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
of the Maldives (Law 3/2010) (the “Tax Administration Act”). The Maldives has signed DTAAs with the UAE, India, Bangladesh and Malaysia and all four are currently in effect. The Maldives is also a party to the SAARC Limited Multilateral Agreement on Avoidance of Dou - ble Taxation and Mutual Administrative Assistance in Tax Matters, which came into force on 1 January 2012 in the Maldives. A DTAA with Hong Kong, which was signed on 26 May 2025, has not yet come into force. 5.4 Tax Consolidation Tax consolidation for the purposes of tax calculation and deduction by a group entity is not available under the tax laws in the Maldives. Under the Income Tax Regulation (Regulation 2020/R- 21), each entity in the group has to prepare and submit separate income tax returns. Parent companies must submit consolidated accounts, including their subsidi - aries, as they are considered group entities under the Income Tax Regulation. However, under the Income Tax Act, group entities must divide the tax-free thresh - old of MVR500,000 among themselves to determine the tax bracket for the group’s taxable income. Com - panies within a group cannot therefore benefit from the tax-free threshold as individual companies, as they are grouped together for tax purposes. 5.5 Thin Capitalisation Rules and Other Limitations Thin capitalisation rules are implemented in the Mal - dives in line with Section 71 of the Income Tax Act. Where the total amount of interest paid, exceeds the interest capacity of a person (30% of a person’s tax EBITDA) for that period, the excess amount cannot be deducted in the computation of taxable profit of that person for that period, except where interest is paid to a bank licensed under the Banking Act of the Mal - dives (Law 24/2010) (the “Banking Act”) or to an insur - ance business or finance leasing business or housing finance business licensed under the Monetary Author - ity Act of the Maldives (Law 6/1981) (the “Monetary Authority Act”).
The following taxpayers are exempt from the thin capi - talisation rules. • Commercial banks licensed under the Banking Act. • Insurance businesses, finance leasing businesses, housing finance businesses or non-banking finan - cial institutions licensed to conduct financing busi - ness under the Monetary Authority Act. • Persons categorised as micro, small or medium- sized businesses under the Law on Small and Medium Enterprises (Law 6/2013). • State-owned enterprises (SOEs), in which the gov - ernment of the Maldives directly holds a majority of the ordinary share capital. 5.6 Transfer Pricing Under Section 67 (a) of the Income Tax Act, if an arrangement or transaction is between associates and the terms are not arm’s length terms, taxable income will be computed based on arm’s length terms. This applies where the actual terms result in higher income, lower deductions, lower losses or lower tax credits for any person involved. 5.7 Anti-Evasion Rules General Anti-Avoidance Rule (GAAR) Section 66 (a) of the Income Tax Act grants the Com - missioner General of Taxation the authority to invali - date any arrangement or transaction, where the Com - missioner has reasonable grounds to suspect that an arrangement or transaction was entered into for the purpose of tax avoidance or to reduce tax liability, either by issuing an assessment under Section 39 of the Tax Administration Act or by other means. Reasonable grounds for action by the Commission - er General, highlighted under Section 128-1 of the Income Tax Regulation, include: • conducting a transaction which lacks a bona fide commercial purpose; • conducting a transaction which lacks economic substance; • abuse of organisational form; and • recharacterisation of an arrangement or transac - tion.
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