On 16 March 2021, the Maldives Inland Revenue Authority (MIRA) issued the Advance Pricing Arrangement Regulations (2021/R-42) (the Regulations), setting out the procedure to be followed in entering into an advance pricing agreement (APA) in relation to a transaction with an associated enterprise.

The salient points of the Regulations are listed below.

Who can apply?

• Resident persons and non-resident persons having a permanent establishment in the Maldives, who have entered into or wish to enter into international transactions and arrangements with associates, may propose to enter into an APA.

Procedure

• A person proposing to enter into an APA must make a request for a pre-filing consultation, which aims to determine the scope of the agreement, identify transfer pricing issues, determine the suitability of international transaction for the agreement, and discuss broad terms of the agreement.
• The APA application must contain, among others:
  • a description of the transactions or arrangements which are proposed to be included in the APA, and the proposed scope and period of the APA;
  • details of how the transfer price will be determined via the APA, including:
    • comparability analysis of the transaction or arrangement;
    • elected transfer pricing method and the basis for such election;
    • critical assumptions; and
    • worldwide organization structure, history of and information about products, functions, tangible assets and intangible assets of the associated enterprise;
  • place of residence of the associated enterprise; and
  • jurisdiction or jurisdictions which the person proposes to be party to the APA.
• A person may request to amend or withdraw an application for an APA by making a written submission to the MIRA, prior to reaching an agreement on the APA.

Compliance with the APA

• A person with whom the MIRA enters into an APA must submit an annual Compliance Report together with the Income Tax Return for that tax year by 30 June of the following tax year, for the duration of the APA. The report must provide, among others:
  • details of activities carried out by the person during the tax year;
  • evidence of compliance with the APA; and
  • assurance that critical assumptions and conditions stipulated in the APA remain unchanged.

Termination and Discontinuation

• The MIRA may terminate an APA under the following circumstances. The termination shall have effect from the first day of the first tax year to which the APA relates.
  • intentional misrepresentation, omission or provision of incorrect information on an APA application or a compliance report;
  • non-submission of the compliance report by the due date without reasonable cause; or
  • material breach of a principal condition stipulated in the APA.
• The MIRA may discontinue an APA under the following circumstances. The discontinuation shall have effect from a date determined by the MIRA with reference to the reasons for the discontinuation.
  • unintentional misrepresentation, omission or provision of incorrect information on an APA application or a compliance report;
  • non-submission of the compliance report by the due date with reasonable cause;
  • material breach of a condition stipulated in the APA;
  • material breach of a critical assumption; or
  • change to an advance pricing-related provision in a tax law, tax convention or international agreement.

Fees

• The MIRA may charge a non-refundable application fee before proceeding with APA negotiations. The taxpayer must also reimburse the cost of essential travel incurred by the MIRA in relation to APA negotiations.

The Regulations came into effect on 16 March 2021.