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Maldives Publishes First Amendment to the Income Tax Act — Orbitax Tax News & Alerts

The Maldives Inland Revenue Authority (MIRA) has published the First Amendment to the Income Tax Act (Law no. 15/2021), which was ratified by the president and published in the Official Gazette on 20 July 2021. The main measures of the law include:

  • The permanent establishment (PE) rules are amended, including:
    • a building site, a construction, assembly, or installation project or connected supervisory activities are considered a PE if such site, project, or activities last more than 90 days (down from 6 months);
    • activities involving exploration, extraction, or exploitation of natural resources, including fishing, are considered a PE if such activities last more than 90 days (new rule);
    • activities involving installation or substantial use of mechanical or scientific equipment or machinery are considered a PE if such activities last more than 90 days (new rule).
  • The scope of income or gains of any other kind (subject to income tax) is extended to include unexplained monies or assets received or obtained and investments and expenditures financed through unexplained funding sources;
  • The scope of income deemed to be derived from the Maldives is extended to include:
    • commissions earned in respect of services supplied in the Maldives;
    • income earned in respect of performances by public entertainers in the Maldives;
    • income earned in respect of R&D conducted in the Maldives; and
    • income earned by non-resident contractors;
  • The following head office expenses paid by a permanent establishment are made non-deductible:
    • royalties paid for the use of patents or other rights; and
    • commissions paid for specific services provided to the PE or for management;
  • New provisions are added for imposing a 10% withholding tax on offshore transfers of:
    • immovable property situated in the Maldives, including options and rights to buy such immovable property;
    • shares or comparable interests if, at any time in the 365 days preceding the transfer, more than 50% of their value is derived from immovable property situated in the Maldives;
    • shares or comparable interests in a company, partnership, or trust resident in the Maldives; and
    • intellectual or intangible property used or registered in the Maldives;
  • The non-resident withholding tax rate on payments to non-resident contractors is reduced from 10% to 5%
  • The 3% non-resident withholding tax on the following payments is repealed:
    • reinsurance premiums to a non-resident reinsurer;
    • commissions for a transfer or deposit through a bank;
    • commissions for the use of a card issued by a bank; and
    • intercarrier charges between telecommunication service providers;
  • Provisions are added that grant the President discretion to exempt income derived from a specific project or industry for a specified period, in consultation with the Cabinet; and
  • A minimum ownership threshold of 10% is added for the inclusion of income under the controlled foreign entity rules that apply when a company, partnership, trust, or other entity that is not a resident of the Maldives is controlled by 5 or fewer residents of the Maldives (no particular threshold was previously provided).

Law no. 15/2021 is currently only available in the Dhivehi language. An English-language version is expected and should be made available on the MIRA legislation web page. Further details will be published once available.