As we face many unforeseen circumstances following the Coronavirus (COVID-19) pandemic, the impact of the pandemic on many taxpayers is substantial and could intensify during the coming days. Given the circumstances, you may have a number of questions with respect to your tax affairs and how the COVID-19 pandemic would have an impact on you as a taxpayer. Here we provide answers to some of those questions.
Has there been any extensions of deadlines for tax filing and payment?
As of date, no extensions have been granted with respect to the payment of taxes, tourism land rent, fees and other charges to the MIRA.
What if the deadline falls on a day that the MIRA is closed?
If any deadline falls within a period on which government offices are closed, you can fulfil those obligations on the next working day without any fines/penalties. For instance, since the MIRA was closed on 28th March 2020 – the deadline for filing GST and Green Tax Returns for February 2020 – you can file the returns and make payments on the first working day following the holidays which, as things stand now, is 5th April 2020.
Are there any options for payments in instalments?
As per MIRA’s announcement of 25 March 2020, lenient commitment payments and instalment plans will be allowed for taxpayers who apply for such arrangements prior to 30 June 2020 in relation to taxes such as GST, Green Tax and WHT.
However, this option is currently not available for land rent payments, and other non-tax payments.
What are the options for filing and payments?
You can make filing and payments via MIRA’s online portal- MIRAConnect. The payment could be made online using MIRA’s Vaaru Card or Bank of Maldives debit and credit cards.
If any payment is to be made to the MIRA via MRTGS, the Bank of Maldives has now made arrangements to process the MRTGS payment requests via email. You can attach a scanned copy of the MRTGS Form signed by an authorised signatory and send it to [email protected].
What are the penalties for missing on filing/payment deadlines?
Fines and penalties will continue to accrue until the relevant tax return is filed and the payment is made in full. The fines imposed are:
|Income Tax, Goods & Services Tax, Green Tax||Late filing||MVR50 per day and 0.5% of tax payable|
|Late Payment||0.05% per day|
|Land rent||Late Payment||0.5% per day|
How can I mitigate the fines/penalties?
The fine for late-filing will accrue from the due date until the tax return is filed. Given that returns can be filed online, fines for late-filing is something you can minimise. Even if you are unable to make the payments, filing the tax return on time may be worthwhile. Further, the payment options can be discussed with the MIRA as explained in Question 3.
My business activities are suspended for now. Do I have to cancel my TIN or inform the MIRA?
If this is a temporary closure of business, you do not need to cancel your TIN or inform the MIRA.
You are required to inform the MIRA and cancel your TIN only if you permanently cease your business. Note that you will need to file your tax returns even during the period where you have temporarily closed the business.
Will the imposition of Income Tax on employment income commence on 1 April?
Yes, that’s how it stands now. As 1 April 2020 is the date specified in the Income Tax Act, any delay in a postponement will need to come from the Parliament, by way of an amendment to the Income Tax Act or a special law to address the situation.
What is the deadline for registration under the Income Tax Act?
The deadline remains unchanged. This means that employee registration for income tax must be completed by 31 March 2020.
Do I still have to pay my interim payments based on last year’s liability?
In the event that you have reasonable grounds to expect a tax liability that is lower than that of last year, the Income Tax Act allows you to make a reasonable estimate of the amount of interim payment. This means that your first interim payment which is due on 31 July 2020 need not be based on your tax liability for 2019, but can be based on your estimated tax liability for 2020.
If you choose to estimate, the estimated liability should be at least 80% of the final liability for the tax year. If the estimated liability is less than 80% of the final liability, you will be deemed to have underpaid the interim payment (compared to half of the liability for the previous year), and fines will be applicable accordingly.
Example: Your final tax liability for 2019 is MVR 20,000,000. As a general rule, your interim payments for 2020 would be MVR 10,000,000 each.
However, because of COVID-19 pandemic, you estimate to have a final tax liability of only MVR 4,000,000 in 2020. If so, you can pay MVR 2,000,000 as your first interim payment on 31 July 2020 and MVR 2,000,000 as the second interim payment on 31 January 2021.
Goods & Services Tax
I had to refund my customers due to a cancelled sales transaction, after I had raised an invoice to them. What is the GST treatment in this case?
If you have raised an invoice, due to which you have already accounted for GST with the MIRA, you can claim that amount back. To cancel an invoice, you can raise a credit note, and claim a deduction in your tax return for the month in which you raised the credit note.
Non-resident Withholding Tax
To manage cashflow, I am postponing some payment to non-residents. What’s the tax impact?
You must account for withholding earlier of when the payment is made or is required to be made (accrued) under the accounting standards you have adopted. This means that you may have to pay withholding tax even if you are postponing the payment. Check with your tax advisors on the specific scenario that’s applicable to you.
We got you covered
If you have any other specific questions, please contact the following members of our team: