Tax Audit Malta: Prepare Before the CFR Calls — or Respond With Confidence When They Do
The CFR is auditing more companies each year, and the transfer pricing rules effective January 2024 have widened the scope. Whether you have received an audit notification or want a compliance review before one arrives, our tax practitioners have handled 20+ years of CFR examinations — we know what they look for and how to protect your position.
- Qualified tax practitioners with 20+ years handling CFR audits
- Proactive compliance reviews that catch issues before the CFR does
- Transfer pricing documentation under S.L. 123.207 (effective 2024)
- Full audit representation — from initial notification through to resolution
Representing Malta businesses in CFR audits and compliance matters since 2004.
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Established
CFR Expertise
6/7
Refund System Expertise
Proven
Track Record
CPA
Warranted Practitioners
Your Contacts
Andrew Fenech
Business Development Manager
Adrian Pavia Dimech
Audit Principal
Tatiana Muscat
Audit Manager
Warranted by the Malta Accountancy Board
ACCA & MIA Certified Professionals
Corporate Member of FinanceMalta, MIT & IFSP
Fully GDPR & AMLD-Compliant
What a CFR Tax Audit Covers — and Why It Matters More Than You Think
A tax audit in Malta is a formal examination by the Commissioner for Revenue (CFR) of your tax returns, financial records and supporting documentation. The purpose is to verify that your company has complied with Malta’s tax laws — primarily the Income Tax Act (Cap. 123), the Income Tax Management Act (Cap. 372) and the VAT Act (Cap. 406).
The CFR has broad powers under Articles 13 and 14 of the ITMA. Article 13 allows the Commissioner to require any information needed for audit purposes. Article 14 grants powers of entry and search — meaning the CFR can physically inspect your premises and records.
Tax audits in Malta take several forms. Desk audits are conducted at the CFR’s offices based on submitted returns. Field audits happen at your business premises and involve physical inspection. Comprehensive audits cover multiple tax years and examine income tax, VAT and payroll obligations together. Specialised audits may focus on transfer pricing or specific compliance areas.
There is also a critical distinction between a CFR-initiated audit and a voluntary tax compliance review. The first is an enforcement action you must participate in. The second is a proactive service — an advisory review conducted by your accountants to identify and resolve issues before the CFR finds them. The cost difference between fixing a problem voluntarily and defending one under audit is significant.
The Red Flags That Put Your Company on the CFR’s Audit List
The CFR uses a risk-based selection approach. While random audits do happen, most are triggered by specific red flags in your filings or external data sources. Here are the most common triggers:
Inconsistent reporting. If your tax returns show discrepancies between income declarations and financial statements, or your reported income does not match what the CFR receives through CRS and FATCA data exchanges, you move up the priority list.
Large refund claims under the 6/7 system. Malta’s shareholder refund mechanism is a core feature of the corporate tax system, but large or frequent refund claims attract increased scrutiny. The CFR reviews whether tax payments, dividend distributions and shareholder eligibility all line up properly.
Significant or unusual transactions. High-value transactions without a clear commercial rationale, complex cross-border arrangements, or transaction patterns inconsistent with your stated business activities are all red flags.
International information exchange. Malta participates in CRS (automatic exchange with OECD countries), FATCA (with the US under L.N. 78 of 2014), and DAC6 (mandatory disclosure of cross-border arrangements within 30 days). Data flowing in from these channels is actively used to cross-check local filings.
Industry risk factors. Financial institutions, entities subject to DAC6 reporting, and sectors flagged in Malta’s National Risk Assessment face higher audit likelihood. Whistleblower reports through the CFR, FIAU, or MFSA can also trigger an examination.
Penalties and Interest: What a Tax Audit Can Cost You
Understanding the financial exposure helps you decide whether a proactive review is worth the investment.
| Item | Rate / Amount | Legal Basis |
|---|---|---|
| Interest on late income tax payments | 0.33% per month (approx. 4% p.a.) | ITMA (Cap. 372) |
| Late filing of VAT return | EUR 5 per day | Article 76, VAT Act (Cap. 406) |
| Interest on late VAT payments | Rate prescribed by Minister | L.N. 51 of 2014 |
| Additional tax for understatement | Determined per case | ITMA (Cap. 372) |
| Standard audit lookback period | 6 years | ITMA (Cap. 372) |
| Extended period (fraud or omission) | 12 years | ITMA (Cap. 372) |
Voluntary disclosure and cooperation with the CFR can result in penalty mitigation or full remission. Separate applications are required for income tax and VAT penalties.
