Employers in the Maldives have several tax responsibilities. One of these is the mandatory contribution to the Maldives Retirement Pension Scheme. Under the Maldives Pension Act (Law Number 8/2009), employers are required to contribute 7% of an employee's pensionable wage. The pensionable wage generally refers to the employee's basic salary plus certain allowances.

Retirement Pension Scheme

• Mandatory Contribution: Employers must contribute 7% of an employee's pensionable wage. This is a mandatory obligation.
• Pensionable Wage: This generally refers to the employee's basic salary plus certain allowances.

While not strictly an employer tax, businesses are responsible for collecting and remitting Goods and Services Tax (GST) when providing taxable goods and services in the Maldives. Currently, the GST rate is at 8%. Although GST is a consumer tax, it can increase the overall cost of doing business and therefore indirectly impact employment costs.

Goods and Services Tax (GST)

• Employer Responsibility: Businesses are responsible for collecting and remitting GST when providing taxable goods and services in the Maldives.
• Impact on Employment Costs: GST can increase the overall cost of doing business and therefore indirectly impact employment costs.

Employers with more than ten employees are generally required to pay a Skills Development Levy. The rate of this levy varies depending on the business activities.

Skills Development Levy

• Applicable Businesses: Employers with more than ten employees are generally required to pay a Skills Development Levy.
• Rate: The rate varies depending on the business activities.

Employers of foreign workers are required to pay work permit fees that contribute to the management of expatriate employment. It is also crucial for employers to stay updated on any changes or new taxes that could apply to businesses as the Maldives tax system may evolve.

Other Considerations

• Work Permit Fees: Employers of foreign workers are required to pay work permit fees.
• Potential Future Taxes: The Maldives tax system may evolve; it is crucial for employers to stay updated on any changes or new taxes.

Employees generally contribute 7% of their pensionable wage to the Maldives Retirement Pension Scheme. This contribution is deducted directly from their salary. The pensionable wage usually includes the employee's basic salary and specific allowances.

Retirement Pension Scheme

• Mandatory Contribution: Employees contribute 7% of their pensionable wage.
• Pensionable Wage: This includes the employee's basic salary and specific allowances.

The Employee Withholding Tax (EWT) system acts as an advance payment of an individual's income tax liability. Employers are responsible for withholding and remitting EWT. The EWT tax rates have a progressive structure:

Employee Withholding Tax (EWT)

• Income Tax Withholding: The EWT system is an advance payment of an individual's income tax liability.
• Tax Brackets:
  • Up to MVR 60,000 per month: 0%
  • MVR 60,001 to MVR 100,000 per month: 5.5%
  • MVR 100,001 to MVR 150,000 per month: 8%
  • MVR 150,001 to MVR 200,000 per month: 12%
  • Above MVR 200,000 per month: 15%

While EWT is withheld on income throughout the year, employees must file an annual income tax return to calculate their final tax liability. Any overpaid EWT will be refunded or offset against other taxes, while underpayments require additional tax payments.

Important Notes

• Annual Income Tax Reconciliation: Employees must file an annual income tax return to calculate their final tax liability.
• Exemptions and Deductions: There may be certain exemptions and deductions that could reduce an employee's income tax liability.

Apart from pension contributions, there might be other social contributions depending on specific employment arrangements or industry regulations. Different tax rules may apply to expatriate employees working in the Maldives.

Additional Considerations

• Social Contributions: There might be other social contributions depending on specific employment arrangements or industry regulations.
• Expatriate Employees: Different tax rules may apply to expatriate employees.

VAT, or Value Added Tax, is a broad-based tax that applies to a wide range of services within the Maldives. This includes professional services such as accounting, legal, and consulting, as well as hospitality, telecommunications, entertainment, transportation, and more. However, there may be specific exemptions for essential services like healthcare, education, and potentially financial services.

VAT Registration

Businesses whose annual taxable supplies exceed a certain threshold would be required to register for VAT. There may also be an option for businesses below the threshold to register for VAT voluntarily.

Charging and Collecting VAT

A standard VAT rate would apply to taxable services. Businesses would issue tax invoices to customers, clearly showing the VAT amount charged.

Input Tax Credit

Registered businesses would be able to claim back the VAT paid on their business purchases (input tax) against the VAT they collect from their sales (output tax). This mechanism prevents cascading taxes.

Zero-Rated Supplies

Services supplied to customers outside the Maldives, such as the export of services, would likely be zero-rated. In this case, businesses wouldn't charge VAT but could still claim back input tax on related expenses.

Imports of Services

VAT might apply on services received from abroad by a Maldivian business, potentially via a reverse charge mechanism. This ensures a level playing field between local and foreign service providers.

Compliance and Administration

Businesses would be required to file VAT returns periodically (e.g., monthly or quarterly) and remit VAT collected, less input tax credits. Keeping detailed records of transactions, invoices, and VAT calculations is essential for tax compliance.

The previous Business Profit Tax Act has been repealed and replaced by the Income Tax Act, which started on January 1st, 2020. The Income Tax Act imposes a standard 15% tax rate on business profits.

Special Economic Zones (SEZs)

The Maldives Special Economic Zone Act grants various benefits to businesses operating within designated SEZs. These incentives include:

• Capital goods imported for use within SEZs may be exempt from import duties.
• Businesses in SEZs may be eligible for full or partial exemption from business profit tax for a specified period.
• SEZ businesses may be granted Goods and Services Tax (GST) relief for up to 10 years.
• Payments made by SEZ businesses to non-residents may be eligible for withholding tax relief for up to 10 years.
• Foreign shareholders purchasing land within SEZs may be exempt from sales tax.

Tourism Sector Incentives

The tourism sector is subject to a slightly higher Tourism Goods and Services Tax of 16%.

Additional Tax Considerations

Maldivian residents who have paid foreign income taxes may be eligible for a foreign tax credit to offset their Maldives tax liability. GST is applied to the supply of goods and services in the Maldives. Rates are generally 8% with a higher 16% rate for tourism goods and services. Customs duties apply to imported goods (except those specifically exempted). Rates vary by item classification.