MALDIVES Law and Practice Contributed by: Hassan Maaz Shareef, Aminath Amathulla, Aishath Shifala, Mohamed Azmee, Nazahath Ahmed, Maaisha Mohamed Musthafa, Aifa Shareef and Noorul Hudha Ahmed, Premier Chambers LLP
5. Tax Law 5.1 Taxes Applicable to Employees/ Employers Employee Withholding Tax
Banks are taxed at a rate of 25% of their taxable income. Capital gains tax Under the Income Tax Act, the Maldives does not impose a separate capital gains tax. Instead, gains arising from the disposal of movable, immovable, intellectual or intangible property are treated as part of taxable income and are subject to income tax at 15%. Capital gains may arise from, among other things, the disposal of immovable property situated in the Maldives, shares or interests in entities whose value derives from Maldivian immovable property and other business or investment assets. Non-resident withholding tax Under the Income Tax Act, income derived from the Maldives by non-residents is subject to a 10% tax on the gross amount of income received. Non-resi - dent withholding tax is payable on rent in relation to immovable property situated in the Maldives, royal - ties, interest, dividends, fees for technical services, commissions paid in respect of services supplied in the Maldives and insurance premiums paid to insur - ers. Payments to non-resident contractors are subject to withholding tax at the rate of 5%. Capital gains withholding tax Under the Income Tax Act, gains derived by non-res - idents from the disposal of certain assets are subject to capital gains withholding tax at 10% of the gross payment. This applies in particular to disposals of immovable property situated in the Maldives and to offshore indirect transfers, where more than 50% of an entity’s value is derived from Maldivian immovable property. The obligation to withhold and remit the tax lies primarily with the payer or acquirer of the asset, with secondary liability rules applying where the payer fails to comply. Employee withholding tax See 5.1 Taxes Applicable to Employees/Employers . Goods and services tax Under the Goods and Services Tax Act (Law 10/2011), businesses operating in the general sector are cur -
Under the Income Tax Act of the Maldives (Law 25/2019) (the “Income Tax Act”), employee withhold - ing tax is applicable where an employer pays remu - neration to an employee, whether in cash, annuities, in-kind benefits or any other form. Employers must deduct employee withholding tax from the gross amount of each payment made monthly at the fol - lowing rates: • 5.5% (if remuneration is more than MVR60,000 but less than MVR100,000); • 8% (if remuneration is more than MVR100,000 but less than MVR150,000); • 12% (if remuneration is more than MVR150,000 but less than MVR200,000); and • 15% (if remuneration is more than MVR200,000). Social Charges Under the Pensions Act (Law 8/2009), both employ - ers and employees have to contribute to the Maldives Retirement Pension Scheme. Both must contribute at least 7% of the pensionable wage (basic salary). Participation in the Maldives Retirement Pension Scheme is mandatory for all local employees aged between 16 and 65. Foreign employees in the same age bracket may voluntarily register and contribute to the Maldives Retirement Pension Scheme. 5.2 Taxes Applicable to Businesses Taxes Applicable to Businesses Income tax Under the Income Tax Act, entities other than banks and individuals who are resident in the Maldives must pay income tax at a rate of 15% if taxable income exceeds MVR500,000. For income tax purposes, a company is considered resident if it is incorporated, has its head office or central management and control in the Maldives. Partnerships are considered resident if they are incorporated and have their head office in the Maldives.
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