MaldivesTax Obligations Detailed

In the Maldives, employers face several tax obligations related to employee compensation and other business activities.

Employer Withholding Tax (EWT)/PAYE

• Employers withhold income tax from employee salaries monthly, remitting it to the Maldives Inland Revenue Authority (MIRA). This is known as Pay As You Earn (PAYE).
• The withholding is calculated on gross remuneration after deducting employee contributions to the Maldives Retirement Pension Scheme (MRPS).
• All cash and non-cash benefits (unless tax-exempt) are included in the remuneration for calculating EWT.

EWT Rates for 2025 (Monthly Salary Brackets)

• MVR 0 - 60,000: 0%
• MVR 60,001 - 100,000: 5.5%
• MVR 100,001 - 150,000: 8%
• MVR 150,001 - 200,000: 12%
• MVR 200,001 and above: 15%

EWT Filing and Payment Deadline

• Returns and payments for January 2025 are due by February 16th, 2025. This follows the general monthly filing and payment pattern.

Social Security Contributions

• Employers contribute 7% of the employee's pensionable wage to the MRPS.

Goods and Services Tax (GST)

• Businesses exceeding a certain taxable income threshold must register and collect GST.
• Current GST rates are 6% standard rate, and 12% for specific goods and services and the tourism industry will have 16% GST rate effective from 1 January 2024.

Green Tax

• Applies to tourist accommodations (USD 6 per night). While not directly an employer obligation, businesses in the tourism sector are responsible for collecting and remitting this tax.

Other Taxes Relevant to Businesses Operating in Maldives

• Business Profit Tax (BPT): 15% on profits exceeding MVR 500,000 for companies and other entities. Banks face a 25% BPT rate on profits.
• Withholding Tax (WHT): 10% on payments to non-residents, including contractors and for insurance premiums.
• Customs Duty: Varies from 0% to 100% of the value of imported goods.

It's important to note that this information is based on the available resources as of February 5, 2025, and might be subject to change due to legal updates. Consulting with a tax advisor or referring to official MIRA resources is always recommended for up-to-date guidance.

In the Maldives, employee tax deductions primarily revolve around income tax, encompassing various aspects such as rates, deadlines, and allowable deductions.

Income Tax

As of 2025, the Maldives follows a progressive income tax system with varying rates based on income levels. Employees are subject to withholding tax, where the employer deducts tax directly from the employee's salary and remits it to the Maldives Inland Revenue Authority (MIRA).

• Tax Rates: These are applied to the annual taxable income. While the exact rates for 2025 might not be readily available, using the 2023 rates as an example, they ranged from 0% for income up to MVR 720,000 to 15% for income exceeding MVR 2,400,000. These are prorated for monthly deductions under the Pay-As-You-Earn (PAYE) system.

• Deductions: Specific expenses related to employment are generally not deductible from employment income. However, certain deductions are permissible:

  • Zakat Payments: Payments made under the Islamic principle of Zakat are deductible.
  • Pension Contributions: Contributions to the Maldives Retirement Pension Scheme (MRPS) are deductible.
  • Life Insurance Premiums: Deductions are available under specific conditions.
  • Charitable Donations: Donations to approved state institutions or charities are deductible up to 5% of the taxable income.
  • Interest on Loans: Deductible up to 6% per year.

• Deadlines: Employee Withholding Tax returns and payments are due on the 16th of the following month (for example, January's return is due February 16th). It's crucial for employers to adhere to these deadlines to avoid penalties.

• Year-End Adjustment: While the PAYE system generally covers the final tax liability, employees can file an annual tax return for adjustments, if needed. This allows for accounting of deductions not considered during the year.

Other Relevant Taxes and Contributions

• Goods and Services Tax (GST): As of February 5th, 2025, the standard GST rate is 6%, with specific rates for certain sectors. For the tourism sector it is currently 16%, scheduled to increase to 17% from July 1st, 2025. Goods and services sold in cafes within tourist establishments (exclusively for employees) are subject to 8% GST as of November 5th, 2024.
• Green Tax: This tax applies to tourists staying in designated establishments.
• Social Security Contributions: Employers contribute 7% of the employee's pensionable wage.

It is important to note that tax regulations can change, so keeping up to date with the latest information from the MIRA is essential for accurate compliance. As of February 5th, 2025, this summary reflects the available information. Consulting a tax professional is recommended for personalized advice.

The Maldives levies a dual Goods and Services Tax (GST) system, encompassing General GST (GGST) and Tourism GST (TGST).

