Management Services Subject to WHT Only if Rendered After Commencement of the BPT Act: High Court

The High Court of Maldives, on 26 April 2019, struck down the Tax Appeal Tribunals decision regarding the interpretation of Section 6 of the Business Profit Tax Act, stating that Withholding Tax may be applied only on payments for services that are rendered after the commencement of the Act.

The decision was made in the case of Jetan Travel Services Pvt Ltd v MIRA, where the judges’ unanimous decision was made in favour of Jetan, overturning the decision made in case number TAT-CA-W/2014/006 of the Tribunal.

The issue in contention before the High Court was on retrospective application of the BPT Act, to impose Withholding Tax on payments made after the commencement of the Act but for services rendered prior to the commencement. The MIRA, in their arguments, relied upon then Section 64 of the BPT Regulation and the rules of statutory interpretation in asserting that the intention of Section 6 of the BPT Act was to impose WHT on a payment made for any of the types of services described in Section 6, regardless of when the service was rendered, so long as the payment was made during a tax year. However, counsel for Jetan argued that MIRA’s interpretation leads to a retrospective application of the law, which is a violation of the Constitution and the BPT Act.

The High Court, in it’s ratio decidendi, relied upon the rules of statutory interpretation and the Constitution of the Maldives, and the minutes of the discussion regarding the Business Profit Tax Bill on the Maldives Parliament floor. The High Court Judges, with reference to the Majilis minutes regarding the BPT Bill, stated that the minutes made it clear that Parliament did not intend the language to permit retrospective application of the law. Furthermore, the High Court bench also noted that interpreting Section 6 of the BPT Act in light of Section 64 of the BPT Regulation, allowed for a broader interpretation than permissible by law.