The frequency of tax law amendments in the Maldives can vary as there are no set fixed intervals between amendments.

To amend a tax law, a draft amendment is prepared by Ministry of Finance and submitted to Peoples Majlis (“Parliament”) where it is assigned to a relevant committee for review and debate. After the committee review, the draft amendment is debated on the floor of Parliament. If the amendment is approved by the parliament, it is sent to the President of the Maldives for his approval. Once the amendment has been signed into law by the President, it is published in the official government gazette. The amended tax law then becomes effective on the specified date, which may be immediate or at a future time.

The Maldives has a self-assessment tax system, and both the corporate entities and Individuals are required to prepare and file their tax returns electronically via the Maldives Inland Revenue Authority (“MIRA”)’s online portal (MIRA Connect Portal).

Taxpayers must maintain all accounting records and supporting documents for a period of five years following the end of the taxable period and they should be readily accessible to MIRA officials upon request.

There are two main tax authorities in Maldives.

1. Ministry of Finance: The tax policy unit of ministry of finance is involved in formulating tax policies in Maldives with the consultation from public. The unit is also responsible for drafting tax laws and proposing amendments to the tax laws.
2. Maldives Inland Revenue Authority (MIRA): The primary tax authority in the Maldives responsible for the administration and enforcement of tax laws. MIRA also provides technical input to the tax policy unit.

Within MIRA there are tax offices open throughout the country where taxpayers can visit to file returns and engage with MIRA officials to resolve tax issues. MIRA also operates their online portal (MIRA Connect) where taxpayers can file their tax returns and make payments. Taxpayers can also resolve and clarify minor tax issues via the MIRA website.

If a taxpayer has any disagreements with a tax assessment, they can file an objection with MIRA which is discussed within an internal committee before issuing an objection review report. If the taxpayer is not satisfied with the objection review by MIRA, they have the option to appeal with Tax Appeal Tribunal within 60 days. The decision by the tribunal can be appealed at High Court and the Supreme Court of Maldives.

The Maldives has a dedicated Tax Appeal Tribunal, which is an independent body established to resolve tax disputes between taxpayers and tax authorities.

Under the Tax Administration Act, if a taxpayer objects to a decision made by MIRA within 30 days, MIRA has to decide and respond to the taxpayer within 120 days and taxpayers have 60 days from the date of MIRA’s notice of objection to file an appeal at the Tax Appeal Tribunal if they are unhappy with the MIRA judgment.

Within 180 days of the appeal’s filing date, the Tribunal should consider and render a decision on it. In the event that a just resolution cannot be found in the allotted time frame, the members of the tribunal may choose to extend the appeal’s decision-making process by a maximum of ninety days

If a taxpayer is not satisfied with the decision of the Tribunal, they have the option to appeal the decision to the High Court and subsequently to the Supreme Court of the Maldives.

An appeal filed before the High Court shall be concluded within 180 days from the filing of the appeal. Should MIRA or taxpayer appeal the decision of the High Court at the Supreme Court, the decision of the Supreme Court should also be concluded within 180 days as stipulated in the Tax Administration Act

However, in practice the duration of tax proceedings can vary depending on the complexity of the case, the volume of cases pending before the tribunal and, and other factors.

The Maldives has fixed return filing and payment deadlines for each type of tax. The below outlines the types of tax returns and their filing/payment deadlines:

Type of Tax Return	Frequency	Filing/Payment Deadline
Corporate and Personal Income tax Return	Annually	30th June of the following year
Employee Withholding Tax	Monthly	15th of the following month
Non-resident Withholding Tax	Monthly	15th of the following month
Green Tax	Monthly	28th of the following month
Goods and Services Tax*	Monthly	28th of the following month
Airport Tax & Fees	Monthly	28th of the following month
Tourism Land Rent	Quarterly	30th of the following month after the quarter end.
Duty Free Royalty	Monthly	10th of the following month

* Businesses with monthly income surpassing MVR 1,000,000 are mandated to collect and remit Goods and Service Tax on a monthly basis. Conversely, those below this threshold have the option to remit GST either monthly or quarterly.

Taxpayers are not required to pay the disputed tax amounts. However, to appeal an assessment of MIRA at the tribunal, the taxpayer are required to pay an amount not less than 25% of the disputed amount.

If the dispute ends in favor of the taxpayer, any amount paid to MIRA will be refunded to the taxpayer. However, if the appeal is not resolved in the taxpayer’s favor, the taxpayer will be required to pay the full remaining amount of the disputed tax.

