The Government of Maldives has sent the draft of the Income Tax Bill (“ITB”), intended to introduce Personal Income Tax and redesign the existing Business Profit Tax regime, to the Parliament today, 15 October 2019.
Under the proposed Bill, the existing Business Profit Tax (and non-resident Withholding Tax), Bank Profit Tax will be abolished and ‘rolled over’ to the income tax regime with certain changes. Although the BPT Act and Bank Profit Tax Act will be repealed with the introduction of the income tax, the taxes that were levied under those Acts will be continued under the Income Tax Act. The tax rates will remain the same for banks (25% on profits that exceeds zero Rufiyaa), corporations, partnerships and other bodies (15% on profits that exceed MVR500,000), although for individuals, the rates proposed are as follows:
|Annual Taxable Income (MVR)||Rate|
|480,000 or less||0%|
|1,200,001 and above||15%|
One significant change from the existing BPT regime is that an individual’s salary income will be subject to income tax. Under the proposed Bill, the income tax on Salary will be paid on a ‘Pay As You Earn’ (PAYE) basis (referred in the ITB as ‘Employee Withholding Tax). That is, every time the employer pays salary, employer withholds income tax and pay that amount to MIRA. Salary includes basic salary, allowances, bonuses and other benefits provided to employee in consideration for their services. The PAYE tax brackets proposed in the bill are as follows:
|Monthly Income (MVR)||Rate|
|40,000 or less||0%|
|100,001 and above||15%|
Further, the non-resident Withholding Tax imposed under the BPT Act has also been ‘enhanced’ under the ITB. In addition, the ITB also introduces a more comprehensive Capital Gains Tax regime compared to the BPT Act.
The ITB is expected to be passed by the parliament within the next couple of weeks. The proposed commencement date of the Act is 1 January 2020.
(Photo credits: presidency.gov.mv)