Maldives Individual Tax Guide

Worldwide Personal Tax and Immigration Guide 2021–22

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The government of Maldives has implemented the Income Tax Act, which is effective from 1 January 2020. With the implementation of this act, the Business Profits Tax, the remittance tax and certain provisions of the land sales tax have been repealed and individual income tax and employee withholding tax was introduced.

A. Income tax Individual income tax. Under the Income Tax Act, effective from

1 January 2020, individuals must pay tax on their business income and all other forms of income received by them. If an individual receives business income, he or she can deduct expenses incurred with respect to that business in a manner prescribed in the act. Individuals must file an annual individual income tax return. However, individuals earning only employment income are required to pay only employee withholding tax (see Employee withholding tax) and are not required to file an annual individual income tax return.

The following are the income tax brackets and rates for individuals.

Annual taxable income (MVR)

720,000 or less More than 720,000 but less than or equal to 1,200,000 More than 1,200,000 but less than or equal to 1,800,000 More than 1,800,000 but less than or equal to 2,400,000 More than 2,400,000

Tax rate (%)

0 5.5 8 12 15

Employee withholding tax. With the introduction of employee

withholding tax, effective from 1 April 2020, employers are required to withhold and pay tax from the remuneration paid to employees. Remuneration subject to employee withholding tax is total remuneration received by an employee in a month, after the deduction of the amount contributed to the Maldives Retirement Pension Scheme by the employee. Remuneration also includes allowances and benefits received by the employee, whether

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received in cash or in-kind. The following are the employee withholding tax brackets and rates: Remuneration subject to withholding tax (MVR)

60,000 or less More than 60,000 but less than or equal to 100,000 More than 100,000 but less than or equal to 150,000 More than 150,000 but less than or equal to 200,000 More than 200,000

Tax rate (%)

0 5.5 8 12 15

Business income tax. With the introduction of the Income Tax Act, the Business Profits Tax Act has been repealed and business income tax is now included in the Income Tax Act. Business income tax is imposed at a rate of 15% on profits. All persons, excluding individuals accruing profits from businesses, are subject to the tax on their taxable profits. The first MVR500,000 (USD32,425) is exempt from tax. Specified payments, such as management fees, technical services fees, royalties and rent for immovable property paid to nonresidents, are subject to nonresident withholding tax (NWHT) at a rate of 10%. Reinsurance payments made to nonresidents are subject to NWHT at a rate of 3%.

Certain expenses are allowed or disallowed for business income tax purposes. For example, receipts that have been subject to withholding tax are deductible, while private expenses are not deductible.

Losses incurred in a tax year can be carried forward and deducted against profits of the subsequent five tax years.

Companies that are registered with Maldives Inland Revenue Authority are required to file the following business income tax returns and make the following payments: • First interim return due on 31 July of the tax year: one-half of the total tax paid in the preceding tax year • Second interim return due on 31 January of the following tax year: one-half of the total tax paid in the preceding tax year • Final return due on 30 June of the following tax year: any balance of tax due If a company has reasonable grounds to expect that its tax payable for a tax year will be less than the tax payable for the preceding year, the company may make a reasonable estimate of the tax payable for that year when calculating the interim payments.

However, if the actual tax payable exceeds more than 20% of the estimated interim liability, fines and penalties will apply to the unpaid interim liability.

B. Goods and services tax Goods and services tax (GST) is levied at a rate of 6% on general goods and services supplied in the Maldives. The rate of GST for the tourism sector is 12%. A green tax of USD6 per occupying guest is levied. A GST return must be filed by the 28th day of the month following the end of the tax period.

C. Work permit Foreigners going to the Maldives for employment are required to obtain a work permit from the employer. Work permits are issued

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by Maldives Immigration, which requires that employers deposit a sum of money as a work permit deposit for each employee. A monthly visa fee of MVR250 applies for foreign workers.

Business visas also can be obtained from a Maldivian sponsor for a maximum of 90 days.