OECD Standards and Malta: How the Island Implements International Requirements – International Compliance

What are OECD Standards and Why Does Malta Care?

The OECD is like the class teacher of the global economy—setting the rules and keeping a close eye on everyone. Founded in 1961, it now has 38 member states making up about 80% of the world’s economy. Malta’s been a member since 2004, right when the island joined the EU.

The Most Important OECD Areas for Malta

If you’re wondering what the OECD actually does: these are the main focus areas that are especially relevant for Malta.

• Tax Policy and Transparency: Automatic exchange of information between countries so no one can secretly hide millions in low-tax jurisdictions anymore
• Financial Market Regulation: Standards for banks, insurance companies, and investment funds—critical for Malta’s financial sector
• Anti-BEPS Measures: BEPS means Base Erosion and Profit Shifting—in plain English: reducing and relocating profits. The OECD wants to prevent companies from artificially shifting their profits to low-tax countries

Why Malta Is Under The Spotlight

Over the past 20 years, Malta has built a reputation as the EU Singapore—a small but sophisticated financial centre with attractive tax rules. This draws money and jobs, but also suspicion. The OECD keeps asking: Is this still healthy tax competition, or already harmful tax avoidance?

What does this mean for you? If you’re planning a company in Malta or already own one, you should be aware of the OECD standards. They determine which tax advantages remain legal, and which are considered aggressive tax planning.

Malta OECD Compliance: The Current Status 2025

Let’s be honest: Malta isn’t exactly the teacher’s pet with the OECD. The island has fought for years to avoid landing on the grey or black list. Currently, Malta is substantially compliant—which is like a “satisfactory” on a report card. Not bad, but there’s definitely room for improvement.

Malta-OECD Timeline of Recent Years

What Malta Is Doing Right

Before I get too critical: Malta has made significant changes in recent years. The Malta Financial Services Authority (MFSA) has been seriously upgraded—more staff, stricter controls, modern IT systems. Since 2021, companies must prove they have genuine substance in Malta—not just a mailbox address, but actual business operations.

• Automatic Exchange of Information: Since 2017, Malta has been exchanging tax data with over 100 countries
• Country-by-Country Reporting: Large corporations must report their profits and taxes for each country separately
• Anti-Avoidance Regulations: New laws are in force to combat artificial tax structures
• Enhanced Due Diligence: Banks and financial service providers must scrutinize their clients much more closely

Where Malta Still Needs Improvement

The OECD mainly points to three issues. First: Although controls have been tightened, enforcement is still lacking. Second: When it comes to complex international structures, Maltese authorities often don’t look closely enough. Third: Malta’s infamous bureaucracy hasn’t spared OECD compliance—processes take longer than they should.

What does this mean for you? If you’re considering starting a company in Malta, be prepared for significantly more paperwork and higher compliance costs than five years ago. The days of easy tax optimization are over.

BEPS and Tax Transparency: What Changes for You

BEPS might sound like something from a comic book, but it’s actually one of today’s most important tax issues. The OECD BEPS project (Base Erosion and Profit Shifting) aims to prevent multinational corporations from artificially shifting their profits to low-tax countries. This is vital for Malta—a significant portion of the economy depends on international companies setting up holding structures here.

The 15 BEPS Action Points and Malta

The OECD developed 15 action points against tax avoidance. I’ll spare you the whole list, but for Malta, these are the most relevant:

• Action 5 – Harmful Tax Practices: Malta’s tax regime is regularly reviewed for harmful tax practices
• Action 6 – Treaty Shopping: Abuse of double tax treaties is being made more difficult
• Action 13 – Country-by-Country Reporting: Large corporations must disclose their activities by country
• Action 15 – Multilateral Instrument: Speedier adaptation of tax treaties

Pillar One and Pillar Two: The New Global Tax Order

In 2021, the OECD moved up a gear with Pillar One and Pillar Two. Pillar One regulates where big tech companies have to pay tax—not just where their HQ is. Pillar Two introduces a global minimum tax of 15%.

Since 2024, companies with revenues above €750 million must pay at least 15% tax—no matter where they’re based. Malta has implemented this rule, even though theoretically it could undercut Malta’s attractive tax system.

Practical Impact: What Actually Changes?

I see it daily in conversations with entrepreneurs: The days when you could simply set up a holding in Malta and pay practically no tax are over. Today you need:

1. Real Substance: Office, employees, genuine business operations in Malta
2. Economic Rationale: You must be able to explain why your company is based in Malta
3. Extensive Documentation: Every transaction must be properly documented
4. Professional Advice: Specialized tax professionals are now essential

Automatic Exchange of Information in Detail

Since 2017, Malta has been automatically exchanging tax data—which means: if you have a bank account in Malta, your home country will know about it. The OECD’s Common Reporting Standard (CRS) ensures over 100 countries exchange their financial data.