Yes, all taxpayer related information that comes into the possession of the tax authorities is considered confidential under the Tax Administration Act except in the following circumstances:

• Information currently available from the public domain
• Information of a person who has given written consent for its disclosure
• Information revealed during civil and criminal proceedings
• Information given to employees of tax authority for the purpose of administration of tax laws
• Information revealed to obtain advice on the interpretation of tax laws
• Information disclosed in compliance with double tax agreements or tax information exchange agreements
• Information outside the scope of double tax agreements or tax information exchange agreements but should be disclosed to the officers authorized to administer the tax laws of a foreign country or territory regarding an individual who is liable to pay taxes in the Maldives.
• information disclosed in accordance with any agreement reached between the Maldivian government and a foreign authority to prevent or look into any criminal activity.
• Information disclosed for incorporation into Government statistics, without withholding the taxpayer’s identity

Maldives is a signatory to the Common Reporting Standard (CRS) with the first reporting year for CRS being 1 January 2021 – 31 December 2021. All reporting financial institutions are obligated to submit CRS returns detailing all the reportable accounts for the year 2021 by 31 July 2022.

The Maldives Monetary Authority is working on updating and maintaining the beneficial ownership of reporting entities. The primary purpose of this requirement to ensure persons are not hiding behind legal entities, corporate vehicles and trusts to conduct various illicit activities, including fraud, money laundering and terrorism financing. However, the government has yet to address on the publication of the beneficial ownership of reporting entities.

Tax residency is determined based on the form of the business entity registration.

In the case of an individual, any person:

1. whose permanent place of living is in the Maldives; or
2. who is present in the Maldives or intends to be present in the Maldives for an aggregate of 183 (One Hundred and Eighty-Three) days or more in any 12 (Twelve) month period commencing or ending during a tax year; or
3. who is an employee or official of the Government of the Maldives and is posted overseas during a tax year.

In the case of a company, a company:

1. that is incorporated in the Maldives; or
2. that has its head office in the Maldives; or
3. the control and management of which is in the Maldives.

In the case of a partnership, a partnership:

1. that is formed in the Maldives; or
2. the control and management of which is in the Maldives.

The Maldives does not have a regulatory framework for “transparent entities”.

Yes, cross border transactions between associated entities is one of the most if not the most common dispute between the Tax Authority and taxpayers.

The most common transaction which is continuously disputed by the Tax Authority are loan/funding advance transactions between a taxpayer and its foreign associated entities. There are instances where the Tax Authority has contested the substance of the transaction and reclassified these as shareholder equity, resulting in no tax deduction against any interest expenses.

Where the tax authority is of the opinion that a cross-border transaction within an international group is not on arm’s length terms, the common practice is to disallow such transaction wholly. However, there have been instances where the tax authority has brought the transaction to arm’s length terms during their audits.

One of the notable cases concluded by the High Court includes MIRA v CDLHT Oceanic Maldives Pvt Ltd (case no. 2021/HC-A/274) and MIRA v Sanctuary Sand Maldives Pvt Ltd (case no. 2021/HC-A/275) where clarity was provided regarding the deductibility of interest on a loan transaction between related parties and requirement to perform a comparability analysis in determining whether a transaction is at arm’s length. Its important to note that both these cases have been appealed at the Supreme Court of Maldives and a decision is yet to be issued.

The Maldives has a world-wide tax system and Controlled Foreign Company (CFC) provisions rules apply when a company, partnership, trust or other entity that is not a resident of the Maldives is controlled by 5 (five) or fewer residents of the Maldives.

Any resident of the Maldives who owns 10% or more of the foreign entity’s share capital is required to include the foreign entity’s share of taxable revenue in their taxable income. This is calculated using the following formula;.

Any resident of Maldives that is required to include the share of the foreign entities in their taxable income must submit the form “Schedule 5 – Reporting of share of taxable income from Controlled Foreign Entities” (for each entity that they hold more than 10% in the share) along with their annual income tax returns submissions.

To determine whether a resident of Maldives holds 10% of the share of the foreign entity, the interest of all associates who hold interest in the share capital should be considered.

The Maldives has a transfer pricing regime in place. The Tax Authority have the authority to review transactions between associated entities and adjust if they are of the opinion that the prices are not at arm’s length.

A Transfer Pricing Regulation was issued by the Maldives Inland Revenue Authority detailing the transactions which are subjected to Transfer Pricing Documentation and those that are eligible for exemption. The Regulation follows the three-tier approach recommended by the OECD, which includes a Master File, Local File and applicable entities to prepare and submit Country by Country Reporting.

