Maldives, Republic of
Individual - Income determinationLast reviewed - 14 January 2023
Employment income includes basic salary and allowances (e.g. accommodation allowance, phone allowance, non-practising allowance, technical allowance, attendance allowance, meal allowance). This also includes statutory benefits, such as leave encashment and return airfare of expatriate employees. Hence, all gains received by an employee, including all benefits, whether in money or otherwise, paid or granted to the employee in respect of employment are taxable, unless such a gain or benefit is specifically exempt from tax.
The payment made by a payer of remuneration to a pension fund or retirement fund or any other such fund established in respect of the welfare rights of a recipient of remuneration shall be the ordinary open market value of the allowances and benefits within the definition of remuneration. However, the contribution made by a payer of remuneration into the account of the recipient of the remuneration setup under Retirement Pension Scheme established under the Maldives Pension Act (Law number 8/2009) shall not constitute allowances and benefits within the definition of remuneration.
There is no separate provision for levy of income tax on equity compensation. In accordance with the general provisions of the Income Tax Act, non-monetary benefits shall be valued at their open market value at the time of occurrence of the transaction. Hence, equity compensation shall be treated as income at its open market value.
Profits from business (income minus allowable expenses) carried out by the individuals shall be taxable at the rate applicable to individuals under the Income Tax Act.
Capital gain is the amount by which the disposal consideration exceeds the cost base of the property. Cost base of a property includes the expenditure on acquiring and improving the property and expenditure incurred directly in connection with the disposal of the property. There is no separate tax rate for capital gain. Capital gain forms part of the total income.
In the following cases, the gain or loss on disposal of assets will not be included in the taxable income of an individual:
- Where the sale consideration from disposal of a property does not exceed MVR 40,000 and total considerations from all such disposals do not exceed MVR 100,000 in an accounting year.
- Disposal of a sole immovable property used for principal private resident of an individual.
- Transfer of assets to the spouse or child or mother or father of an individual.
- Disposal of personal clothes, home furniture, household appliances, and loose tools.
- Transmission of assets to a person on death of an individual.
Capital loss incurred on disposal of a property should be set off against the capital gain in the same tax year, and unadjusted capital loss, if any, should be carried forward to subsequent years (up to five years) for set off against capital gain.
Dividends received by a resident in the Maldives from a company that is resident in the Maldives are exempted from income tax.
Profits distributed by a partnership that is resident in the Maldives to its partners who are resident in the Maldives are exempted from income tax.
Interest income in excess of MVR 5,000 shall be subject to income tax.
Income derived from the rental of any immovable property situated or registered in the Maldives is deemed to be derived from Maldives and subject to income tax.
There is a special provision made in the Income Tax Act for the rental income derived from an immovable property in Maldives:
A person who derives rent from immovable property situated in the Maldives and prepares financial statements on a cash basis may elect to claim a deduction of an amount equal to 20% of the amount of total rental income received in that accounting period as expenditure incurred in deriving the person’s rental income.
Where a taxpayer makes the election under this provision, one shall not be allowed any other deduction in the computation of one’s taxable income in respect of expenditure incurred to derive one’s rental income.
Other income includes non-monetary benefits such as accommodation facility, conveyance, rights of use of assets, vehicles and vessels, health care benefits, and other benefits provided by an employer or associate of an employer.
The following allowances and benefits provided by a payer of remuneration in any non-monetary form shall not constitute remuneration:
- Food and beverage and entertainment and sports allowances or benefits provided by an employer in a non-discriminatory manner between employees in a place provided by the employer.
- Food and beverages provided to employees on special occasions in a manner that is non-discriminatory among employees and provided on a basis that is not regular.
- Accommodation provided to employees for the purpose of employment in the place of employment. The accommodation facility should be such that a person other than an employee can neither be accommodated nor has the right of accommodation in that place.
- Accommodation facility provided to persons employed in the State security service.
- Accommodation facility provided by the State to a person carrying out an employment in a place outside of the Maldives, under a contract of service made with an office of the State.
- Transportation provided to employees to commute to their primary place of work, where such primary place of work is located on an uninhabited island and the person is not residing in that island.
- Transportation, food, and accommodation provided to a person to work in a place other than the person’s primary place of work for a period of not more than one year, specifically for the purpose of performance of duties of employment.
- Recreational activities organised by the employers in the Maldives in order to build and strengthen employee relations, which are open for participation of employees in a non-discriminatory manner, and the cost of which cannot be allocated distinctly to each individual employee.
- Interest on any one loan or advance to employees as interest-free or at a rate that is lower than the ordinary open market rate of interest, provided the repayment period does not exceed six months and the principal amount of the loan or advance does not exceed MVR 50,000.
- Garments or uniforms provided to employees that are specifically designed for the work and are not suitable to be worn outside of work on a regular basis.
- Awards given to employees up to a cumulative value that does not exceed MVR 5,000 annually.
- Medical check-ups required for the purpose of obtaining or extending work visa, under the Maldives Immigration Act.
- Medical insurance required to be provided under the Maldives Immigration Act.
- Medical expenses incurred by the payer of remuneration in respect of injuries that result from work-related incidents.
- Allowances and benefits of the President and Vice President of Maldives.
- Security protection provided by the State to any person via any of the State security services.
- Allowances and benefits provided in a non-monetary form where the cumulative value does not exceed a total of MVR 1,000 per month.
In addition, following incomes received by an individual are exempted from income tax:
- Interest income up to a maximum of MVR 5,000 in an accounting period.
- Interest or profit derived in respect of a debt security or similar product that is listed for trading on a securities exchange licensed by the Maldives Capital Market Development Authority for operation in the Maldives.
- Interest derived in respect of a security issued by a company listed on the Maldives Stock Exchange.
- Dividends received by a resident in the Maldives from a company that is resident in the Maldives.
- Profits distributed by a partnership that is resident in the Maldives to its partners who are resident in the Maldives.
- Income exempt from tax under a treaty or an agreement made between the Maldives and a foreign jurisdiction or an international organisation.
- Basic pension and retirement pension under the Maldives Pension Act (Law number 8/2009).
- Payments received under a life insurance policy.
- Education grants and scholarships where the Commissioner General of Taxation is satisfied that the grants and scholarships have been granted to enable or to assist the recipient to pursue education, or if education is undertaken at an educational or research institution approved by the Commissioner General.
- Gifts received by an individual (up to a maximum of MVR 40,000 per an accounting period).
- Gifts received by an individual in the following manner:
- the gift is received from a person related to the individual
- the gift is a wedding gift, or
- the gift is a grant from the government or a charitable organisation approved by the Commissioner General.
- Money received as hibah, bequest, or inheritance.
- Money or property received as Zakat through a government office.
- Payments of dowry, nafaka, or halanath.
- Income derived from the disposal of a person’s sole or principal private residence.
- Grants received under the Social Protection Act and other grants from the government received by individuals.
- Money received under the Social Health Insurance Scheme established under the National Social Health Insurance Act (Law number 15/2011).