Income Tax Regulations Issued

January 4, 2020

On 31 December 2019, the Maldives Inland Revenue Authority (MIRA) issued the Income Tax Regulations (Regulation No. 2019/R-1090), detailing the requirements in the newly introduced Income Tax Act (ITA).

Major provisions in the Regulations are summarised below.

Employers must register their employees under the ITA, if the actual average monthly employment income during the past 12 months, or the expected average monthly employment income in the following 12 months, or the actual employment income in any month, of at least one employee exceeds MVR 60,000 (directors of companies and partners in a partnership are considered as employees).
Employees must register under the ITA if their actual average monthly employment income during the past 12 months exceeds MVR 60,000.
Employees who hold multiple employments must register under the ITA if their average monthly gross income exceeds MVR 40,000.
Registration must be done using the form: MIRA 118 (Employee Registration).

Individuals and non-individuals who satisfy the following criteria must register under the ITA:
- Persons required to register under the Business Registration Act (Law No. 18/2014)
- Individuals and deemed partnerships:
  - holding a business permit or license issued by the government; or
  - employing at least one employee who is subject to Employee Withholding Tax; or
  - whose average monthly gross income exceeds MVR 40,000; or
  - who are required to make a payment which is subject to Non-resident Withholding Tax (NRWT).
Non-individuals must register if their gross income in an accounting period exceeds MVR 500,000.
Persons already registered under the Tax Administration Act are not required to register again under the ITA.
Registration must be done using the form: MIRA 117 (Income Tax Registration).

Employers must submit an Employee Withholding Tax Return (MIRA 601) for a month if at least one employee was subject to Employee Withholding Tax during that month. The Return must include information about all employees employed by the employer.
If an employer is required to submit an Employee Withholding Tax Return for a month, the employer must submit a Return for all subsequent months in that year, unless an exemption is granted by the Commissioner General.
If an employer was required to submit at least one Employee Withholding Tax Return in a year, the employer must submit a Withholding Tax Reconciliation Statement (MIRA 650) for that year, and pay additional tax (if any), by 28 February of the following year.
The Regulations list down types of fringe benefits which are not considered as employment income and therefore exempt from Employee Withholding Tax.
Employee Withholding Tax Return must be prepared, and Employee Withholding Tax must be paid, in Rufiyaa.

A person must submit a NRWT Return (MIRA 602) for a month if the person made a payment which is subject to NRWT during that month.
For the purposes of NRWT, the permanent establishment of a non-resident person carrying on business in the Maldives will be treated as a separate entity from its head office.
NRWT Return must be prepared, and NRWT must be paid, in Rufiyaa.

All taxpayers must follow an accounting period of 1 January to 31 December.
Taxpayers must prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) or any other accounting standard acceptable to MIRA, using the accrual basis of accounting. A taxpayer may, however, opt to prepare their financial statements using the cash basis, if their annual gross income does not exceed MVR 10 million.
Financial statements accompanying the Income Tax Return submitted by persons whose annual gross income exceeds MVR 10 million must be audited by an independent auditor licensed by the relevant authority.

Registration of charitable organisations and their post-registration obligations.
Banks and other financial institutions approved by the Commissioner General for the purpose of calculating deductible interest (interest payable to a non-approved bank or financial institution is capped at 6%).
Procedure for granting exemption from Income Tax to non-resident air transport and shipping businesses.
Calculation rules for capital allowance, balancing allowance and balancing charge for tangible and intangible assets.