Maldives – Transfer Pricing (2025)

Legal framework and scope

Maldives’ transfer pricing framework is grounded in the Income Tax Act and the Transfer Pricing Regulation. The Arm’s Length Principle is referenced in Section 67 and Section 79 (r) of the Income Tax Act, and the specific Transfer Pricing Regulation is identified as Transfer Pricing Regulation (2020 –R-43). The Maldives Inland Revenue Authority (MIRA) has issued a Transfer Pricing Arm’s Length Guide and a Draft Transfer Pricing Guide, both prepared with reference to the OECD Transfer Pricing Guidelines (TPG). The domestic framework applies to transactions between associated parties; the country profile does not provide an exhaustive list of transaction types that would be excluded.

Arm’s Length Principle and the role of the OECD Guidelines

The Transfer Pricing Regulation and related guides were developed with direct reference to the OECD TPG. The TPG serve as the methodological backbone for defining arm’s length outcomes in Maldives, and MIRA’s administrative guidance follows OECD principles when applying the arm’s length standard.

Definition of related parties

Domestic law provides explicit definitions. Section 79 (oo) of the Income Tax Act defines “Relative” to mean a person’s spouse; the person’s child, parent, grandparent or sibling; or the spouse of such persons. Section 79 (ss) defines “Associate” as cases where one person controls or is controlled by another, where both persons are controlled by the same person(s), where persons are relatives of one another, where one person is a partner in a partnership of the other, or where one person is a trust and the other is a beneficiary or settlor of that trust. MIRA’s guidance further requires identification of permanent establishments (PEs) and the economic relationships among associates through a functional analysis to accurately delineate controlled transactions.

Methods and selection criteria

The Transfer Pricing Regulation explicitly lists traditional methods: Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin Method (TNMM) and Profit Split. Section 8(e) of the Transfer Pricing Regulation also contemplates “other methods” defined as a method approved by MIRA that takes into account prices paid or payable in comparable circumstances to an independent party considering all relevant facts. Taxpayers wishing to apply a method other than the listed ones must obtain prior approval from MIRA; no such requests have been received to date.

Maldives applies the “most appropriate method” criterion rather than a strict hierarchy. The Draft Transfer Pricing Guide (Determination of Arm’s Length, page 26) states that the most appropriate method is the one best suited to the facts and circumstances of the particular transaction and which provides the most reliable measure of price, profit or income. In selecting it, factors to consider include the nature of the controlled transaction (as determined by a functional analysis), the degree of actual comparability, completeness and accuracy of data on independent transactions, reliability of assumptions, and the sensitivity of adjustments to inaccuracies. MIRA does not prefer any single method and selects the method that yields the most reliable result given data quality and adjustment accuracy.

Comparability and ranges

MIRA recommends a three-step approach: first, conduct a comparability analysis involving precise delineation of the controlled transaction by identifying commercial and financial relations and economically relevant characteristics; second, identify the most appropriate transfer pricing method and the tested party; and third, determine the arm’s length result. This approach largely follows Chapter III of the OECD TPG.

There is no legal preference for domestic comparables over foreign comparables; practice depends on data availability. MIRA currently has access to a transfer pricing database and may use foreign comparables going forward. Some taxpayers have already used foreign comparables in practice. Regarding secret comparables, MIRA does use them in practice although it does not encourage their use; the law does not restrict secret comparables and confidentiality is provided under Tax Administration Act Section 15. No court cases on this matter have been reported.

Although the questionnaire response indicates that domestic law does not require or mandate use of arm’s length ranges or statistical measures, the Draft Transfer Pricing Arm’s Length Guide provides a specific rule when the dataset includes six or more entries: construct an arm’s length range from the 35th percentile to the 65th percentile. If the controlled transaction’s price falls within that range, it is deemed arm’s length; if it falls outside, the arm’s length price is taken as the median of the dataset; and if the median is not applicable, the arithmetic mean of all values in the dataset shall be used. Thus, administrative guidance sets out clear percentile rules despite the lack of explicit statutory requirement.

