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
except where interest is paid to a bank licensed under the Banking Act of the Maldives (Law 24/2010) (the “Banking Act”) or to an insurance business or finance leasing business or housing finance business licensed under the Monetary Authority Act of the Maldives (Law 6/1981) (the ”Monetary Authority Act”). The following taxpayers are exempt from the thin capitalisation rules. • Commercial banks licensed under the Bank - ing Act. • Insurance businesses or finance leasing businesses or housing finance businesses or non-banking financial institutions licensed to conduct financing business under the Mon - etary Authority Act. • Persons categorised as micro, small or medi - um-sized businesses under the Law on Small and Medium Enterprises (Law 6/2013). • State-owned enterprises (SOEs), in which the government of the Maldives holds a majority of the ordinary share capital directly. 5.6 Transfer Pricing Under Section 67 (a) of the Income Tax Act, where an arrangement or transaction is entered into between parties in the following circum - stances, the taxable income will be computed in line with the arm’s length terms, irrespective of the actual terms of the arrangement or trans - action. • The arrangement or transaction was entered into between two persons who were associ - ates. • The terms on which the arrangement or trans - action was entered into between the persons were not arm’s length terms.
• If the income of one person involved in the transaction would be higher than under arm’s length conditions. • If any deduction given to one person would be lower than under arm’s length conditions. • If any loss incurred by one person would be less than under arm’s length conditions. • If any tax credits available to one person would be less than under arm’s length condi - tions. 5.7 Anti-Evasion Rules General Anti-Avoidance Rule (GAAR) Section 66 (a) of the Income Tax Act grants the Commissioner General of Taxation the author - ity to invalidate any arrangement or transac - tion, where the Commissioner 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 Commis - sioner General highlighted under Section 128-1 of the Income Tax Regulation include: • the carrying out of a transaction which lacks a bona fide commercial purpose; • the carrying out of a transaction which lacks economic substance; • the abuse of organisational form; and • the recharacterisation of an arrangement or transaction. 5.8 Tariffs Tariffs are governed in the Maldives by the Export Import Act (Law 31/1979) (the “Export Import Act”), which is implemented and enforced by the Maldivian Customs Service. Tariff rates are generally applied uniformly based on the type of goods, while preferential rates and exemp -
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