Invest in the Maldives
Maldives Taxation System
Both foreign businesses and local businesses are subject to the following taxes.
The Maldives has a residency-based tax system, whereby residents are taxed on their worldwide income, while non-residents and temporary residents are taxed only on their Maldives-sourced income. Read our overview of the Maldives Income Tax regime here.
Goods and Services Tax
Goods and services supplied by GST registered persons are taxed under this regime. Certain goods and services are zero-rated and exempt from the GST.
Green tax is payable by tourists and is dependent on the type of tourist establishment at which they stay.
The administrative aspects governing the general obligations and rights of taxpayers are laid out in the Tax Administration Act (Law Number 3/2010]. The Maldives Inland Revenue Authority is responsible for administering and enforcing taxes, and acts as the State collector of all rents and fees payable to the Government.
Unless specifically exempted from tax, all of the following types of incomes are taxable:
- Business income
- Rental income from movable or immovable property
- Dividends, interest and royalty
- Annuities, pensions, and retirement benefits
- Fees for technical services and commissions
- Amounts derived from the disposal of movable, immovable, intellectual or intangible property
Generally, all recorded expenses are deductible if they are incurred wholly and exclusively for the purpose of production of income – unless specifically disallowed or limited for deduction by the Income Tax Act (Law Number 25/2019). However, stricter rules apply for deductions in relation to employment income, whereby “wholly, exclusively and necessarily” test is applied.
Personal Income Tax:
|Taxable Income per year
Corporate income tax (applicable to companies and partnerships):
|Taxable Income per year
Banks: 25% of the taxable income
Financial Reporting Requirements
Accounts must be prepared in accordance with International Financial Reporting Standards
or International Accounting Standards issued by International Accounting Standards Board or Accounting and Auditing Organisation for Islamic Financial Institutions Standards.
Taxpayers with an annual turnover of more than MVR 10,000,000 are required to have their accounts audited by an independent auditor licensed by the relevant authority at the time of submission of the income tax return.
Employee Withholding Tax
In the context of Maldivian Employee Withholding Tax, the employer, on behalf of the employee withholds tax from the employees remuneration and pays to the Maldives Inland Revenue Authority on a monthly basis. The monthly PAYE tax brackets are based on the annual tax brackets for individuals (prorated to arrive at monthly brackets).
Due to the fact that limited deductions are available from employment income, it is expected that an employee’s PAYE will usually be the final tax liability of that employee. However, employees are allowed to file an annual tax return and make a year-end adjustment where necessary.
Tax Incentives and Exemptions from Tax
Reciprocal exemption is applicable to non-resident owners, charterers or lessors of ships or aircrafts. An application for exemption must be lodged for approval from the Commissioner General.
Tax Incentives for mega investments
The Special Economic Zones Act (Law Number 24/2014) allows the Government of Maldives to provide tax incentives and reliefs including tax exemptions and tax holidays to developers and investors who invest in “Special Economic Zones” (SEZ) created under the Act.
The Act mandates the President to release an annual decree specifying the type of economic activities that may be carried, the minimum value of investment in such a zone and incentives available to its developer and investors.
Foreign Tax Credit
Where a tax resident in the Maldives has paid tax in a foreign country or territory, credits will be allowed even without a Double Tax Avoidance Agreement, equal to the amount of foreign tax paid or tax payable in the Maldives, whichever is lower.
Currently the Maldives only has a full-fledged income tax treaty with the United Arab Emirates.
The Maldives implements transfer pricing rules as a measure to prevent arbitrary shifting of income between Maldivian companies and their foreign affiliates. As such, all persons liable to pay tax in the Maldives are required to maintain transfer pricing documentation in relation to related party transactions clearly reflecting;
- details of the commercial and financial relations between the parties involved;
- terms and conditions imposed between the parties; and
- explanation as to why the terms of the transaction are concluded as at arm’s length.
The Thin Capitalisation rules adopted under the Maldivian tax laws are similar to the fixed ratio rule proposed under Action 4 of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) initiative. The maximum amount that can be deducted as interest expense subject to thin cap rules, is up to 30% of the tax-EBITDA of the business.
The rules apply to all forms of interest expenses, except interest paid to a Maldivian bank and financial institutions licensed by the Maldives Monetary Authority. Thus, interest payable to foreign banks are also subject to Thin Capitalisation rules.
Controlled Foreign Entities (CFE)
The Maldives also implements CFE rules to combat diversion of profits to tax shelters and preferential regimes. To be considered as a CFE in the Maldives, five or fewer tax residents of the Maldives must have a controlling interest of more than 50% in the foreign entity.
The taxable income of the foreign entity must then be computed in accordance with the provisions of the Income Tax Act of the Maldives and each shareholding resident of the Maldives must include the undistributed income of the CFE in its taxable income utilising a formula specified in the Income Tax Act.
Non-Resident Withholding Tax
A 10% withholding tax is imposed on specified payments made to non-residents, which includes:
- Rent in relation to immovable property situated in the Maldives;
- Interest (other than interest paid or payable to a bank or non-banking financial institution approved by MIRA);
- Fees for technical services;
- Commissions paid in respect of services provided in the Maldives;
- Payments made in respect of performances in the Maldives by public entertainers;
- Payments made for carrying out research and development in the Maldives;
- Payments made to a non-resident contractor;
- Insurance premium paid to a non-resident insurer.
Goods and Services Tax
The rate of GST) differs based on the sector of business. Businesses operating in the tourism sector (such as tourist resorts, tourist vessels, tourist hotels and guest houses, and any other facility situated in these establishments) are required to charge tax at a rate of 12%, whereas businesses operating in all other sectors are required to charge tax at a rate of 6% on the value of goods and services supplied.
Maldives has a list of essential goods that are zero-rated and few exempt goods and services. All exports from the Maldives are zero-rated.
It is mandatory for all businesses operating in the tourism sector to register for GST.
Businesses operating in other sectors are generally required to register for GST if:
- total value of goods and services supplied in the past 12 months exceeds MVR 1,000,000
- estimated value of supply for the following 12 months exceeds MVR 1,000,000
- imports goods into the Maldives
Other Taxes & Fees
Green Tax is a tourism sector-specific levy imposed in the Maldives, whereby the government charges USD 6 per person per day of stay at tourist resorts, tourist vessels, and tourist hotels and USD 3 per person per day of stay at guesthouses.
Tourism Land Rent
Tourism Land Rent is payable to the Government of the Maldives from lands and islands leased out to build tourist resorts, tourist hotels and tourist guesthouses.
Once the lease agreement is signed with the Ministry of Tourism, the tourist establishments will be registered with the MIRA for the purpose of land rent collection.
The rent on lands and islands will be determined based on the land area which is based on the “Mean Tide Line” of such lands or islands. Rent must be paid to the MIRA quarterly.
Company Annual Fee and Setup Fees
All companies registered with the Ministry of Economic Development are required to pay an annual fee.
- Public companies: MVR 10,000
- Private companies: MVR 2,000.
Setup Fee & Charges
In addition to the above, when setting up, a one-time registration fee which varies depending on the authorised capital of the company must be paid along with a Revenue stamp of MVR 500.