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 commenced on 1 April 2020.
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.
Income Tax is charged on the taxable income of an individual as per the table below.
|Tax bracket 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%|
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.
Since taxation of remuneration was commenced on 1 April 2020, employee withholding tax was also commenced on 1 April 2020.
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
Employee Withholding Tax (EWT) will be deducted at below rates
|Remuneration subject to withholding tax [Tax brackets] (per month)||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%|
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.
Remuneration subject to Employee 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.
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.
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.
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.
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.
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.
A non-resident is a person who is neither a resident nor a temporary resident.
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.