On 17 December 2019, the Income Tax Act came into effect upon its ratification by the President. The Act introduces personal income tax in the Maldives for the first time and will subsume the existing Business Profit Tax (BPT) and Bank Profit Tax regimes from 1 January 2020.

Key aspects of the Act are summarised below.

Introduction of personal income tax

The Act introduces personal income tax on income earned by individuals, at the following rates. Personal income tax, other than on employment income, is payable under the Act from 1 January 2020.

Taxable income for the year (MVR)	Rate
up to 720,000	0%
720,001 – 1,200,000	5.5% of the amount in excess of 720,000
1,200,001 – 1,800,000	MVR 26,400 + 8% of the amount in excess of 1,200,000
1,800,001 – 2,400,000	MVR 74,400 + 12% of the amount in excess of 1,800,000
2,400,001 and over	MVR 146,400 + 15% of the amount in excess of 2,400,000

Introduction of employee withholding tax (EWT)

Employers must deduct employee withholding tax from the gross amount of salary payments on a monthly basis, at the following rates, from 1 April 2020:

Employment income per month (MVR)	Rate
up to 60,000	0%
60,001 – 100,000	5.5% of the amount in excess of 60,000
100,001 – 150,000	MVR 2,200 + 8% of the amount in excess of 100,000
150,001 – 200,000	MVR 6,200 + 12% of the amount in excess of 150,000
200,001 and over	MVR 12,200 + 15% of the amount in excess of 200,000

Employers will be required to submit a monthly “Employee Withholding Tax Statement” by the 15^th day of the following month and pay the amount due by that date.

No change to non-individual BPT and Bank Profit Tax rates

Persons other than banks and individuals carrying on business in the Maldives will continue to be taxed at the current BPT rate under the Income Tax Act, which is as follows:

Taxable income for the year (MVR)*	Rate
up to 500,000	0%
500,001 and over	15% of the amount in excess of 500,000

* For companies within a group, the tax-free threshold of MVR 500,000 must be divided equally amongst all companies within the group which are within the charge to tax.

Banks will continue to be taxed at the current rate of 25% of taxable income for the year under the Income Tax Act.

Expansion of payments subject to non-resident withholding tax

The types of payments which are currently subject to non-resident withholding tax under the BPT Act have been expanded to include the following, among others, from 1 January 2020:

• rent in relation to immovable property situated in the Maldives;
• royalties;
• interest paid to a non-approved bank or financial institution;
• dividends;
• payments made to a non-resident contractor; and
• insurance premiums and reinsurance premiums.

The rate of non-resident withholding tax will remain at 10%, except for reinsurance premiums which will be taxed at 3% (currently not subject to withholding tax).

Repeal of some taxes and laws

The Act repeals the following taxes and laws from 1 January 2020:

• Remittance Tax (which is a 3% tax on money transferred out of the Maldives by foreigners employed in the Maldives);
• Land Sales Tax (which is a 15% tax on the value of land sale transactions); and
• the Law on Taxation of Petroleum Companies Operating in the Maldives.

The Dhivehi version of the Income Tax Act is available at http://www.gazette.gov.mv/gazette/download/5641.