MALDIVES LAW AND PRACTICE Contributed by: Shaaheen Hameed, Hassan Maaz Shareef, Aminath Amathulla, Nazahath Ahmed, Isha Ali Raoof, Aifa Shareef, Noorul Hudha Ahmed and Mohamed Azmee, Premier Chambers LLP
The determination of eligible projects or indus - tries is made by the President, with advice from the Cabinet of Ministers and published in the government gazette. Exemptions are granted for a specific period and take factors such as revenue impact, economic and social impact and the attainability of objec - tives into account. A list of exempted persons and the reasons for exemption need to be published in the govern - ment gazette. Foreign Tax Credit Under Section 72 of the Income Tax Act, resi - dents paying taxes abroad can either deduct the amount of foreign tax paid or the tax payable in the Maldives on the net foreign sourced income, whichever is lower. Deductions are applied separately with respect to each type of income and each country or territory from which each type of income was derived. Deductions must be claimed within two years after the end of the accounting period and adjustments can be made within two years of any tax payable adjustments. Tax Treaties Tax credits are also applicable under any dou - ble tax avoidance agreements (DTAAs) and are deducted in line with the provisions of the Tax Administration Act of the Maldives (Law 3/2010) (the “Tax Administration Act”). The Maldives has signed DTAAs with the UAE, India and Bangladesh and all three are currently effective. The Maldives is also a party to the SAARC Limited Multilateral Agreement on Avoid -
ance of Double Taxation and Mutual Administra - tive Assistance in Tax Matters, which came into force on 1 January 2012 in the Maldives. A DTAA with Malaysia, which was signed on 24 May 2023 has not yet come into force. Most recently, on 26 May 2025, a DTAA was signed with Hong Kong. However, ratification is still pending. 5.4 Tax Consolidation Tax consolidation for the purposes of tax cal - culation 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 pre - pare and submit separate income tax returns. Parent companies have to submit consolidated accounts including their subsidiary companies, as they are considered group entities under the Income Tax Regulation. However, under the Income Tax Act, group entities have to divide the tax-free threshold of MVR500,000 among themselves, for the purpose of determining the tax bracket for taxable income as a group. Com - panies within a group cannot therefore benefit from the tax-free threshold as individual compa - nies, as they are grouped together to calculate the taxable bracket. 5.5 Thin Capitalisation Rules and Other Limitations Thin capitalisation rules are implemented in the Maldives 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 per - son’s tax EBITDA) for that period, the excess amount cannot be deducted in the computation of taxable profit of that person for that period,
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