Navigating the complexities of employer and employee taxation in the Maldives requires a clear understanding of local regulations and compliance requirements. The Maldivian tax system primarily involves income tax on individuals and businesses, alongside mandatory social security contributions. Employers play a crucial role in this system by correctly calculating, withholding, and remitting taxes and contributions on behalf of their employees, ensuring adherence to the laws set forth by the Maldives Inland Revenue Authority (MIRA) and the Maldives Pension Administration Office.
For the year 2025, employers operating in the Maldives must be fully aware of their obligations regarding payroll taxes and income tax withholding. Similarly, employees need to understand how their income is taxed and what deductions or allowances may apply to them. Proper management of these responsibilities is essential for legal compliance and smooth business operations.
Employer Tax Obligations
Employers in the Maldives have specific obligations related to their workforce's taxation and social security. The primary employer-borne cost related to payroll is the contribution to the Maldives Pension Scheme.
- Maldives Pension Scheme Contribution: Employers are required to contribute to the mandatory pension scheme for all eligible employees. The contribution rate is set as a percentage of the employee's gross salary.
- Employer Contribution Rate: 7% of gross salary
- Employee Contribution Rate: 7% of gross salary (withheld by the employer)
- Calculation Basis: Gross salary, which includes basic salary and other allowances.
- Payment: Contributions for both the employer and employee portions must be remitted to the Maldives Pension Administration Office monthly.
There is no separate "payroll tax" levied on the employer's total payroll amount beyond the pension contribution and the administrative burden of income tax withholding.
Income Tax Withholding
Employers are responsible for withholding income tax from their employees' salaries and wages based on the progressive tax rates applicable in the Maldives. This is a Pay As You Earn (PAYE) system.
- Taxable Income: Income tax is levied on an individual's total income, which includes salary, wages, allowances, bonuses, and other employment-related benefits.
- Withholding Calculation: Employers must calculate the monthly income tax to be withheld based on the employee's annualized monthly income and the applicable tax brackets.
- Tax Rates for 2025: The income tax rates are progressive, meaning higher income levels are taxed at higher rates. The following annual income thresholds and rates apply:
| Annual Taxable Income (MVR) | Monthly Taxable Income (MVR) | Tax Rate (%) |
|---|---|---|
| Up to 60,000 | Up to 5,000 | 0 |
| 60,001 to 100,000 | 5,001 to 8,333.33 | 5 |
| 100,001 to 150,000 | 8,333.34 to 12,500 | 10 |
| 150,001 to 200,000 | 12,500.01 to 16,666.67 | 15 |
| Above 200,000 | Above 16,666.67 | 20 |
Employers must remit the total amount of income tax withheld from all employees to MIRA monthly.
Employee Tax Deductions and Allowances
The Maldivian income tax system provides certain allowances that reduce an individual's taxable income.
- Personal Allowance: All resident individuals are entitled to a standard personal allowance. For 2025, the first MVR 60,000 of annual income (equivalent to MVR 5,000 per month) is exempt from income tax. This is automatically accounted for in the tax brackets and withholding calculations.
- Other Deductions: Generally, there are limited specific deductions available for employees in the Maldives. The tax system primarily relies on the personal allowance threshold. Deductions for specific expenses like medical costs or educational fees are not standard features of the employee income tax calculation.
Tax Compliance and Reporting Deadlines
Employers must adhere to strict deadlines for remitting withheld taxes and pension contributions, as well as for filing necessary reports.
- Monthly Payments: Both the income tax withheld from employees and the employer/employee pension contributions must be paid to MIRA and the Pension Office, respectively, by the 15th day of the following month. For example, taxes and contributions for January must be paid by February 15th.
- Monthly Reporting: Employers are typically required to submit monthly withholding statements to MIRA detailing the income paid and tax withheld for each employee.
- Annual Reporting: Employers must file an annual reconciliation statement with MIRA by June 30th of the following year, summarizing the total income paid and tax withheld for all employees during the preceding tax year (January 1st to December 31st). They must also provide employees with an annual income and tax statement.
Failure to meet these deadlines can result in penalties and interest charges.
Special Considerations for Foreign Workers and Companies
Foreign individuals working in the Maldives and foreign companies operating there have specific tax implications.
- Tax Residency: An individual's tax obligations in the Maldives depend on their residency status. Generally, an individual is considered tax resident if they are present in the Maldives for more than 183 days in any 12-month period. Residents are taxed on their worldwide income, while non-residents are typically only taxed on income sourced from the Maldives. Employers must correctly determine the residency status of foreign workers for withholding purposes.
- Income Sourced in Maldives: Income derived from employment exercised in the Maldives is considered Maldives-sourced income, regardless of where the employer is located or where the payment is made. This income is subject to Maldivian income tax.
- Double Tax Treaties: The Maldives has entered into Double Tax Avoidance Agreements (DTAAs) with several countries. These treaties can affect the tax treatment of foreign workers, potentially providing relief from double taxation. Employers should consider the provisions of any applicable DTAA when managing the payroll of employees from treaty countries.
- Foreign Companies: A foreign company may have tax obligations in the Maldives if it establishes a permanent establishment (PE) in the country. While corporate income tax is separate from employment tax, the existence of a PE can impact the company's overall tax compliance burden and its status as an employer within the Maldivian tax framework. Foreign companies employing staff in the Maldives, even without a PE, are still required to register as employers for income tax withholding and pension contribution purposes.