General GST (GGST)

• Rate: Currently 8%, applicable to all goods and services not specifically covered under TGST.
• Registration Threshold: Businesses must register for GGST if their annual turnover exceeds MVR 1 million. Voluntary registration is possible for businesses with turnovers between MVR 500,000 and MVR 1 million. Importers and exporters must register regardless of turnover.
• Filing and Payment: Monthly or quarterly (for turnovers less than MVR 1 million monthly), due by the 28th of the following month or quarter.
• Exemptions: Certain essential goods (e.g., rice, sugar, flour, specific vegetables) are zero-rated (0% GST). Exempt goods and services include educational services by registered institutions, healthcare by registered providers, and certain government-provided housing.

Tourism GST (TGST)

• Rate: Currently 16%, increasing to 17% on July 1, 2025. Applies to goods and services provided by tourist resorts, hotels, guesthouses, and related businesses (diving schools, spas, etc.), travel agencies, and domestic air transport to non-Maldivians.
• Registration Threshold: No threshold; all businesses in the tourism sector must register.
• Filing and Payment: Similar to GGST.

Recent Changes & Future Updates

• Destination Principle (July 1, 2025): The Maldives is transitioning from the origin principle to the destination principle for GST, affecting foreign tourism providers and digital platforms.
• Employee Cafes (Effective November 5, 2024): Goods and services sold in cafes serving exclusively employees at tourist establishments are subject to 8% GGST.
• Green Tax (Effective January 1, 2025): Increased rates for Green Tax apply, with exemptions for children under two years old.

General Information on GST in Maldives

GST was introduced in the Maldives in 2011 to modernize the tax system. The system aims to broaden the tax base and generate revenue for government services and development projects. It's important for businesses operating in or selling to the Maldives to understand the nuances of both GGST and TGST to ensure compliance. The Maldives Inland Revenue Authority (MIRA) is the governing body for tax administration and provides detailed information and resources on its website.

The Maldives offers various tax incentives, primarily focused on attracting foreign investment and promoting specific sectors like tourism and Special Economic Zones (SEZs).

Tax Incentives for Special Economic Zones (SEZs)

The Special Economic Zones Act (Law Number 24/2014) provides incentives for investments in designated SEZs. These zones cater to various sectors, including industrial estates, tourism, transshipment ports, healthcare, education, technology, renewable energy, food security, and gas exploration. A minimum investment of USD 100,000,000 is generally required, with specific allocation requirements depending on the sector. Incentives may include:

• Exemption from import duties on materials used for SEZ development
• Exemption from Income Tax
• Exemption from Goods and Services Tax (GST)
• Exemption from taxes on land sales and purchases
• Exemption from Withholding Tax
• Tax relief and tax credits
• Free repatriation of capital and profits

Tax and Rent Concessions for Remote Tourism Development

As of January 14, 2025, the Maldives is planning to offer tax and land rent concessions to stimulate tourism investment in less-developed regions. Details regarding the specific concessions and eligibility criteria are yet to be finalized, with amendments to tourism laws and regulations currently underway. These incentives aim to address the lower return on investment typically associated with remote area development.

Tax Changes Affecting the Tourism Sector in 2025

Several tax adjustments impacting the tourism industry will take effect in 2025:

• Increase in Tourism Goods and Services Tax (TGST): The TGST rate will increase from 16% to 17% starting July 1, 2025.
• Increase in Green Tax: Effective January 1, 2025, the Green Tax will double:
  • Resorts and Hotels (50+ rooms): USD 12 per person per night
  • Hotels and Guesthouses (49 rooms or less): USD 6 per person per night
  • Children under two years old are exempt.
• New Foreign Currency Revenue Rule: The tourism sector is now mandated to deposit all foreign currency earnings into local banks.

General Tax Information

• Corporate Income Tax: The corporate income tax rate in the Maldives is 15%. Several deductions are available, such as Zakat payments, contributions to the Maldives Retirement Pension Scheme, donations to approved charities (up to 5% of taxable income), and interest on loans (up to 6% per year). Non-resident international transport operators are taxed at a lower rate of 2%.

• Personal Income Tax: A progressive tax system applies to personal income. Rates range from 0% to 15%, depending on income brackets. Deductions similar to those for corporate income tax apply.

• Foreign Tax Credit: A foreign tax credit is available for taxes paid in other countries, even without a Double Tax Avoidance Agreement (DTAA). The credit is limited to the lower of the foreign tax paid or the Maldivian tax payable on that income. The Maldives has a DTAA with the United Arab Emirates.

• Withholding Tax: Withholding tax applies to specific payments made to non-residents by businesses operating in the Maldives at rates of 5% or 10%.

Note: This information is current as of February 5, 2025, and might be subject to changes due to ongoing legislative processes or future amendments. Consulting official government sources or tax professionals is recommended for the most up-to-date information.