The thin capitalization rule is followed in the Maldives. The following entities are however exempted from this rule;

• Commercial banks licensed under the Maldives Banking Act
• Insurance businesses or finance leasing businesses or housing finance businesses or non-banking financial institutions licensed to conduct financing business under the Maldives Monetary Authority Act
• Persons categorized as micro, small or medium sized businesses under the Law on Small and Medium Enterprises
• State-Owned Enterprises (SOEs), of which the Government of the Maldives directly holds majority of the ordinary share capital

Apart from the above entities interest payable to banks and non-bank financial institutions licensed by the Maldives Monetary Authority are also out of the scope of thin capitalization.

Interest deductible after application of the thin capitalization rule is capped to a maximum of 30% of Tax-EBITDA (Earnings before Interest, Tax and Amortization). Any non-deductible interest can be carried forwarded to a period of 10 years from the year it was incurred.

The Maldives currently does not have any safe harbor rules.

Taxpayers can apply for advance pricing arrangements with MIRA by submitting “Request for Pre-filing Consultation” (MIRA 921) form together with supporting documents. Advance pricing arrangements can in some cases be made between associates of taxpayers regarding the appropriate transfer pricing methodology for a set of transactions, to mitigate transfer pricing related issues. APAs can be made bilaterally or multilaterally under the Advance Pricing Arrangement Regulation.

A person whose granted an APA is required to file an annual compliance report with the Tax Authority conforming the terms of the APAs are complied in the tax year.

General anti-avoidance rules are specified in Income Tax Act and specific rules targeting common tax avoidance practices, including transactions between associated entities, mandatory preparation of transfer price documentation for qualifying controlled transactions, taxation of controlled foreign transactions and limitations on interest deductibility through a thin-capitalization mechanism linked to the tax-EBITDA (Earnings before Interest, Tax, Depreciation and Amortization) of the entity are outlined in the Income Tax Act.

Pursuant to the Income Tax Act, the Commissioner General of Taxation has the power to invalidate arrangements or transactions if there are reasonable grounds to believe that tax avoidance or reduction of tax liability was one of the purposes of the arrangement or transaction

The Tax Administration Act has mandated civil and criminal penalties should the tax authority identify that a person has committed an offence knowingly, intentionally, with the intention to evade or to facilitate a taxpayer to evade tax payable under a tax law.

There are currently no digital service taxes levied in the Maldives.

However, discussions to broaden the Goods and Services subjected to Goods and Service Tax are currently under discussion and have been included in the Maldives Medium Term Revenue Strategy for 2024-2028 published by the Ministry of Finance in June 2024.

The Government has yet to confirm on the method adopted for taxing digital services.

The Maldives is a member of both the OECD’s BEPs and the Inclusive Framework initiative. Several changes to the Tax Administration Act and other relevant statutes were made to address the recommendations of these two initiatives.

In relation to addressing challenges in taxing the digital economy, the Maldives has not yet made a public statement on the process and the methods under which it will be incorporated in the tax legislations. However, given that the Maldives have adopted several of OECD’s recommendations in relation to the BEPs project, it is anticipated that the Maldives will adopt the proposed taxing methods by the OECD in relation to digital economy.

To comply with the OECD BEPs projects four minimum standards, introduction of mandatory Country-by-Country Reporting requirements through regulations was issued in January 2021. A mechanism for Mutual Agreement Procedures has been established, with procedures outlined for cases where tax treaties allow such procedures.

Amendments to the Goods and Services Tax Act and Income Tax Act have been brought due to the OECD BEPS program as well. The plan to incorporate pillar 2 rules by the end of 2025 will bring further amendments to the Income Tax Act and Maldives Model DTAA and tax treaty policies will also be updated to include STTR model provisions.

The following taxes are implemented and enforced in the Maldives.

a) Income Tax:

The income tax rates in the Maldives depends on the corporate entity form.

Income tax rate for incorporated businesses including companies and partnerships is:

• 0% on taxable income not exceeding MVR 500,000 (tax-free threshold).
• 15% on taxable income exceeding MVR 500,000.

Income tax rate for Individuals is a progressive tax rate as follows.

• Income not exceeding MVR 720,000 at 0%
• More than MVR 720,000 but not exceeding MVR 1,200,000 at 5.5%
• More than MVR 1,200,000 but not exceeding MVR 1,800,000 at 8%
• More than MVR 1,800,000 but not exceeding MVR 2,400,000 at 12%
• Any income exceeding MVR 2,400,000 at 15%

For commercial banks operating in the Maldives, a flat tax rate of 25% is applicable on their whole taxable income for the tax year.

