Transfer Pricing in the Maldives

The legal framework

Maldivian transfer pricing rests on a short statutory core carrying a much longer body of administrative guidance. Section 67 of the Income Tax Act (Law No. 25/2019) does the operative work: where associates transact on terms that are not arm's length, and arm's length terms would have produced higher income, a smaller deduction, a smaller loss or a smaller amount of tax credits for one of them, taxable income must be computed as though arm's length terms applied. Section 79(r) defines those terms by reference to what non-associates might reasonably have agreed in comparable circumstances, and section 67(d) deems a permanent establishment and its head office to be separate persons. MIRA's remedial powers under section 67(c) are deliberately narrow and four in number: increase income, reduce the deduction, reduce the loss, or reduce the tax credit allowed. Nothing beyond that - no deemed dividend, no secondary adjustment, no domestic corresponding-adjustment provision.

The detail sits in the Transfer Pricing Regulation 2020/R-43, issued on 10 June 2020 under sections 68(b)(4) and 76(b) and still unamended. Two MIRA guides carry most of the interpretive load: "Application of the arm's length principle" (I842) and the documentation guidelines (I843). Both are final published documents - I842 last updated on 4 December 2025, I843 published on 23 February 2021 - each carrying MIRA's standard statement that taxpayers may rely on them as its interpretation of the law. The "draft" description in the December 2021 OECD country profile refers to the superseded consultation versions and should not be repeated. What does matter is where the numbers live: several of the most consequential figures in Maldivian practice - the range, the tolerance, the refresh cycle - sit in guidance rather than in the Regulation, so their weight is administrative rather than statutory. The OECD Guidelines are not incorporated into domestic law; MIRA says its guidance is largely based on the 2017 edition but departs where the Act, its own procedures or local conditions require. The only place the Guidelines bind directly is the country-by-country template, imported by reference.

Methods, comparables and benchmarking

Section 8(e) of the Regulation lists all five OECD methods, plus an "other method" approved by MIRA that tests the price against what an independent party would pay in comparable circumstances. Prior approval is mandatory, and MIRA's guidance warns that an other method should not displace a recognised one that is more appropriate. Selection is by most appropriate method with no hierarchy, judged on the functional analysis, the degree of actual comparability, the completeness of independent data, the reliability of assumptions and sensitivity to error - though where a traditional transactional method and a profit method are equally reliable, the traditional method wins.

The benchmarking mechanics are where Maldivian practice departs most sharply from the international norm, and where imported group studies most often fail. The arm's length range is not the interquartile range. Where CUP, resale price, cost plus or TNMM is used and the set holds six or more observations, the range runs from the 35th to the 65th percentile of the values ranked ascending, the position found by multiplying the count by 0.35 or 0.65 and rounding up. A result outside that narrow band is adjusted to the median, or to the arithmetic mean where no median applies. The interquartile range appears in MIRA's guidance only as an optional tool for narrowing a defective set. Working against that severity is a 3% tolerance at paragraph 91 of I842: a variance of up to 3% of the controlled price is deemed arm's length, but once it exceeds 3% the entire difference is adjusted, not the excess.

MIRA also wants local comparables first, on market-comparability grounds, and permits regional sets only where a reliable local search fails and material differences can be adjusted for. In a jurisdiction with almost no database-covered independents, regional Asian sets are the practical answer - but the file must show the failed local search rather than start from the region. Any reliable commercial database is accepted, internal comparables are considered first, and the tested party is the party with the less complex functional analysis, identified in the local file with the basis for its selection. Where multiple years are used, MIRA prescribes the weighting: quantum of sales for resale price, quantum of costs for cost plus, and sales, costs or assets according to the profit level indicator chosen for TNMM. Financing carries two hard statutory overlays alongside the arm's length test: interest to a lender that is not an approved bank or financial institution is deductible only up to 6% a year, and total interest is capped at 30% of tax-EBITDA. There are no rules at all on intangibles, hard-to-value intangibles, cost contribution arrangements or commodities.

Documentation: what MIRA expects

Section 68 of the Income Tax Act obliges every taxpayer liable to income tax to prepare and maintain documentation for associate transactions, and Schedule 2 of the Regulation splits it into a master file and a local file broadly tracking the OECD annexes. There is no positive monetary threshold that brings a taxpayer in: everyone with associate dealings is in scope, and the exemptions then take taxpayers and transactions out. The local file is demanding in one respect that often catches groups out - it requires a multi-year comparability analysis, the tested party and method with the basis for both, the comparables and their financial data, the computations, and copies of in-force APAs and rulings to which MIRA is not a party.

The timing rules are simple but unforgiving. Documentation must be contemporaneous - prepared when the policy is developed and revisited on material change - and finalised by the income tax return due date, which is 30 June following the tax year for a calendar-year taxpayer. It must be in English or Dhivehi, show its completion date and identify the period. Nothing is filed annually; MIRA calls it in, and the guidance allows 30 days from request. A file may be refreshed once every three years under the "qualifying past TPD" rule, but only where the transaction type and counterparty are unchanged and the past file still accurately describes the year, and reliance requires a declaration plus a copy of the earlier file. Retain everything for five years.

Exemptions operate at two levels. Micro, small and medium enterprises under Law No. 6/2013 - broadly, revenue below MVR 20 million - are exempt where they also qualified in the two preceding periods. At transaction level, section 7 carves out most equal-rate domestic dealings, domestic loans from non-lending lenders, loans up to MVR 15 million priced at MIRA's published indicative margin (+1% over the MMA policy rate for 2020 to 2025), routine support services from Schedule 1 charged at a 5% cost mark-up, and all remaining associate transactions aggregating no more than MVR 5 million. Return disclosure is a separate and much wider net: Schedule 4 of the MIRA 604 is triggered by any one of seven tests - a non-resident associate, a permanent establishment in or outside the Maldives, foreign incorporation, more than 50% ownership by a non-Maldivian individual or a foreign-incorporated entity, or total annual income of MVR 20 million or more coupled with international transactions - so a small company with a single overseas parent files it whatever its size. Country-by-country reporting then applies at the EUR 750 million threshold, with annual notification due by the last day of the reporting fiscal year.

Audits, penalties and the enforcement climate

There is no transfer-pricing-specific penalty. Documentation and disclosure failures fall into the general offences in the Tax Administration Act: section 65 carries 0.5% of the tax payable for the period plus up to MVR 50 for each day of delay, with house arrest of one to six months; section 64 raises this to MVR 100 a day and three months to a year where the failure is knowing and intended to evade tax. The evasion route is buttressed by a statutory presumption that incorrect or omitted information was included or omitted to evade tax unless the taxpayer proves otherwise, which places unusual weight on contemporaneous working papers. Unpaid tax accrues 0.05% a day. Critically, there is no documentation-based penalty protection - a good file does not buy a discount, it buys a defence on the merits.

The audit window is short. MIRA must issue an audit notice within two years of the return due date, or the filing date where the return was late, extending to three years for suspected fraud, and open-ended where no return was filed. An assessment increasing declared tax must follow within two years of that notice, and the Tribunal may extend that by up to three further years. Where the audit does come, expect it in tourism. MIRA's Compliance Improvement Plan 2025-2026 puts resorts and multinationals at the top of its accurate-reporting risks, notes that resort tax contributions do not track industry growth, and names improper transfer pricing record-keeping and Schedule 4 non-disclosure as specific failings; excessive interest claims are singled out for wholesale and retail trade and for transport service providers. Taxpayers do have a meaningful protection: in the September 2023 High Court judgments in the CDLHT Oceanic and Sanctuary Sands appeals, the burden of establishing that a transaction is not arm's length, through comparability analysis, was confirmed to rest with MIRA.

Dispute resolution and advance certainty

Objections must be lodged with MIRA within 30 days of notification, with reasons in detail. MIRA has 120 days to decide, and its failure to do so means the decision objected to is conclusively treated as incorrect - a rare taxpayer-favourable default worth diarising. Appeal to the Tax Appeal Tribunal follows within 60 days, but requires payment of at least 25% of the disputed tax, exclusive of fines and interest, before the appeal proceeds. The Tribunal must decide within 180 days, extendable by 90, with onward appeals to the High Court and Supreme Court.

