Permanent establishments (PEs)

Income derived by a non-resident from a business carried out through a permanent establishment in the Maldives is taxed as income derived from the Maldives.

To identify whether your business operations constitute a permanent establishment in the Maldives, please refer to the Section 79(gg) of the Income Tax Act.

Calculation of taxable income of a permanent establishment

Subject to the Income Tax Act and Income Tax Regulation, permanent establishments must use the general approach stated in Article 7(2) of the OECD Model Tax Convention on Income and on Capital (2017) to calculate the taxable income.

If a non-resident’s business is carried out through more than one permanent establishment, all the permanent establishments with same tax rate must be aggregated and taken as one for the purpose of income tax computations.

Deductions

Similar to other businesses, a permanent establishment of a non-resident can claim a deduction for expenses incurred by the permanent establishment in that accounting period if the expense was incurred wholly and exclusively for the purpose of production of the total income attributable to the permanent establishment.

Expenses that are not incurred for the sole purpose of deriving total income would be deductible up to the proportion of the expense incurred for the purpose of deriving total income.

Expenses can be deducted only once and up to the total amount of expenditure incurred.

There are special deduction rules applicable to permanent establishments when it comes to deduction of certain expenses.

Head office expense: The maximum amount allowed as a deduction for head office expenses charged to the permanent establishment by the non-resident person in any accounting period must not exceed 3% of the total income generated from the general course of business of that permanent establishment.

Deduction of income subject to NWT: Permanent establishment can choose to deduct the income that has suffered non-resident withholding tax (i.e. to be taxed on gross basis) in computing its taxable income. If the permanent establishment chooses to deduct such income, no other deductions would be allowed in respect of such income.

The permanent establishment and the head office must be treated as two separate entities and the transactions between the permanent establishment and the head office must be priced at arm’s length.

Tax rates

Non-residents deriving income through a permanent establishment will pay income tax based on the form of the non-resident.

Tax rates and brackets applicable to individuals

Tax bracket 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%

Tax rates and brackets applicable to persons other than individuals and banks

Tax bracket for taxable income derived in an accounting period Tax rate
Not exceeding MVR 500,000 0%
More than MVR 500,000 15%

Banks have to pay tax at a rate of 25% of their total taxable income.

Are permanent establishments required to register?

Non-residents deriving income through a permanent establishment are required register under the Income Tax Act.

Are permanent establishments required to file income tax return?

Non-residents deriving income through permanent establishment is required to file income tax return.

How to file income tax return?

Easiest way to file your income tax return is online via your MIRAconnect account. To file the return online please click here.

Need assistance in filing the return? Click here to request for a one-to-one session with our staff.

If you wish to submit income tax return manually, download the relevant form and submit the filled form along with relevant documents over the counter to our any of our offices or collection centers.

Make a payment

If your annual income is MVR 20 million or more, you are required to make payment online via MIRAconnect. To make the payment via MIRAconnect please proceed to MIRAconnect.

If your annual income is less that MVR 20 million, if you wish, you can make the payment over the counter to any of our offices or collection centers.

©   Maldives Inland Revenue Authority