Reflections from the Maldives Tax Forum 2025

When the Maldives Tax Forum 2025 turned to the subject of transfer pricing, it stepped directly into one of the world’s most technical and fast-moving areas of taxation. The discussion did not merely outline the rules; it unpacked what those rules mean for a small island economy like ours, where capacity constraints, limited data, and evolving business structures intersect.

The session brought together a diverse panel representing all key corners of the tax landscape. It included senior professionals from the advisory side who engage directly with businesses on transfer pricing planning and compliance, experienced officials from the Tax Authority’s International Tax Audit Division who see first-hand the challenges during audits, and practitioners involved in tax policy and legislative development. The combination of advisory, audit, and policy perspectives allowed the discussion to explore transfer pricing not just as a technical discipline, but as a practical and institutional challenge for the Maldivian economy.

The keynote was delivered by Colin Hutchins, Deputy Secretary of Revenue at the Nauru Revenue Office, who has experience working closely with MIRA on transfer pricing audits.

1. Why Transfer Pricing Matters in the Maldivian Context

Transfer pricing is universally acknowledged as one of the most complex areas of taxation. For the Maldives, the difficulty is not simply the technicality of the rules, it is the mismatch between those rules and the realities of a developing, service-driven economy.

Across the panel, a shared issue emerged:

“Businesses tend to treat transfer pricing as an afterthought.”

Documentation is often prepared only after an audit commences, leaving companies exposed to penalties, adjustments, and long drawn disputes. Several underlying causes were discussed:

• Lack of specialised staff capable of preparing Master Files, Local Files, and benchmarking analyses.
• Dependence on foreign affiliates, who may not fully understand Maldivian market conditions.
• Absence of case law, leading to uncertainty, especially around the characterisation of intercompany financing as debt or equity.
• Limited internal data, with many entities lacking the analytical groundwork required for arm’s length assessments.

In short, both taxpayers and the tax authority face significant constraints, and the complexity of the rules only amplifies those gaps.

2. Documentation: A Burdensome Exercise Without Local Data

The most pressing challenge discussed was the cost and practicality of preparing compliant documents.

Transfer pricing documentation is tedious, highly technical, and expensive. The Maldives’ structural limitations make it even harder:

• Financial data is not publicly available, making local comparables nearly impossible to obtain.
• Commercial databases are costly and often do not reflect local economic conditions.
• In many cases, documentation is missing key elements such as functional analyses, comparables, or economic adjustments.

The panel noted practical alternatives that are often overlooked:

• OECD guidance allows the use of internal comparables within the same entity or group, with adjustments.
• For intercompany loans, MMA’s published financial data can be used to set indicative arm’s length rates before turning to commercial databases.
• When relying on foreign comparables, geographic adjustments become essential where market conditions differ significantly from neighbouring jurisdictions.

Ultimately, benchmarking in the Maldives is often an exercise in “closest reasonable approximation” rather than perfect comparability, something both the Tax Authority and taxpayers must navigate.

3. Advance Pricing Agreements: A Useful Tool Introduced Too Late?

A recurring theme was the limited uptake of Advance Pricing Agreements (APAs), despite their introduction into local regulations.

The panel’s message was candid:

• APAs were introduced after major disputes had already escalated into litigation.
• For many businesses, the APA mechanism feels reactive rather than preventive.
• There is limited understanding of the benefits, certainty, reduced disputes, and upfront clarity.

There was broad agreement that if APAs had been introduced earlier, they might have prevented years of disputes now sitting before the courts and tribunals.

4. Safe Harbours: A Pragmatic Solution for a Developing Economy

The most forward-looking segment of the discussion centred on safe harbour rules.

For the Maldives, safe harbours could be transformative:

• They reduce compliance costs by eliminating the need for extensive benchmarking.
• They minimise disputes, since margins are pre-agreed.
• They accommodate the capacity limitations of both taxpayers and the tax authority.

The panel noted that even the OECD is shifting towards simplification through Pillar One – Amount B, which essentially acts as a safe harbour for baseline marketing and distribution activities.

Adopting similar measures locally could:

• Ease compliance burdens,
• Bring predictability to the system, and
• Reduce the volume of future transfer pricing disputes.

As advisors highlighted, businesses generally want to comply; the challenge is the complexity and cost of doing so.

5. The Importance of Integrating Transfer Pricing from the Outset

Another key point was the need for advisors, lawyers, and accountants, the first point of contact for investors, to embed transfer pricing considerations early in the tax planning process. Transfer pricing cannot be retrofitted. Once a position is taken, it is difficult to justify or benchmark after the fact.

While the Tax Authority has adopted a facilitative approach so far, the panel noted that with upcoming legislative amendments, compliance expectations will rise. Businesses can no longer afford to treat transfer pricing as secondary.

6. Data Availability and Transparency: A Foundational Challenge

One of the structural issues highlighted was the lack of access to financial data. While the authorities collect annual accounts and other data, these are not publicly accessible.

This lack of transparency:

• Hinders benchmarking.
• Forces reliance on foreign comparables.
• Increases compliance costs.
• Weakens economic adjustments.

The panel acknowledged that strengthening data availability could significantly improve the quality of transfer pricing analysis and reduce the burden on both sides of the compliance divide.

Final Reflections

Transfer pricing is no longer a technical footnote; it is a central policy tool that shapes how value is taxed in globalised economies. For the Maldives, the challenge lies not in the ambition of the rules but in adapting them to local constraints.

The panel’s reflections pointed to a clear direction:

• The rules are complex, but simplification tools like safe harbours exist.
• Expertise is limited, but capacity is growing.
• Data is scarce, but not all solutions require commercial databases.
• APAs are valuable, but timing matters.
• Compliance is demanding, but early planning reduces risk.

In essence, the Maldives must build a practical and proportionate transfer pricing framework, one that reflects our economic scale, administrative capacity, and business realities.