Interest Paid to Lease Finance Companies Fully Deductible

On 8 November, the MIRA issued Tax Ruling B67 which deals with approved banks and financial institutions for BPT purposes.

The new ruling, which supersedes Tax Ruling B2 which was published back on 20 March 2012, now considers Housing Finance Companies, and Leasing Finance Companies licensed by the the regulatory body of their respective country of operation as part of the banks and financial institutions approved by the MIRA.

Taxpayers can deduct interest payments made to the aforementioned types of companies in full, provided those deductions are made in accordance with Tax Ruling B64, which sets out rules pertaining to thin capitalisation. Prior to this Ruling, Housing Finance Companies, and Leasing Finance Companies were not considered as ‘Banks and Financial Institutions Approved by the MIRA’.

In addition to this, the ruling now allows Housing Finance Companies, Lease Finance Companies, and Insurance Companies registered with the Maldives Monetary Authority to fully deduct interest paid to another MMA licensed Housing Finance, Leasing Finance, or Insurance Company.

The ruling takes effect from tax year 2018 onwards.