MaldivesTax Obligations Detailed

In the Maldives, employers face various tax obligations related to income tax, goods and services tax (GST), and social security contributions.

Income Tax (Employee Withholding Tax)

As an employer, you are responsible for withholding income tax from your employees' salaries and remitting it to the Maldives Inland Revenue Authority (MIRA). This is known as Employee Withholding Tax (EWT). The tax is calculated on the employee's gross remuneration after deducting their contribution to the Maldives Retirement Pension Scheme (MRPS). Include all salaries, wages, allowances, and benefits, whether paid in cash or not, in the calculation.

The EWT rates for 2025 are as follows:

• MVR 0 - 720,000: 0%
• MVR 720,001 - 1,200,000: 5.5%
• MVR 1,200,001 - 1,800,000: 8%
• MVR 1,800,001 - 2,400,000: 12%
• MVR 2,400,001 and above: 15%

You are required to submit the Employee Withholding Tax return and payment to MIRA monthly, by the 16th of the following month.

Business Profit Tax (BPT)

Companies operating in the Maldives are subject to Business Profit Tax (BPT) at a rate of 15% on profits exceeding MVR 500,000. Certain deductions are allowed, such as charitable donations, welfare expenses for employees, and a fixed 20% deduction for rental income. There's also an earning stripping rule that limits interest deductions.

Goods and Services Tax (GST)

The standard GST rate is currently 12% on most goods and services. However, the Tourism Goods and Services Tax (TGST), applicable to the tourism sector, is set at a higher rate of 16% as of today's date but is planned to increase to 17%. Certain goods and services are exempt or zero-rated.

Social Security Contributions

Employers are required to contribute 7% of their employees' pensionable wages to the Maldives Retirement Pension Scheme (MRPS). This is part of the social security system in the Maldives. Employees also contribute a percentage of their salary to the MRPS.

Other Taxes

• Green Tax: A tax of USD 6 per day is levied on tourists staying at resorts, hotels, or vessels. This tax is collected by the respective establishments and remitted to the government.

• Customs Duty: Import duties range from 0% to 100% depending on the goods.

It's important to consult with a tax advisor or the MIRA for the most up-to-date information on tax rates, regulations, and deadlines. This overview provides a general understanding of the employer tax obligations in the Maldives as of February 4, 2025, and may be subject to changes based on updated regulations.

In the Maldives, employee tax deductions primarily consist of income tax, mandatory pension contributions, and voluntary deductions.

Income Tax (PAYE)

Employee income tax, also known as Pay-As-You-Earn (PAYE), is deducted monthly based on progressive tax brackets. The tax rates for 2023 are as follows:

• MVR 0 - 720,000: 0%
• MVR 720,000 - 1,200,000: 5.5%
• MVR 1,200,000 - 1,800,000: 8%
• MVR 1,800,000 - 2,400,000: 12%
• Above MVR 2,400,000: 15%

These annual brackets are prorated monthly for PAYE calculations. While limited deductions apply specifically to employment income, employees can claim certain deductions when filing their annual tax return, including Zakat payments, pension contributions, specific life insurance premiums, donations (up to 5% of taxable income), and interest on loans (up to 6% per year). This annual filing allows for year-end adjustments to reconcile any difference between PAYE deductions and the final tax liability. The deadline for submitting the Employee Withholding Tax Return and payment for January 2025 is February 16, 2025.

Pension Contributions

Employees are required to contribute to the Maldives Retirement Pension Scheme (MRPS). The employer deducts this contribution directly from the employee's salary and remits it to the MRPS along with the employer’s contribution. Information on rates (as of February 4, 2025) is unavailable within the sources provided.

Other Deductions

Other potential deductions from an employee's salary might include voluntary deductions agreed upon with the employer, such as health insurance premiums, union dues, or loan repayments.

Employer Obligations

Employers in the Maldives are responsible for withholding and remitting PAYE tax to the Maldives Inland Revenue Authority (MIRA) monthly. They must also deduct and remit employee pension contributions. It is crucial for employers to maintain accurate payroll records and comply with all tax deadlines and regulations. Non-compliance can lead to penalties.

General Tax Information in Maldives

Beyond employee deductions, the Maldives tax system includes several other taxes relevant to businesses and individuals.

• Goods and Services Tax (GST): A consumption tax applied to most goods and services. The standard rate is currently 6%, with certain exceptions and exemptions. A higher rate of 16% applies to goods and services in the tourism sector which is scheduled to increase to 17% on July 1, 2025. A reduced GST rate of 8% applies to goods and services sold in cafes operating exclusively for employees of tourist establishments (effective November 5, 2024).

• Green Tax: A tax levied on tourists staying in resorts, hotels, or tourist vessels. This tax is typically collected by the accommodation provider and remitted to the MIRA. The Green Tax rate is subject to change and specific details should be verified with official sources as information about rates is not available. Children under two are exempt from this tax as of January 1, 2025.