What does this mean for you? Forget the idea of a secret bank account in Malta. Transparency is here to stay. Plan your taxes legally and openly—anything else will get exposed sooner or later.

Financial Services Under OECD Oversight: The Reality

Malta’s financial sector is like a teenager after a growth spurt—grown quickly, but still finding its feet. Accounting for over 25% of GDP, it’s certainly systemically important. The OECD is watching closely to see if Malta does its homework.

The Numbers Speak for Themselves

The Maltese financial sector is impressive, albeit somewhat top-heavy:

OECD Standards in Practice: What Has Changed?

I notice it every time I’m at the bank: Due diligence has become much stricter. What used to be a formality now takes weeks. Banks ask about everything—source of funds, business model, beneficial owners, planned transactions.

• Know Your Customer (KYC): Banks have to know their clients inside out
• Anti-Money Laundering (AML): Suspicious transactions are automatically reported
• Source of Funds: Every euro needs to be traceable
• Beneficial Ownership: Who really stands behind the company?

The MFSA on Steroids

In recent years, the Malta Financial Services Authority (MFSA) has transformed radically. Once known as business-friendly, it is now far stricter. The budget has doubled, staff has been increased, and IT systems modernized.

In 2024, the MFSA initiated 127 enforcement proceedings—three times as many as in 2019. Fines have soared from an average of €50,000 to over €200,000.

Regulatory Challenges for Financial Services Providers

If you run or plan to set up a financial services company in Malta, be ready for much higher compliance costs. A mid-sized investment fund now spends about 15-20% of its budget on compliance—before the OECD clampdown it was 5-8%.

The biggest cost drivers:

1. Compliance Staff: Qualified compliance officers are scarce and expensive
2. IT Systems: Automated surveillance and reporting tools
3. External Consultants: Lawyers and advisers for regulatory matters
4. Audits: More frequent and thorough inspections

What does this mean for you? Malta remains attractive for financial services, but only for professional, well-capitalised players. The days of quick and cheap wins are over.

Malta vs. Other EU Countries: OECD Standards Compared

Malta is often compared with other small EU financial centres. Luxembourg, Ireland, Cyprus—all compete for international investors, all must comply with OECD standards. But how does Malta really stack up?

The Big EU Financial Centre Comparison

Why Luxembourg Outperforms

Luxembourg has one key advantage: decades of experience with international regulation. While Malta only joined the EU in 2004, Luxembourg has played in the Champions League of financial centres since the 1960s. You notice it in the professionalism of the regulators and in political stability.

Ireland’s Transformation After the Double Irish

Ireland had to abolish its famous Double Irish structure in 2020—a tax scheme that let corporates pay virtually no tax in Europe. Since then, Ireland has become much more OECD-compliant, but it’s still hugely attractive as a base for tech companies.

Malta’s Unique Position

Malta has one edge over its bigger rivals: flexibility. As a small country, Malta can adapt to new requirements faster. Malta’s parliament can pass new laws within months—it takes years in Germany or France.

• Language: English is an official language, making international business easier
• Time zone: Ideal for business between Europe, Africa, and Asia
• EU membership: Full access to the EU’s single market
• Size: Manageable regulation, personal contacts with authorities

The Darker Sides of the Competition

Not all EU financial centres are better off than Malta. Cyprus is still struggling to restore trust after the 2013 financial crisis. The Netherlands came under fire after the cum-ex scandal. Even Switzerland—not EU, but an important comparator—had to effectively do away with its bank secrecy.

What does this mean for you? Malta isn’t perfect, but it’s certainly competitive within the EU. The combination of EU benefits, English language, and flexible regulation keeps the island attractive despite OECD pressure.

Impact on Entrepreneurs and Investors

Let’s get down to business: What do all these OECD standards really mean for you if you want to operate in Malta? I’ve helped entrepreneurs with their Malta expansions for years and can tell you: it’s more complicated now, but still very doable.

The New Reality for Holding Structures

The classic Malta holding company isn’t dead, but it needs more care. In the past, a mailbox address and a local director were often enough. Today, real substance is required:

• Physical presence: An office or at least a co-working space
• Qualified staff: At least one employee in Malta
• Board meetings: Board meetings must take place in Malta
• Business decisions: Key decisions must be made in Malta

How Much Does OECD-Compliant Compliance Cost?

Costs have risen sharply. Here’s a realistic calculation for a Maltese holding with €5 million in revenue:

Sectors in Focus: Who Still Benefits?

Not all industries are equally affected. Some sectors actually benefit from stricter regulations, as it weeds out less reputable competitors:

1. Fintech: Malta promotes itself as Blockchain Island and benefits from clear rules
2. Gaming: The MGA (Malta Gaming Authority) is considered one of the strictest in the world
3. Fund management: UCITS and AIFs find a professional environment in Malta
4. Insurance: Captive insurance and re-insurance remain attractive

Pitfalls for New Entrepreneurs

I keep seeing the same mistakes. First: Entrepreneurs underestimate the substance requirements and create too little real presence. Second: They save in the wrong places and hire unqualified advisors. Third: They fail to realize that Malta is now a professional financial centre—and your approach needs to match.

