This ruling is issued pursuant to the authority granted under Section 84 of the Tax Administration Act (Law Number 3/2010) as amended by Law Number 14/2011. Unless otherwise stated, all legislative references are to the Business Profit Tax Act (Law Number 5/2011). This ruling is legally binding.

Introduction

1. This ruling replaces Tax Ruling number TR-2012/B21 (Business Profit Tax: Penalties for offences under the Business Profit Tax Act), issued on 8 October 2012, which set out the manner in which penalties specified in the Act shall be imposed. The penalties specified in the Act in relation to offences covered in this ruling have been mitigated via this ruling in accordance with section 37 of the Act.

2. Section 37 of the Act states:
“The MIRA may in their discretion mitigate any penalty, or stay or compound any proceedings for a penalty, and may also, after judgment, further mitigate or entirely remit the penalty.”

Ruling

Failure to pay tax by the due date

3. A Person who fails to pay any amount of tax payable under the Act by the due date shall be subject to a penalty of 0.05% (zero point zero five percent) of the outstanding amount per day, up to a maximum of twice the outstanding amount of tax, or MVR 250,000 (Two Hundred and Fifty Thousand Rufiyaa), whichever is higher.

4. The penalties specified in sections 23(h), 24(c) and 25(c) of the Act shall apply in the manner specified in those sections, irrespective of whether or not a penalty is imposed under paragraph ‎3.

Failure to file tax returns and other documents or information by the due date

5. A Person who fails to file the Business Profit Tax Return by the due date shall be subject to a penalty calculated as follows:

(a) Where that Person has no tax liability for that period of assessment, a penalty of MVR 50 (Fifty Rufiyaa) per day of delay, up to a maximum of MVR 125,000 (One Hundred and Twenty Five Thousand Rufiyaa);

(b) Where paragraph ‎5‎(a) does not apply, a penalty of MVR 50 (Fifty Rufiyaa) per day of delay, up to a maximum of twice the amount of tax payable for the period of assessment.

6. A Person who fails to file the Withholding Tax Return by the due date shall be subject to a penalty of MVR 50 (Fifty Rufiyaa) per day of delay, up to a maximum of twice the amount of tax payable for the period of assessment.

7. A Person who fails to submit a document or provide information required by the MIRA by the due date shall be subject to a penalty calculated as follows:

(a) Where that Person has no tax liability for that period of assessment or where the document or information is required from a third party, a penalty of MVR 50 (Fifty Rufiyaa) per day of delay, up to a maximum of MVR 125,000 (One Hundred and Twenty Five Thousand Rufiyaa);

(b) Where paragraph ‎7‎(a) does not apply, a penalty of MVR 50 (Fifty Rufiyaa) per day of delay, up to a maximum of twice the amount of tax payable for the period of assessment.

Failure to keep records

8. A Person who fails to keep records in accordance with the requirements of the Act and regulations made thereunder shall be subject to a penalty calculated as follows:

(a) If that Person falls within the micro business category, MVR 2,500 (Two Thousand Five Hundred Rufiyaa) multiplied by the number of times a notice is being issued to that Person for failure to keep records;

(b) If that Person falls within the small business category, MVR 5,000 (Five Thousand Rufiyaa) multiplied by the number of times a notice is being issued to that Person for failure to keep records;

(c) If that Person falls within the medium-sized business category, MVR 10,000 (Ten Thousand Rufiyaa) multiplied by the number of times a notice is being issued to that Person for failure to keep records;

(d) If that Person falls within the large business category, MVR 25,000 (Twenty Five Thousand Rufiyaa) multiplied by the number of times a notice is being issued to that Person for failure to keep records.

9. A penalty imposed under paragraph ‎8 shall not exceed MVR 250,000 (Two Hundred and Fifty Thousand Rufiyaa).

Definitions

10. For the purpose of this ruling, period of assessment refers to the period for which a self-assessment of the tax liability of a Person is required to be made.

11. For the purpose of this ruling:

(a) A micro business is one that generates an annual turnover of less than MVR 500,000 (Five Hundred Thousand Rufiyaa) or employs five employees or fewer;

(b) A small business is one that generates an annual turnover between MVR 500,001 (Five Hundred Thousand and One Rufiyaa) and MVR 5,000,000 (Five Million Rufiyaa), or employs six to 30 (thirty) employees;

(c) A medium-sized business is one that generates an annual turnover between MVR 5,000,001 (Five Million and One Rufiyaa) and MVR 20,000,000 (Twenty Million Rufiyaa), or employs 31 (thirty one) to 100 (one hundred) employees;

(d) A large business is one that generates an annual turnover of MVR 20,000,001 (Twenty Million and One Rufiyaa) or more, or employs 101 (one hundred and one) employees or more.

12. For the purpose of determining the category of a business under paragraph ‎11, the number of employees shall be referred to only where turnover cannot be ascertained.

Date of Effect

13. This ruling shall have effect from 8 October 2012.

14. This ruling supersedes Tax Ruling number TR-2012/B21 (Business Profit Tax: Penalties for offences under the Business Profit Tax Act) issued on 8 October 2012.

15. Notwithstanding paragraph ‎14, where the penalty for an offence under this ruling exceeds the penalty which has been imposed for the same offence under Tax Ruling number TR-2012/B21, the latter shall prevail.