• Business Profit Tax (BPT): Levied on the profits of businesses. The standard BPT rate is 15%.

• Airport Taxes and Fees: These apply to departing passengers and include a departure tax and an airport development fee. Rates for these are subject to change, and the most current information should be verified with official sources. New rates took effect December 1, 2024.

It's important to consult the Maldives Inland Revenue Authority (MIRA) for the most up-to-date information and specific details regarding tax rates, regulations, and deadlines, as tax laws are subject to change. The information above is based on available data as of February 4, 2025.

The Maldives levies a Goods and Services Tax (GST) on goods and services, with different rates and regulations for the tourism and general sectors.

GST Rates

• General Goods and Services (GGST): 8% (effective January 1, 2023)
• Tourism Goods and Services (TGST): 16% (effective January 1, 2023, increasing to 17% on July 1, 2025)

Registration Threshold

• GGST: Mandatory registration if taxable turnover exceeds MVR 1,000,000 in any 12-month period (past or future). Voluntary registration is also available.
• TGST: Mandatory for all businesses in the tourism sector, regardless of turnover.

Filing and Payment

• Taxable Period: Monthly for businesses with turnover exceeding MVR 1,000,000 per month. Quarterly for businesses with lower turnover.
• Filing Deadline: The 28th of the month following the taxable period's end (unless postponed by the Commissioner General).
• Payment: Must accompany the tax return.
• Invoicing: Required within three days of service completion.
• Online Filing: Mandatory for the tourism sector. Required for general sector businesses with an annual turnover of MVR 20,000,000 or more.

Exemptions and Zero-Rated Supplies

• Exempt Supplies: These are not subject to GST and input VAT cannot be claimed. Examples include education by registered institutions, healthcare by registered providers, and certain government housing sales.
• Zero-Rated Supplies: GST is not charged, but input VAT can be claimed. Examples include essential goods (rice, sugar, flour), exported goods and services, and specified basic foodstuffs.

Specific Tourism Sector Regulations

The TGST applies to goods and services supplied by:

• Tourist establishments (resorts, hotels, guesthouses, etc.) authorized by the Ministry of Tourism.
• Businesses operating within tourist establishments (diving schools, shops, spas, etc.), excluding those serving only employees (effective November 5, 2024, cafes serving only employees are also excluded).
• Travel agencies.
• Agents of foreign tourist vessels.
• Domestic air transport providers (for non-Maldivian citizens).

Other Important Information

• The Maldives will switch from the origin principle to the destination principle for determining GST liability on July 1, 2025.
• Green tax rates will increase on January 1, 2025, but children under two will be exempt.

Please note that this information is current as of February 4, 2025, and is subject to change.

Maldives tax incentives primarily focus on attracting foreign investment and promoting specific sectors like tourism and development in special economic zones.

Tax Incentives and Concessions

• Tax Treaties: The Maldives has tax treaties with the UAE and Bangladesh to avoid double taxation. These agreements can reduce the tax burden for investors from these countries.
• Special Economic Zones (SEZs): SEZs offer several incentives for investors, including exemptions from import duties, income tax, GST, taxes on land sales and purchases, and withholding tax. Tax reliefs and credits are also available depending on the investment. SEZs prioritize investments in key areas such as healthcare, education, IT, manufacturing, and renewable energy, with a minimum investment of USD 100,000,000.
• Tourism Sector Incentives: The Maldives government occasionally introduces tax and land rent concessions to promote tourism development, especially in remote areas. These concessions are subject to changes in regulations and may vary based on location and investment size.

General Tax Information

• Corporate Tax: Foreign companies are taxed at the same rate as local companies on income derived within the Maldives. The corporate tax rate for non-resident international transport operators is 2%. No capital gains tax is levied.
• Goods and Services Tax (GST): The standard TGST rate is 16%, increasing to 17% in July 2025. A lower rate of 8% applies to the general sector. Certain goods and services are exempt or zero-rated.
• Green Tax: This tax supports environmental sustainability initiatives. Rates vary depending on the type of accommodation, with increases effective from January 2025. Resorts and larger hotels (50+ rooms) will charge USD 12 per person per night, while smaller guesthouses (49 rooms and under) will charge USD 6 per person per night. Children under two are exempt.
• Repatriation of Funds: There are no restrictions on repatriating profits or earnings for foreign investors, subject to applicable taxes.
• Foreign Investment Registration: Foreign investors must obtain approval from the Ministry of Economic Development and register a company or branch in the Maldives. An administrative fee applies.
• Royalty on Foreign Investments: Annual royalty payments are required for foreign investments registered with Invest Maldives. The rate depends on the percentage of Maldivian ownership in the entity.

Please note that tax regulations and incentives can be subject to change. Consulting with a tax advisor is recommended for the latest updates and specific guidance.