The Maldives operates a tax system where both employers and employees have specific obligations. Understanding these obligations is crucial for businesses operating in the Maldives, especially when employing local or foreign workers. This guide provides a detailed overview of employer tax responsibilities and employee tax deductions in the Maldives for 2025, covering social security contributions, income tax withholding, available deductions, compliance deadlines, and special considerations for foreign entities.
Employer Social Security and Payroll Tax Obligations
Employers in the Maldives are required to contribute to the Maldives Retirement Pension Scheme (MRPS) and the Social Security Scheme. These contributions are mandatory and calculated as a percentage of the employee's gross salary.
- Maldives Retirement Pension Scheme (MRPS): Both the employer and employee contribute to this scheme, which provides retirement benefits to employees.
- Social Security Scheme: This scheme covers healthcare and other social welfare benefits.
The contribution rates for 2025 are as follows:
| Scheme | Employer Contribution | Employee Contribution |
|---|---|---|
| Maldives Retirement Pension Scheme (MRPS) | 7% | 7% |
| Social Security Scheme | 5% | 5% |
These contributions must be remitted to the Maldives Inland Revenue Authority (MIRA) on a monthly basis. Failure to comply with these obligations may result in penalties.
Income Tax Withholding Requirements
Employers in the Maldives are responsible for withholding income tax from their employees' salaries. The Maldives operates a progressive income tax system, where the tax rate increases as the income increases. The income tax is known as PAYE (Pay As You Earn).
The income tax brackets for 2025 are as follows:
| Taxable Income (MVR per month) | Tax Rate |
|---|---|
| 0 - 15,000 | 0% |
| 15,001 - 20,000 | 6% |
| 20,001 - 30,000 | 8% |
| 30,001 - 50,000 | 10% |
| 50,001 - 70,000 | 12% |
| 70,001 - 100,000 | 15% |
| Above 100,000 | 18% |
Employers must calculate the income tax based on these brackets and remit it to MIRA monthly. Accurate record-keeping of employee salaries and tax deductions is essential for compliance.
Employee Tax Deductions and Allowances
Employees in the Maldives may be eligible for certain tax deductions and allowances that can reduce their taxable income. These deductions can include:
- Pension Contributions: Employee contributions to the Maldives Retirement Pension Scheme (MRPS) are tax-deductible.
- Approved Donations: Donations to approved charitable organizations may be tax-deductible, subject to certain limits.
- Medical Expenses: Certain medical expenses may be deductible, subject to specific conditions and documentation requirements.
Employees must provide the necessary documentation to their employers to claim these deductions. Employers should ensure that they accurately reflect these deductions when calculating income tax withholding.
Tax Compliance and Reporting Deadlines
Employers in the Maldives must adhere to strict tax compliance and reporting deadlines. Key deadlines include:
- Monthly Tax Payments: Social Security contributions and income tax withholdings must be remitted to MIRA by the 15th of the following month.
- Annual Tax Returns: Employers must file an annual tax return providing details of all employee salaries, deductions, and tax withholdings. The deadline for filing the annual tax return is typically within three months after the end of the tax year (December 31).
Failure to meet these deadlines may result in penalties, including fines and interest charges. Maintaining accurate records and using a reliable payroll system can help ensure compliance.
Special Tax Considerations for Foreign Workers and Companies
Foreign workers and companies operating in the Maldives are subject to specific tax considerations.
- Foreign Workers: Foreign workers are generally subject to the same income tax rates and social security contributions as Maldivian citizens. However, there may be specific rules regarding residency status and eligibility for certain deductions.
- Foreign Companies: Foreign companies operating in the Maldives may be subject to corporate income tax on their profits. They may also be required to withhold taxes on payments made to foreign contractors or suppliers.
- Double Tax Agreements: The Maldives has double tax agreements with certain countries, which may provide relief from double taxation for foreign workers and companies.
It is advisable for foreign workers and companies to seek professional tax advice to ensure compliance with all applicable tax laws and regulations. Understanding these obligations is crucial for businesses operating in the Maldives, especially when employing local or foreign workers.