Furthermore, businesses operating in international transport is taxed at 2% on their gross income sourced from the Maldives.

b) Employment Income and Pensions:

Employers are required to withhold employee withholding taxes on employees that’s receives a remuneration of more than MVR 60,000 per month. The employee withholding tax rates are progressive and as follows:

• Income not exceeding MVR 60,000 at 0%
• More than MVR 60,000 but not exceeding MVR 100,000 at 5.5%
• More than MVR 100,000 but not exceeding MVR 150,000 at 8%
• More than MVR 150,000 but not exceeding MVR 200,000 at 12%
• Any income exceeding MVR 200,000 at 15%

c) VAT (or other indirect tax):

GST rates are sector-specific and apply regardless of the business entity’s

form. For businesses in the tourism sector, the standard GST rate of 16% is imposed on all goods and services not falling under zero-rated or exempt categories. Conversely, entities in non-tourism sectors are subject to a standard GST rate of 8% on all goods and services not falling under zero-rated or exempt categories

d) Savings Income and Royalties:

There are no taxes levied on the savings income in the Maldives. However, through the non-resident withholding tax mechanism, where royalty payments are made to non-residents, a withholding tax at the rate of 10% is required to be withheld and paid to MIRA.

e) Income from Land:

Maldives has implemented a tourism land rent on the land area of islands and plots of land leased out for the purpose of developing and operating tourist establishments and varies for islands situated in different atolls of the Maldives.

f) Capital Gains:

Gains from the sale of movable, immovable, intellectual, or intangible property, which are not eligible for tax depreciation (commonly called as “capital allowance”), result in capital gains. These gains are calculated by subtracting the asset’s cost base and associated direct disposal expenses from the total sales proceeds. Typically, capital gains are consolidated within the annual income tax declaration. However, transactions falling under the category of “offshore indirect transfer,” involving non-resident sellers, require special attention.

In such cases, the buyer is obligated to withhold 10% of the sale price as a withholding tax, payable to the tax authority upon the triggering event (earlier of the payment or ownership transfer date). The remaining 90% is remitted to the seller. If the actual tax liability on these gains is lower than the withholding tax, the seller can seek a refund by including relevant details in their annual income tax return

g) Stamp and/or Capital Duties:

On 11 July 2021, Revenue Stamp Act was repealed with effect from the date of publication. The repeal of stamp duty is meant to bring convenience and improve the ease of doing business. As such, currently there are no stamp duties levied in the Maldives.

Taxable profit is determined by adjusting accounting profit in accordance with provisions outlined in the Income Tax Act and the Income Tax Regulation. Notable adjustments include limitations on deductibility of interest expenses and head office expenses. Interest expenses paid to non-approved financial institutions  are capped at an annual rate of 6%, with further application of thin-capitalization rules for all interest expenses except those to banks and non-bank financial institutions licensed by the Maldives Monetary Authority. Head office expenses are restricted to a maximum of 3% of revenue.

Specific conditions must be met when claiming deductions for pension expenses, employee welfare expenses, donations, bad debts, and provisions for bad debts. No deduction is permitted for accounting depreciation or amortization; instead, a specified deduction called “capital allowance” is allowed against qualifying capital expenditure.

Additionally, no deduction is allowed for any expenditure incurred to generate exempt income, fines incurred on breach of any law or regulation and the following expenditure incurred by a Permanent Establishment in the Maldives to its head office or an associated party of the head office.

1. Fees paid as royalty in respect of a patent or right.
2. Commission paid for a specific services performed for, or for management services provided.

In the Maldives, companies, partnerships, and trusts are recognized as taxable entities and they are separate legal entities that are subject to taxation on their own income.

The Maldives has a world-wide tax system and the liability to business taxation in the Maldives is generally based on tax residence. (Refer to answer in Question 8)

Under the Income Tax Act, Section 12-1, the President has the discretionary power to exempt specific business projects or industries from income tax for a period determined by the President.

When granting an exemption under this Section, the following is taken into consideration:

1. The effect that the exemption will have on State revenue
2. The economic and social impact of such exemption
3. A measure of attainability of intended objectives as regards such exemption

The exemptions are mainly provided for projects funded through government budget.

Apart from this, The Maldives Special Economic Zone Act published in the Gazette in 2014 also provides tax incentives for certain development sectors in the Maldives. These include;

• Industrial estates
• Export processing zones
• Free trade zones
• Enterprise zones
• Free ports
• Single factory export processing zones
• Offshore banking units
• Offshore financial services centers
• High-tech parks

The incentives for developers and investors of special economic zones includes capital goods import duty relief, business profit tax relief, up to 10-year goods and services tax relief, up to 10-year withholding tax relief and sales tax exemption for foreign shareholder land purchases.