Transfer Pricing: New Thresholds That Could Trigger Your Next Audit
New rules under S.L. 123.207 require formal documentation for cross-border arrangements exceeding these thresholds.
| Transaction Type | Annual Threshold | Documentation Required |
|---|---|---|
| Revenue nature transactions | EUR 6,000,000 | Master file + local file |
| Capital nature transactions | EUR 20,000,000 | Master file + local file |
Applies to basis years commencing on or after 1 January 2024. Arrangements entered into before that date are grandfathered if not materially altered. Dividends to associated enterprises are excluded from revenue aggregation. Documentation must follow Chapters I and V of the OECD Transfer Pricing Guidelines 2022.
Not sure if your records would survive a CFR audit? Let us check before they do.
Get My Compliance ReviewWhat to Do When You Receive a CFR Audit Notification
A structured response protects your position. Here is the process we follow with every client.
Review the Notification Scope
We analyse the CFR’s letter to understand exactly which tax years, tax types and areas are under examination. This determines what records you need to gather and where the risk areas are likely to sit.
Gather and Organise Documentation
We prepare a complete document set — tax returns, financial statements, bank records, contracts, invoices and transfer pricing files. Everything is reviewed for consistency before anything goes to the CFR.
Respond to CFR Information Requests
We handle all correspondence with the Commissioner’s office, respond to queries within required timeframes and attend interviews or site visits on your behalf where needed.
Negotiate and Resolve
If the CFR proposes adjustments, we evaluate the findings, present counter-arguments where justified, negotiate penalty mitigation where applicable and exercise appeal rights if the assessment is unfounded.
Review the Notification Scope
We analyse the CFR’s letter to understand exactly which tax years, tax types and areas are under examination. This determines what records you need to gather and where the risk areas are likely to sit.
Gather and Organise Documentation
We prepare a complete document set — tax returns, financial statements, bank records, contracts, invoices and transfer pricing files. Everything is reviewed for consistency before anything goes to the CFR.
Respond to CFR Information Requests
We handle all correspondence with the Commissioner’s office, respond to queries within required timeframes and attend interviews or site visits on your behalf where needed.
Negotiate and Resolve
If the CFR proposes adjustments, we evaluate the findings, present counter-arguments where justified, negotiate penalty mitigation where applicable and exercise appeal rights if the assessment is unfounded.
What You Get With Borg Galea’s Tax Audit Support
Proactive Compliance Reviews
We run the same checks the CFR would — before they do. Our pre-audit health checks cover income tax, VAT, payroll and transfer pricing. Issues caught early cost a fraction of what they cost under formal audit.
Full CFR Representation
From initial notification through to final resolution, we manage the entire audit process. You deal with us; we deal with the Commissioner. That includes correspondence, document preparation, interviews and appeals.
Transfer Pricing Documentation
The new rules under S.L. 123.207 are barely two years old and many companies are not yet compliant. We prepare master files and local files aligned with the 2022 OECD Guidelines, covering loans, services, royalties and intercompany transactions.
Penalty Mitigation Experience
When the CFR assesses additional tax, we negotiate. Voluntary disclosure, demonstrated cooperation and well-documented positions all count toward reducing penalties and interest. We know what works because we have done it repeatedly.
Tax Audit Malta: Your Questions, Straight Answers
Fix Compliance Gaps Before the CFR Finds Them
Tell us about your company and we will assess your compliance position — no obligation. Whether you need a proactive review, transfer pricing documentation or help responding to a CFR notification, we typically respond within one working day.
You will speak with
Andrew Fenech
Business Development Manager
Adrian Pavia Dimech
Audit Principal
Tatiana Muscat
Audit Manager
- Free initial consultation
- Response within 24 hours
- No obligations whatsoever
Tax Audit Malta: Prepare Before the CFR Calls — or Respond With Confidence When They Do
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