1 - When did the Income tax Act become effective?
The Income Tax Bill was signed into a law by the President on 17 December 2019. The taxation under the Act started on 1 January 2020. However, taxation of remuneration under the Act would start on 1 April 2020.
2 - Who are the persons affected by the Income Tax Act?
Residents of Maldives, and persons who are not residents or temporary residents but derives income from Maldives come within the purview of the Income tax Act.
3 - What are the tax rates applicable to an individual under the Income Tax Act?
Income Tax is charged on the taxable income of an individual as per the table below.
|
Tax brackets for taxable income derived in an accounting period |
Tax Rate |
|
Not exceeding MVR 720,000/- |
0% |
|
More than MVR 720,000/- but not exceeding MVR 1,200,000/- |
5.5% |
|
More than MVR 1,200,000/- but not exceeding MVR 1,800,000/- |
8% |
|
More than MVR 1,800,000/- but not exceeding MVR 2,400,000/- |
12% |
|
More than MVR 2,400,000/- |
15% |
4 - What is employee withholding tax?
The amount of tax deducted by an employer or payer from the remuneration payable to an employee, director of a company or partner of a partnership is referred to as the employee withholding tax.
5 - When does the employee withholding tax commence?
Since taxation of remuneration is due to commence on 1 April 2020, employee withholding tax will also commence on 1 April 2020.
6 - How is the employee withholding tax different from the Income Tax?
Employee withholding is a mechanism where the tax due on remuneration is deducted by the payer, before the remuneration reaches the employee, director or partner. Individuals would not double pay the amount of tax that had been already paid on remuneration through the withholding mechanism. Effectively there is no difference between employee withholding tax and Income Tax, except that an amount of tax on remuneration (income) is paid through the withholding mechanism in the case of employee withholding tax.
7 - What are the employee withholding tax rates under the Income tax Act?
Remuneration subject to withholding tax (per month)
[Tax brackets]
|
Tax Rate |
|
Not exceeding MVR 60,000 |
0% |
|
More than MVR 60,000 but not exceeding MVR 100,000 |
5.5% |
|
More than MVR 100,000 but not exceeding MVR 150,000 |
8% |
|
More than MVR 150,000 but not exceeding MVR 200,000 |
12% |
|
More than MVR 200,000 |
15% |
8 - How is "remuneration" defined?
Remuneration includes salary, wages, allowances and benefits derived by an employee or director or partner as consideration for services rendered by the employee or director or partner. It also includes any compensation for loss of employment or service, restrictive covenant payment, and entry or exit inducement payment. Benefits include any fringe benefits, both cash and non-cash.
9 - How is remuneration subject to [employee] withholding tax calculated?
Remuneration subject to withholding tax is the amount of remuneration per month, after the deduction of the amount contributed to the Maldives Retirement Pension Scheme by the recipient of the remuneration.
10 - I had been registered as a taxpayer with MIRA even before the Income Tax commenced. Am I required to register again under the Income Tax Act?
If your registration as a taxpayer with MIRA was valid as of 1 January 2020, you are not required to apply for registration under the Income Tax Act. However, in that case, MIRA would register you under the Income Tax Act based on the information it has and notify you of your registration.
11 - Are companies, partnerships, cooperative societies required to be registered under the Income Tax Act?
Yes, companies, partnerships or cooperative societies are required to be registered under the Income Tax Act. However, the process is arranged in such a way that companies, partnerships or cooperative societies that are incorporated in the Maldives get registered under the Income Tax Act during the business registration process with the Ministry of Economic Development (MED), and therefore a separate form is not required to be submitted to MIRA for registration.
12 - I am an individual doing business in the Maldives, and my business is registered with MED as a sole proprietorship. Am I required to be registered under the Income Tax Act?
Yes, individuals carrying on business through a sole proprietorship are also required to register under the Income Tax Act. However, like corporate entities, such individuals are not required to submit a separate form to MIRA for registration, as it is done during the business registration process with the MED.
13 - If a foreign national stays in the Maldives for more than a half year, would that individual be considered as a resident for the purpose of the Income Tax?
If a foreign national stays legally in the Maldives for 183 days or more, and is not married to a citizen of the Maldives, that individual would be considered as a temporary resident for the purpose of the Income Tax.
14 - How does the taxation of a resident differ from that of a temporary resident?
The main difference is that, a resident would be taxed on income derived from both the Maldives and elsewhere, while a temporary resident would be taxed only on income derived from the Maldives.
15 - Who is a non-resident?
A non-resident is a person who is neither a resident nor a temporary resident.
16 - Temporary residents and non-residents are taxed only on the income derived from the Maldives. How does one differ from the other?
Persons carrying on business in the Maldives are required to deduct non-resident withholding tax from certain payments made to a non-resident, while this requirement is not there when a payment is made to a temporary resident.