Advance Pricing Arrangement Regulation Published

The Third Amendment to the Tax Administration Regulation, granted the Maldives Inland Revenue Authority (“MIRA”) the right to enter into Advance Pricing Arrangements (“APA”) with taxpayers or other tax administrations with the purpose of providing certainty and clarity in the domain of transfer pricing. As such, the Advance Pricing Regulation (the “Regulation”) was published by the MIRA on 16 March 2021 stipulating the procedures to be followed in entering into an APA with the MIRA.

What is an APA?

An APA is an ahead-of-time agreement entered into between a taxpayer and the tax administration specifying the transfer pricing methodology to be applied in a set of related party transactions over a fixed period of time. Such a regime is intended to mitigate the risk of reassessment via transfer pricing audits by specifying the methods of pricing and setting the prices of related party transactions in advance.

Who can apply for an APA?

    • Tax residents in the Maldives entering into international transactions or arrangements with related parties;
    • Permanent Establishments in the Maldives, entering into international transactions or arrangements with related parties.

What is the procedure to be followed?

1: Pre-filing Consultation

    • Submit MIRA 923 Form requesting for a pre-filing consultation;
    • Pre-filing consultation comprises identifying the scope of the arrangement, understanding the controlled transaction in question, deciding if the transaction in question is an appropriate fit for the APA and discussing the potential APA terms.

2: Formal Application

    • Following the pre-filing consultation, a formal application requesting for an APA can be lodged via MIRA 924 Form.
    • At this stage, detailed documentation with respect to the transactions will be required and such information include (but is not limited to); 1) a comparability analysis; 2) particulars of the elected transfer pricing method; 3) critical factors and assumptions; 4) global group structure and any other relevant information.

  3: Evaluation and finalisation of the APA

    • Depending on whether it is a unilateral, bilateral or multilateral APA, negotiations and evaluations will take place and a final decision will be made accordingly.

4: Annual Compliance Report

For the duration of the APA, an Annual Compliance Report will be required to be submitted annually together with the Income Tax Return, on or before 30 June of the following tax year. The Report will include:

  1. Information in relation to transactions/arrangements entered into by the taxpayer for the pertained tax year.
  2. An analysis of the taxpayer’s compliance with the APA.
  3. Proof that there has not been a breach of any critical assumptions.

Are ‘Roll-backs’ allowed?

The Regulation includes a roll-back provision which stipulates that the opportunity to roll back an APA to previous tax years (for which the deadline to file the Income Tax Return has already passed) may be allowed upon reviewing the following:

  1. APA duration of participating jurisdictions;
  2. Surrounding circumstances of the transaction in question;
  3. Status of tax audit or investigation being carried out;
  4. Legal actions being taken

However, the Regulation is not very clear on the implementation of the rollback provision and the details are still awaited.

What is the maximum period covered under an APA?

MIRA may enter into APA for a maximum period of 5 years.

Effective Date

The Amendment takes effect from 16 March 2021 onwards.


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