Malta-Romania Tax Treaty Now Aligns with OECD’s MAP Standard

Background

The Agreement between Malta and Romania for the avoidance of double taxation (Treaty) was originally signed in Bucharest on 30 November 1995. A protocol amending the Treaty has now been given effect in Maltese law through the Double Taxation Relief on Taxes on Income with Romania (Amendment) Order, 2026 (L.N. 97 of 2026). This is the third occasion on which the Treaty has been modified, including the changes resulting from the application of the Multilateral Instrument.

The Single but Significant Change: Article 26(2)

The amendment touches a single provision and adds only a few words: Article 26(2), which governs the Mutual Agreement Procedure (MAP). MAP is the mechanism by which a taxpayer who considers that the actions of one or both contracting states result in taxation not in accordance with the Treaty may request their competent authority to negotiate a resolution directly with the competent authority of the other contracting state.

The comparative table below sets out the text of the provision:

Standard Language Achieved – Anomaly Corrected

What may surprise some is that this additional phrase is not a novel introduction in international tax law practice but a correction of the Treaty’s unusual drafting anomaly. Article 25(2) of the OECD Model Tax Convention (which corresponds to the Treaty’s Article 26(2)) is already worded in precisely the same terms. The dual requirement that the objection be justified and that the competent authority be unable to arrive at a satisfactory solution has existed in the OECD Model (and, for that matter, in the UN Model) since its inception.

The same wording appears across almost all of Malta’s other tax treaties in one form or another, with the exception of the Bulgarian tax treaty (Article 21(1)), which contains the same omission, and which was also subject to a similar amendment.

What This Means in Practice

In practice, the change is more formal than substantial, as it is standard international tax law practice to consider MAP requests on their merits to prevent vexatious claims. MAP is not a guaranteed right, and some justification must always be presented when initiating the procedure – this is expressly stated in the OECD Commentary. The threshold is not intended to be a high one. The OECD Commentary explains that the competent authority must treat an objection as justified where there is, or it is reasonable to believe there will be, taxation not in accordance with the tax treaty. The OECD Commentary also stresses that a request should not be rejected without good reason and that competent authorities must determine MAP eligibility even where domestic litigation is pending.

What is Still Missing

Where the amendment falls short of the full OECD standard is in arbitration. Article 25(5) of the OECD Model provides that if competent authorities cannot resolve a case within two years, unresolved issues must be submitted to arbitration at the taxpayer’s request, with the decision binding on both states. The amended Treaty contains no such clause. This means that if the two competent authorities reach a stalemate after MAP is initiated, there is no binding fallback mechanism under the Treaty. However, the taxpayer may be able to access dispute resolution proceedings under the EU Tax Dispute Resolution Directive (Council Directive (EU) 2017/1852) or the EU Arbitration Convention (90/436/EEC), depending on the particular nature of the dispute.