Success Stories: Who’s Doing It Right

But there are also positive examples. In 2023, a German SME moved its EU headquarters to Malta—15 employees, a proper office, and local management. The result: a 5% tax rate thanks to the Maltese refund system, while being fully OECD-compliant.

A Swiss family office manages €200 million through Malta and—thanks to smart structuring—enjoys an effective 5% tax rate with full transparency to all tax authorities.

What does this mean for you? Malta still works, but only with a professional approach. Budget at least €50,000–100,000 in annual compliance costs and plan for real local activity.

Outlook: Maltas Journey Toward International Standards

I’m optimistic about Malta’s future—but not naive. The island faces the challenge of staying OECD-compliant and economically attractive at the same time. It’s a balancing act, but it’s possible.

The Maltese Government’s Roadmap

In 2024, Malta released a compliance roadmap through 2027. The key milestones:

• 2025: Full digitalisation of all government processes
• 2026: New anti-avoidance rules against aggressive tax planning
• 2027: Aim to achieve an OECD rating of fully compliant

Technological Innovation as a Compliance Lever

Malta is investing heavily in technology to help reduce compliance costs. The government plans to launch a Single Digital Gateway—a platform for handling all official processes. Blockchain-based identity verification is set to speed up due diligence procedures.

The EU Dimension: What’s in Store for Malta?

Malta is committed not just to the OECD but also to the EU. The European Commission is preparing further anti-avoidance directives Malta must implement, especially:

1. ATAD 3: New rules against shell companies
2. DAC 8: Extended transparency requirements
3. SAFE: EU-wide anti-money laundering standards

Malta’s Strategy: Quality Over Quantity

The days when Malta tried to attract as many companies as possible are over. Now the focus is on high-quality investment. Finance Minister Clyde Caruana is talking about rightsizing the economy—fewer, but better companies.

Office rents in Valletta and Sliema have shot up by 40%—a sign that companies are building a real presence.

Risks and Opportunities

Malta’s biggest risk is political pressure from larger EU countries. Germany and France are wary of small financial centres and could push for tougher rules at EU level. Malta’s main opportunity is its flexibility and English language—advantages that remain, even with stricter regulations.

My Forecast for the Next 5 Years

Malta will become more OECD-compliant, but will remain attractive. Compliance costs will continue to rise but will stabilize at a manageable level. Small, dubious providers will disappear—which is good news for everyone working professionally.

What does this mean for you? If you’re planning long-term in Malta, invest in professional structures from the start. The costs will pay off with better legal certainty and a stronger reputation.

Frequently Asked Questions About OECD Standards and Malta

Is Malta still tax-efficient after the OECD clampdown?

Yes, but only with real substance. Maltas refund system still enables effective tax rates of 5%, but you need real business activity on the ground, qualified staff, and professional advisors.

What are the minimum substance requirements in Malta?

You need a physical office, at least one qualified employee in Malta, regular board meetings held locally, and key business decisions must be made in Malta. The exact requirements depend on your sector.

What are the compliance costs for a Maltese company?

For a typical holding with €5 million in revenue, you should budget €50,000–100,000 per year for compliance. This includes office, staff, tax advice, audit, and ongoing compliance measures.

Is Malta on any blacklists?

No, Malta is currently not on any blacklist. The OECD rates Malta as substantially compliant, which means some improvements are still needed, but there are no fundamental issues.

Do I have to report my Maltese company to German authorities?

Yes, with automatic exchange of information, Germany will automatically learn about your Maltese company. You must also declare it in your German tax return and observe any controlled foreign company (CFC) rules.

How does Malta differ from other EU financial centres?

Malta offers a unique mix of EU membership, English as an official language, flexible regulation, and attractive tax rules. Compliance requirements are similar to Luxembourg or Ireland, but costs are often lower.

Can I run my Maltese business remotely?

No, not anymore. The new substance rules require a real on-the-ground presence. You need to be in Malta regularly, hold board meetings there, and make key business decisions on site.

Which industries are most affected by OECD rules?

Pure holding companies, IP holding structures, and businesses with minimal substance are most impacted. Fintech, gaming, and fund management may even benefit from stricter rules.

How long does it take to set up an OECD-compliant business in Malta?

The technical setup takes 2–4 weeks, but establishing genuine substance (office, staff, processes) takes 3–6 months. Expect about half a year before everything is fully OECD-compliant.

What happens if my Maltese company isn’t OECD-compliant?

Risks include back taxes, fines, or loss of license. In the worst case, foreign tax authorities may disregard Maltese tax relief and you could end up paying double tax.