The zones are aimed at expanding the Maldives economy beyond tourism, and will provide the above mentioned incentives to varying degrees for key industries, including manufacturing, logistics and transportation, financial services, R&D, property development and others.

The Law on Foreign Investments in the Republic of Maldives is also structured to enable the government of Maldives to waive duty and tax on investments carried out in the country for a period at the government’s discretion.

Currently there are no special tax regimes for intellectual property.

The current income tax regime mandates individual tax returns for each group company. However, the parent entity is required to submit consolidated financial statements for all group companies, adhering to international accounting standards, when filing the company’s corporate income tax return.

Though a consolidated account is to be submitted with the tax return, each entity is liable for taxes at its individual capacity. However, where a company belongs to a group of companies, the tax-free threshold of MVR 500,000 is distributed among the group’s entities that are subject to income tax in Maldives.

Companies are not permitted to offset business losses at the group level. Instead, losses can be utilized at the individual company level for up to 5 years.

The Maldivian tax regime has a mechanism through which payments made to non-residents are captured. The obligation to withhold and pay the tax to MIRA is on the person carrying on business in the Maldives who makes the payment to the non-resident. The below table shows the payments liable for withholding taxes and the tax rates applicable.

Income Type	Tax Rate
Rent in relation to immovable property situated in the Maldives	10%
Royalty	10%
Interest (except interest received by a bank or non-banking financial institution approved by Commissioner General of Taxation in Maldives)	10%
Dividends	10%
Fees for technical services (FTS)	10%
Commissions received in respect of services provided in the Maldives	10%
Income received in respect of performances in the Maldives by public entertainers	10%
Income received for carrying out research and development in the Maldives	10%
Insurance premium	10%
Income received by a contractor	5%

However it should be noted that, the Government of Maldives and Government of the United Arab Emirates signed a DTAA where certain payments subject to withholding tax is exempt when they are made between residents of the countries and the party does not have a permanent establishment in the other country.

Under the double taxation agreement with UAE, non-resident withholding tax is 10% on Rent in relation to immovable property and payments made in respect of performances in the Maldives by public entertainers. A 7% is levied on the royalty payments between residents of the countries and withholding tax is not levied on other categories of payments.

The Maldives also introduced a withholding tax on employees’ income in April 2020. Employers are required to withhold the appropriate amount of tax from the income of their tax-liable employees and submit such payments to the Maldives Inland Revenue Authority (MIRA). The Maldives has a progressive employee withholding tax rates.

With the enactment of Income Tax Act in 2019, income derived by a non-resident from the disposal of movable, immovable, intellectual or intangible property is subject to a Capital gains withholding taxes in Maldives as well.

A Green Tax is levied on tourists staying at tourist establishments in the Maldives. The funds collected from the Green Tax is lodged into a green fund which plays a pivotal role in the implementation of various environmental development projects across different islands of the Maldives. These initiatives encompass essential areas such as water and sewerage infrastructure, shoreline protection endeavors, and waste management projects

Plastic Bag Fee is a fee collected under the Waste Management Act by businesses operated in the Maldives on plastic bags provided free of charge or sold at the point of sale effective from 18 April 2023 onwards.

While dividends received by a tax resident of the Maldives from a tax resident entity are exempt from income taxes, dividends obtained through other means are considered taxable income at the shareholder level. For non-resident recipients, however, a flat withholding tax rate of 10% applies to dividends.

However, dividends received from entities which are non-residents are taxable as regular income. As such, dividends received by a local corporation from its foreign subsidiary are taxable, as the foreign subsidiary is considered a non-resident for income tax purposes.

The Maldives can be a viable option for international groups seeking to relocate activities tax incentives offered by the free trade zones and special economic zones.

According to data published by the International Monetary Fund (IMF), the Maldives is one of the fastest nations to recover from the economic effects of the COVID-19 pandemic which ensures business stability for investors seeking to relocate.

The Maldives also Ranks the 3rd in Paying taxes in the South East Asia in the ‘Ease of Doing Business rankings’ published by the World Bank.

The Maldives currently does not have an extensive treaty network, however the double tax avoidance agreement with the United Arab Emirates and Bangladesh and Malaysia which helps to effectively avoid double taxation.

While the country offers strategic advantages, the potential challenges such the infrastructure limitations, dependence on tourism and current low credit ratings should be carefully considered.