Advance certainty is available and, given the narrowness of the arm's length range, is more attractive here than in many jurisdictions. The APA Regulation 2021/R-42 supports unilateral, bilateral and multilateral agreements for up to five years, and an APA overrides other special rules for associate transactions. The process begins with a mandatory pre-filing consultation and moves to a formal request; note that the regulation specifies forms MIRA 923 and 924 while MIRA's web page cites MIRA 921, which is the MAP form - follow the regulation. Roll-back to a closed year is possible under section 16, fees are discretionary and non-refundable, and an annual compliance report is due with the return. Be alert to the difference between revocation, which for wilful misrepresentation is retroactive to the first covered year, and cancellation, whose effective date is fixed by reference to the circumstances.

MAP rests on section 52-1 of the Tax Administration Act and Chapter 13 of the Tax Administration Regulation, using form MIRA 921, and expressly reaches transfer pricing, double taxation, residence and PE attribution. Two constraints bite hard. Access closes once the Tribunal or a Maldives court has given final judgment, so litigation and MAP must be sequenced rather than run in parallel to conclusion. And because there is no domestic corresponding-adjustment provision, treaty MAP is the only route to relieving a foreign primary adjustment - against a network of just two treaties in force, with the UAE and Bangladesh, and two more signed but not yet in force, with Malaysia and Hong Kong.

Pillar Two and what changes in 2026

The Maldives has not enacted Pillar Two. There is no GloBE instrument, income inclusion rule, undertaxed profits rule or qualified domestic minimum top-up tax in the Income Tax Act, the Tax Administration Act, the Tax Administration Regulation or anywhere on MIRA's legislation register, and no guidance or filing form has been published. With a 0% band up to MVR 500,000 of taxable income - divided among group members - and 15% above it, banks apart at 25%, Maldivian operations of in-scope groups can compute a GloBE effective rate below the floor and expose the group to top-up tax collected elsewhere. No QDMTT has been announced, so treat the negative finding as current-as-published and re-verify at each budget cycle.

On Amount B, the Maldives sits on the OECD's June 2024 covered-jurisdiction list for the 2025 to 2029 political commitment, meaning other Inclusive Framework members would respect an Amount B outcome it applied. It has not applied one: nothing in the Regulation or MIRA's guidance elects into the simplified and streamlined approach, so baseline marketing and distribution transactions still require full most-appropriate-method analysis against the 35th to 65th percentile range.

Otherwise the framework has been stable. The one substantive change was the third CbCR amendment (2024/R-10), confining the secondary local filing obligation to fiscal years ending in 2024 and later. Tax Ruling TR-2025/A19 of February 2025 now governs redetermination of tax after a Tribunal or court decision, including how time limits are suspended - directly relevant if the pending Supreme Court appeals reopen related-party interest assessments. A Bill amending the Tax Administration Act has been before the Majlis since August 2025 and could move penalties or assessment windows.

How practitioners should respond

Three things should drive the Maldivian workplan. First, re-run the benchmarking. A group study built on the interquartile range is not compliant here; the 35th to 65th percentile band is roughly half as wide, and a result outside it is pushed to the median rather than the nearer edge. Test every existing set against the Maldivian range before MIRA does, and build the 3% tolerance into the sensitivity analysis. Second, document the comparables search itself, not just its output. MIRA's local-first preference means a regional set is defensible only with evidence that a reliable local search failed, the tested party choice must be reasoned on the face of the local file, and any multi-year averaging must use MIRA's prescribed weighting.

Third, treat the calendar as the compliance risk. The file must be finalised by 30 June, produced within 30 days of a request, and refreshed at least every three years - and if reliance is placed on a qualifying past file, the declaration and the copy must both be there, because the declaration alone is not documentation. Reconcile Schedule 4 of the MIRA 604 to the local file before filing, and check the trigger list rather than the revenue line: any non-resident associate or majority foreign shareholder pulls the schedule in regardless of size. MIRA has told the market, in its own compliance plan, that Schedule 4 non-disclosure is on its list.

For financing, run the arm's length analysis and the two statutory limits as separate tests, because a rate that is arm's length can still be cut back by the 6% cap or the 30% tax-EBITDA restriction. Where a loan fits under MVR 15 million, the indicative margin election removes both pricing and documentation risk cheaply - but confirm the current year's published margin, which had not been updated for 2026 at the last available check. Finally, for groups with recurring, material Maldivian flows, price out an APA. Five years of certainty against a narrow statistical range, with no domestic corresponding-adjustment relief and a treaty network of two, is a strong trade.