OECD Transfer pricing country profile: Malta

At a glance

Malta’s transfer pricing (‘TP’) framework is closely aligned with the OECD Transfer Pricing Guidelines (‘OECD TPG’). For intangibles, development, enhancement, maintenance, protection, and exploitation (‘DEMPE’) functions and real control over risk determine outcomes, so governance structures and personnel must reflect the returns. Financial transactions are priced in accordance with OECD TPG Chapter X; however, deductibility remains subject to the Anti-Tax Avoidance Directive (‘ATAD’) limitations (30% EBITDA or EUR 3 million).

Accordingly, maintain robust documentation addressing both transfer pricing and domestic deductibility requirements. Documentation including Master File and Local File should be contemporaneous, audit-ready, and supported by transparent benchmarking and interquartile range analysis. For permanent establishments (‘PEs’), pre-2010 Article 7 of the OECD Model Tax Convention applies. While the Authorised OECD Approach (‘AOA’) may inform practice, the treaty text prevails. For risk-intensive models, consider advance pricing agreements (‘APA’) and mutual agreement procedures (‘MAP’), including bilateral APAs and EU dispute resolution mechanisms, to enhance certainty and mitigate double taxation.

In detail

Arm’s length principle and TP methods

Malta’s Transfer Pricing Rules (‘Rules’), in force since 1 January 2024, embed the arm’s length principle and point directly to the OECD TPG through the binding Guidelines of the Malta Tax and Customs Administration (‘MTCA’). In practice, this means Malta is closely aligned with the OECD framework. Where the Rules don’t refer explicitly, the OECD TPG are your first port of call to interpret the gap and support your position.

When it comes to methods, Malta follows the OECD TPG’s Chapter II toolkit and the “most appropriate method” standard. There is no domestic hierarchy and no commodity-specific rulebook. Your choice should be led by comparability quality and the reliability of any adjustments, and you should be ready to explain why alternatives were less reliable in the case at hand.

Comparability

Malta does not prioritise domestic over foreign comparables. International comparables are acceptable where economic circumstances are comparable. The arm’s length range applies, and working capital or asset intensity adjustments should be made as appropriate. Geographic market differences should be documented comprehensively. The use of “secret comparables” is not permitted; transparency in the selection and screening process is required.
Intangibles, services, and financial transactions

• Intangibles: Malta applies OECD TPG Chapter VI, emphasising DEMPE functions and real control over risk. Substance in governance, personnel, and decision-making must be demonstrable in relation to intangible-related returns.
  Intra-group services: For low-value-adding services (‘LVAS’), Malta accepts the OECD simplified approach. Maintain a clear service catalogue, defensible cost pool, and consistent mark-up. Clarity and traceability are essential for audit readiness.
  Financial transactions: Malta applies OECD TPG Chapter X for pricing intragroup funding. In addition to arm’s length pricing (credit rating, realistic alternatives, terms, collateral), compliance with ATAD interest limitation (30% EBITDA or EUR 3 million) and hybrid mismatch rules is required. Documentation should address both OECD-aligned pricing and domestic deductibility.

Documentation and compliance

Master File and Local File: While not required to be filed routinely, Master File and Local File documentation must be contemporaneous and provided promptly upon request by the MTCA. Content requirements align with OECD TPG Chapter V. Once in scope, no exemptions apply.

Year-end and corresponding adjustments: Bake contractual levers for compensating (year-end) adjustments into your intercompany agreements, and check VAT and withholding effects before posting downward corrections. If a counterparty jurisdiction makes a primary adjustment or applies secondary adjustments, MAP remains a key tool. Malta also allows downward corresponding adjustments through domestic self-assessment mechanisms in appropriate cases.

Penalties

There are no TP-specific penalties in Malta; the general penalty regime applies. In the absence of broad safe harbours (other than for LVAS), effective risk management relies on robust benchmarking and the use of interquartile ranges, supported by clear documentation of your search methodology and screening criteria.

Dispute prevention and resolution

APAs and MAP: Malta now offers a formal transfer pricing APA programme, including unilateral, bilateral, and multilateral options. Given Malta’s treaty network incorporates MAP provisions, the EU Arbitration Convention, and the EU Dispute Resolution framework, entities with high-risk structures such as financing hubs or principal models should consider bilateral APAs to achieve prospective certainty and mitigate double taxation risks.

Permanent establishments and Article 7

Treaty landscape: Within Malta’s treaty network, pre-2010 Article 7 of the OECD Model Tax Convention generally applies, with only a limited number of treaties adopting the post-2010 wording.

AOA policy: Malta is receptive to the AOA in practice; however, the treaty text is determinative. When applying AOA concepts such as free capital attribution or recognition of internal dealings ensure these do not conflict with the relevant pre-2010 Article 7 language. For Maltese PEs abroad, and foreign PEs in Malta, attribution should be based on the specific treaty in force, using AOA principles as an interpretive aid where appropriate.

Key takeaways: What to do now

1. Review and align policies with OECD and MTCA requirements (including methods, DEMPE functions, and financial transactions); and
2. Strengthen documentation: ensure Master File and Local File are ready on request, maintain a comprehensive LVAS package, and prepare financing files (including credit rating analysis and interest limitation calculations); and
3. Consider APAs or MAP for cross-border issues and for situations involving pre-2010 Article 7 treaty provisions.