Malta – Transfer Pricing (2025)

Legal framework and scope

The arm’s length principle is referenced in Maltese domestic law across several provisions. Specifically, Article 5(6) of the Income Tax Management Act (Cap 372 of the Laws of Malta), Articles 2, 12(1)(u)(2) and 51A of the Income Tax Act (Cap 123 of the Laws of Malta), and Rule 7(1)(c) of the Patent Box Regime (Deduction) Rules refer to the arm’s length concept. However, Malta does not currently possess a single, comprehensive domestic transfer pricing law that details methods, procedures and documentation for all TP matters. As a result, many technical and procedural aspects rely on reference to the OECD Transfer Pricing Guidelines (TPG). The domestic framework does not enshrine a full catalogue of TP methods, a single statutory definition of related parties for TP purposes, or specific TP return forms attached to the general tax return.

Arm’s length principle and the role of the OECD Guidelines

When Malta’s domestic law lacks specific TP provisions, the tax administration refers to the OECD Transfer Pricing Guidelines. Those Guidelines play an interpretive and technical guidance role, but they are not legally binding under Maltese law. Thus, taxpayers and tax authorities typically apply the OECD TPG as the authoritative source for TP practice while acknowledging their non-binding nature.

Definition of related parties

There is no single statutory definition of “related parties” for transfer pricing purposes in Malta. Although domestic legislation contains various definitions of “related parties” in several contexts — mainly anti- avoidance provisions and other tax rules — there is no dedicated TP definition except where the concept is derived from Article 9 or equivalent language in Malta’s double tax treaties. In specific contexts the law does define a “related person”: for instance, Article 26(h) of the Income Tax Act (Cap 123 of the Laws of Malta) defines a related person for the purpose of denying deductions for interest, discount or premium paid to a non-resident where there is direct or indirect control or beneficial ownership exceeding 10%, or where one person directly or indirectly owns more than 10% of the ordinary share capital or voting rights of the other.

Methods and rules for application

Maltese domestic law does not prescribe transfer pricing methods in statutory terms. There is no legal hierarchy of methods codified in local law; instead, the jurisdiction relies on the OECD TPG for guidance on acceptable methods (CUP, Resale Price, Cost Plus, TNMM, Profit Split and others as appropriate). The selection of the most appropriate method therefore follows the criteria set out in the OECD TPG — assessing the nature of the transactions, availability of reliable information and the capacity to achieve comparability — rather than a domestically mandated ordering of methods.

Comparability and ranges

Malta largely follows the comparability analysis set out in Chapter III of the OECD TPG. There is no domestic preference for using local comparables over foreign comparables, the tax administration does not use secret comparables, and the legislation does not expressly mandate the use of an arm’s length range or a specific statistical measure to determine arm’s length remuneration. Neither does domestic law require comparability adjustments in a prescriptive manner; in practice, adjustments would be considered in line with OECD guidance.

Documentation and reporting (Master, Local, CbC, thresholds, language, timing, forms)

Documentary obligations in Malta are primarily focused on Country-by-Country Reporting. The Cooperation with Other Jurisdictions on Tax Matters (S.L. 123.127) requires Maltese tax resident ultimate parent entities (UPEs) of multinational enterprise (MNE) groups and certain constituent entities (CEs) appointed as surrogate parent entities (SPEs) to file a Country-by-Country Report (CbCR) with the Commissioner for Revenue (CFR) for reporting fiscal years starting from 1 January 2016. A secondary mechanism can require a Maltese resident CE that is not the UPE to file the CbCR if specified conditions are met; this secondary mechanism applies from periods beginning on or after 1 January 2017 unless the CE has been appointed as the SPE. The CbCR must be submitted by the Maltese reporting UPE, SPE or CE within 12 months from the last day of the MNE group’s fiscal year. The CFR will automatically exchange CbCR information with jurisdictions in which one or more constituent entities of the MNE group are tax resident or in which a permanent establishment is created, at prescribed intervals. The profile indicates that the Master File and Local File consistent with Annexes I and II to Chapter V of the OECD TPG are not explicitly required under domestic law in the material summarised; likewise, there are no specific TP return forms indicated in the profile. The profile does not provide detailed guidance on language, precise filing forms or additional format requirements; therefore, no specific domestic guidance on language or form structure is provided in this country profile.

Safe harbours / exemptions / materiality

The country profile indicates that Malta does not have rules on safe harbours for particular industries, taxpayer types or transaction types, nor does it list other simplification measures in the information provided. No sectoral or transaction-specific safe harbour provisions are included in the profile.

APAs and MAP; procedures and timing

While Malta does not maintain a formal APA programme, APAs can be filed in Malta and requests may include rollback provisions. Malta has incorporated the Mutual Agreement Procedure (MAP) article into its tax treaties, adopted the EU Arbitration Convention and transposed the EU Dispute Resolution Mechanism Directive into domestic law. The Commissioner for Revenue has published MAP guidance on its website. The profile does not provide detailed procedural timelines for APA processing or average MAP resolution times.

Penalties and other considerations (secondary adjustments, re-characterisation, year-end adjustments, PEs)

Penalties are envisaged where Maltese reporting UPEs, SPEs or CEs fail to comply with data collection, retention or reporting obligations established under the EU Administrative Cooperation Directive and the Cooperation with Other Jurisdictions on Tax Matters Regulations (including amendments). Article 52 of the Income Tax Management Act contains general penalties applicable in tax matters. The profile confirms that Malta allows year-end adjustments and does apply secondary adjustments. Regarding profit attribution to permanent establishments (PEs), Malta follows the Authorized OECD Approach (AOA) in 80 out of 81 of its double tax agreements (including signed but not yet in-force treaties). For treaties that do not reflect the modern version of Article 7 (OECD MTC 2010 and later), Malta refers to the OECD Commentary for interpretation. One treaty uses a different approach.

Other legislative or administrative aspects relevant to TP

Although Malta does not have specific TP rules for financial transactions or cost contribution arrangements set out in domestic law according to the profile, other tax rules are relevant. The European Union Anti-Tax Avoidance Directives Implementation Regulations address interest limitation and hybrid mismatch rules. With effect from 1 January 2019 an interest limitation applies that restricts the deduction of net borrowing costs to 30% of EBITDA or EUR 3 million, whichever is higher. From 1 January 2020, payments under hybrid financial instruments that result in a deduction without inclusion will lead Malta to deny the deduction where Malta is the payer jurisdiction; conversely, where Malta is the payee jurisdiction the payment will be included in Malta income if the deduction is not denied in the payer jurisdiction.

Conclusion

Malta recognises the arm’s length principle in domestic provisions but lacks a fully developed, standalone domestic transfer pricing regime. In practice, taxpayers and the tax administration rely heavily on the OECD Transfer Pricing Guidelines for method selection, comparability analysis and documentation practice. The primary explicit domestic documentation obligation reflected in the profile is CbCR filing for Maltese UPEs, SPEs and certain CEs, with automatic exchange of such reports. Malta allows APAs (including rollback), utilises MAP and has implemented EU measures on interest limitation and hybrid mismatches.

References

Further information and country profiles are available on the OECD transfer pricing country profiles page: https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html