Income Tax

Income Tax is levied under the Income Tax Act (Law Number 25/2019). The act was published in the Government Gazette on 17 December 2019 and taxation under the act is set to commence on 1 January 2020. However, remuneration will come within the purview of income effective 1 April 2020. The Business Profit Tax regime imposed under the Business Profit Tax Act would be repealed with the commencement of Income Tax.

Tax residents (except for temporary residents) of Maldives are taxed on their worldwide income, whereas non-residents are taxed on the income derived from Maldives.


Tax Rates

Individuals

Tax bracket ( taxable income per tax year) Tax rate
Not exceeding MVR 720,000 0%
More than MVR 720,000 but not exceeding MVR 1,200,000 5.5%
More than MVR 1,200,000 but not exceeding MVR 1,800,000 8%
More than MVR 1,800,000 but not exceeding MVR 2,400,000 12%
More than MVR 2,400,000 15%

Employee withholding tax

Tax bracket (Remuneration subject to employee withholding tax per month) Tax rate
Not exceeding MVR 60,000 0%
More than MVR 60,000 but not exceeding MVR 100,000 5.5%
More than MVR 100,000 but not exceeding MVR 150,000 8%
More than MVR 150,000 but not exceeding MVR 200,000 12%
More than MVR 200,000 15%

Non-resident withholding tax

Type of income received by the non-resident Tax rate
Income specified in the section 55(a) of the Income Tax Act 10%
Reinsurance premium 3%

Persons other than individuals and banks

Tax bracket ( taxable income per tax year) Tax rate
Not exceeding MVR 500,000 0%
More than MVR 500,000 15%

Banks

25% of the taxable income per tax year


Income derived, from Maldives, by non-resident international transport operators

2% of the gross amount of income (specified in section 11(r) of the Income Tax Act) in a tax year

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FAQ

1 - When did the Income tax Act become effective?

The Income Tax Bill was signed into a law by the President on 17 December 2019. The taxation under the Act started on 1 January 2020. However, taxation of remuneration under the Act would start on 1 April 2020.

 

2 - Who are the persons affected by the Income Tax Act?

Residents of Maldives, and persons who are not residents or temporary residents but derives income from Maldives come within the purview of the Income tax Act.

 

3 - What are the tax rates applicable to an individual under the Income Tax Act?

Income Tax is charged on the taxable income of an individual as per the table below. 

Tax brackets for taxable income derived in an accounting period Tax Rate
Not exceeding MVR 720,000/-  0%
More than MVR 720,000/- but not exceeding MVR 1,200,000/-  5.5%
More than MVR 1,200,000/- but not exceeding MVR 1,800,000/-  8%
More than MVR 1,800,000/- but not exceeding MVR 2,400,000/-  12%
More than MVR 2,400,000/-  15%

 

4 - What is employee withholding tax?

The amount of tax deducted by an employer or payer from the remuneration payable to an employee, director of a company or partner of a partnership is referred to as the employee withholding tax.

 

5 - When does the employee withholding tax commence?

Since taxation of remuneration is due to commence on 1 April 2020, employee withholding tax will also commence on 1 April 2020.

 

6 - How is the employee withholding tax different from the Income Tax?

Employee withholding is a mechanism where the tax due on remuneration is deducted by the payer, before the remuneration reaches the employee, director or partner. Individuals would not double pay the amount of tax that had been already paid on remuneration through the withholding mechanism. Effectively there is no difference between employee withholding tax and Income Tax, except that an amount of tax on remuneration (income) is paid through the withholding mechanism in the case of employee withholding tax.

 

7 - What are the employee withholding tax rates under the Income tax Act?
Remuneration subject to withholding tax (per month)
 [Tax brackets]
 
Tax Rate
Not exceeding MVR 60,000  0%
More than MVR 60,000 but not exceeding MVR 100,000  5.5%
More than MVR 100,000 but not exceeding MVR 150,000  8%
More than MVR 150,000 but not exceeding MVR 200,000  12%
More than MVR 200,000  15%

 

8 - How is "remuneration" defined?

Remuneration includes salary, wages, allowances and benefits derived by an employee or director or partner as consideration for services rendered by the employee or director or partner. It also includes any compensation for loss of employment or service, restrictive covenant payment, and entry or exit inducement payment. Benefits include any fringe benefits, both cash and non-cash.

 

9 - How is remuneration subject to [employee] withholding tax calculated?

Remuneration subject to withholding tax is the amount of remuneration per month, after the deduction of the amount contributed to the Maldives Retirement Pension Scheme by the recipient of the remuneration.

10 - I had been registered as a taxpayer with MIRA even before the Income Tax commenced. Am I required to register again under the Income Tax Act?

If your registration as a taxpayer with MIRA was valid as of 1 January 2020, you are not required to apply for registration under the Income Tax Act. However, in that case, MIRA would register you under the Income Tax Act based on the information it has and notify you of your registration.

 

11 - Are companies, partnerships, cooperative societies required to be registered under the Income Tax Act?

Yes, companies, partnerships or cooperative societies are required to be registered under the Income Tax Act. However, the process is arranged in such a way that companies, partnerships or cooperative societies that are incorporated in the Maldives get registered under the Income Tax Act during the business registration process with the Ministry of Economic Development (MED), and therefore a separate form is not required to be submitted to MIRA for registration.

 

12 - I am an individual doing business in the Maldives, and my business is registered with MED as a sole proprietorship. Am I required to be registered under the Income Tax Act?

Yes, individuals carrying on business through a sole proprietorship are also required to register under the Income Tax Act. However, like corporate entities, such individuals are not required to submit a separate form to MIRA for registration, as it is done during the business registration process with the MED.

 

Charitable Organizations approved by the Commissioner General

Subject to the section 21(b) of the Income Tax Act, a person may deduct donations made to a charitable organization approved by the Commissioner General, or to a State institution, in the computation of that person’s taxable income.

A body or association that wishes to be listed as a charitable organization approved by the Commissioner General must submit MIRA 103 form, in accordance with the chapter 6 of the Income Tax Regulation.

List of the Charitable Organizations approved by the Commissioner General

1.