mean?

HMRC says that SME's are exempted from "transfer pricing rules", not just documentation.
https://www.gov.uk/hmrc-internal-manuals/international-manual/intm412070

But still, any expense must be "wholly and exclusively for the purposes of the business".‍