Recent reports of expatriates and former employees receiving penalty notices from Maldives Inland Revenue Authority (MIRA) for unfiled income tax returns have raised concerns across the Maldivian hospitality sector. These incidents highlight the importance of understanding tax responsibilities—both for employees and employers—to avoid fines and ensure compliance.
Maldives Income Tax at a Glance
Income tax in the Maldives came into effect in 2020. It follows a Pay-As-You-Earn (PAYE) system where employers must withhold tax from employee salaries and remit it to MIRA.
Individual Tax Rates (Annual):
- Up to MVR 720,000: 0%
- MVR 720,001 to MVR 1,200,000: 5.5%
- MVR 1,200,001 to MVR 1,800,000: 8%
- MVR 1,800,001 to MVR 2,400,000: 12%
- Above MVR 2,400,000: 15%
Employee Obligations
- Know What’s Taxable: Income includes not just salary but allowances and non-cash benefits like housing or trips.
- Keep Records: Payslips, annual tax statements, and contracts should be retained.
- Check Employer Compliance: Review your payslips and seek clarification if taxes are not clearly shown.
- File Returns If Needed: Employees with multiple incomes or those leaving the Maldives may have to file directly with MIRA.
Employer Duties
- Withholding & Reporting: Employers must withhold income tax and submit monthly and annual statements to MIRA.
- Include Benefits: Non-cash perks must be valued and included in taxable income.
- Offboarding Protocols: When an employee resigns or leaves the country, employers should finalize all payments, issue tax certificates, and guide on filing requirements if applicable.
- Pension Contributions: Employers must also manage pension deductions and contributions accurately.
Avoiding Issues: Proactive Steps
For Employees:
- Understand your tax obligations and confirm deductions with your employer.
- Before leaving your job or the country, request a final tax statement.
- Consider checking with MIRA or consulting a tax advisor.
For Employers:
- Maintain strong payroll systems and stay up to date on MIRA regulations.
- Ensure expatriates are briefed on their obligations.
- Conduct regular internal audits to catch and correct any errors early.
Penalties for Non-Compliance
MIRA imposes strict penalties:
- Late filing: MVR 50 per day + 0.5% of payable tax.
- Late payment: 0.05% per day on unpaid tax.
These can add up quickly, especially for expatriates unaware of lingering obligations after departure.
Income tax compliance in the Maldives is a shared responsibility. With clear processes, good communication, and timely action, both employees and employers in the hospitality sector can avoid costly penalties and maintain good standing with MIRA.
For legal support with tax compliance or employment matters, contact Apex Law.