Valletta  - Malta has dismissed as "sensational" reports in a German publication suggesting the island was being used as a tax haven by German multinational companies.

While admitting there was a recent surge in German investment in Malta, Finance Minister Tonio Fenech told The Times of Malta on Saturday "this is all above board and according to EU laws."

Fenech said: "The double taxation agreement with Germany is there to facilitate taxation between the two countries and promote investment.

"We have never had any negative reaction by the German government on this front ... This is just sensationalism."

Describing Malta as "a new tax haven Mecca" for large German multinationals, German news magazine Der Spiegel gave details of how large German companies were allegedly dodging tax through the island.

The magazine accused German Finance Minister Peer Steinbrueck of turning a blind eye to what had become a known "tax loophole" used by top German companies to minimize their tax burdens through subsidiaries on Malta.

According to an investigation carried out by the magazine, renowned companies like Lufthansa, Puma and BASF were allegedly using Malta's taxation system to avoid paying all their dues to the German tax authorities.

The magazine also pointed a finger at the German Embassy in Malta, saying it was encouraging other German companies to use this system and invest in the Mediterranean island.

Other German big names, such as Deutsche Bank, would also be investing in Malta, the magazine reported. (dpa)