Comparability adjustments are not mandated by domestic legislation according to the questionnaire, however MIRA’s guide specifies that differences in economically relevant characteristics that could materially affect pricing should be identified and reasonably accurate adjustments determined to remove such differences. Practically, adjustments are expected when material differences exist and can be quantified.

Documentation and reporting

Maldives requires transfer pricing documentation consistent with OECD standards. The Transfer Pricing Regulation requires a Master File and Local File consistent with Annex I and Annex II to Chapter V of the OECD TPG. Country-by-Country Reporting (CbCR) obligations are established under Section 31-1 of the Tax Administration Act and the Country by Country Reporting Regulation (2021 –R9). The deadline for filing the CbCR is 12 months after the end of the reporting fiscal year of the MNE. The Transfer Pricing Regulation was issued pursuant to Section 68 (b) (4) and Section 76 (b) of the Income Tax Act. In the corporate income tax return, Schedule 4 is specifically for reporting international transactions with associates and must be submitted with the income tax return.

Practically, Master and Local Files must be prepared and finalized for the accounting period to which the transactions relate. There is no fixed annual deadline for early filing; documentation must be submitted to MIRA on request within 30 days of such a request. The profile does not specify the required language for documentation, nor does it list forms beyond Schedule 4. There are no transfer-pricing-specific penalties in domestic law; general sanctions under Tax Administration Act Sections 64 and 65 apply for non-compliance.

Exemptions and simplifications

Exemptions from transfer pricing documentation exist at both the taxpayer and transaction levels. Taxpayer-level exemptions are set out in Section 68(a) of the Income Tax Act and transaction-level exemptions in Section 7 of the Transfer Pricing Regulation. In particular, exemptions are granted for micro or small and medium-sized enterprises (SMEs) with annual revenue below MVR 20 million. Exempt income categories are listed in Income Tax Act Section 12. The jurisdiction does not have safe harbour rules or other simplification measures reported in the profile.

APAs and MAP; procedures and timing

Maldives has Advance Pricing Agreement procedures established by the Advance Pricing Regulation (2021-R42). The country provides for unilateral, bilateral and multilateral APAs. Mutual Agreement Procedures (MAP) are facilitated by Section 52-1 of the Tax Administration Act, and recent amendments to the Tax Administration Act and its regulations aim to strengthen dispute resolution procedures. The Advance Pricing Regulation became effective on 16 March 2021. MIRA is in the process of developing detailed policies and procedures for implementing APAs and dispute resolution mechanisms; the profile does not report specific timelines or practical caseload statistics for APA or MAP processing.

Penalties and other considerations

There are no transfer-pricing-specific penalties; general penalties under the Tax Administration Act Sections 64 and 65 apply. The profile indicates that Maldives does not allow or require year-end adjustments and does not apply secondary adjustments (both answered “No” in the questionnaire). Regarding profit attribution to permanent establishments, Maldives does not generally follow the Authorised OECD Approaches (AOA); however, the sole treaty in force with the United Arab Emirates follows the OECD approach and applies a FAR-based allocation. Domestically, Section 24 of the Income Tax Act limits head office expenses to up to 3% of total income generated, which reflects an administrative limitation on head office cost allocations.

Financial transactions are subject to specific guidance in the Transfer Pricing Regulation and the Transfer Pricing Arm’s Length Guide. Additional domestic rules include Income Tax Act Section 22, which caps interest on loans from non-approved bodies at 6%, and Section 71 which contains thin capitalization provisions limiting interest deductions to 30% of tax-EBITDA.

Conclusion

Maldives’ transfer pricing regime aligns administratively with the OECD TPG and combines statutory provisions in the Income Tax Act with detailed regulations and administrative guides issued by MIRA. The jurisdiction requires Master File, Local File and CbCR reporting consistent with OECD Annexes, provides for APAs and MAPs, and establishes exemptions for small taxpayers (annual revenue under MVR 20 million). Administrative guidance fills several gaps left by the legislation, notably on range construction and the application of the “most appropriate method.” Where domestic guidance is not provided in the profile, the OECD TPG are the operational reference.

References

For consolidated country transfer pricing profiles, see https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html