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WHT GUIDE | MIRA

Introduction
This is a general Guide issued to help you:

identify if you are required to deduct Withholding Tax (WHT) from

payments that you make.

calculate the correct amount of WHT that you must deduct.

make payment of the WHT on time.

If you do not understand anything in this Guide or have questions related to

your particular circumstances, contact us by:
Hotline:

1415

Fax:

331 6577

Email:

1415@mira.gov.mv

Website:

www.mira.gov.mv

This Guide is correct at the time of publication (April 24, 2013) and is intended to be a general guide to WHT. It is
therefore not expected to be a substitute for a detailed research or exercise of professional judgment on taxation
matters in the Maldives. Subsequent changes to the law can be found on the Maldives Inland Revenue Authority
website www.mira.gov.mv

WHT GUIDE | MIRA

Table of Contents
Introduction

Table of Contents

1. What is Withholding Tax?

2. What are the requirements to deduct WHT?

3. What is the rate of WHT?

4. What is a Person?

5. What is a Non-Resident?

6. Who must deduct WHT?

7. What are the types of payments that require WHT to be deducted?

8. What are the types of payments that do NOT require WHT to be deducted?

9. What are Royalties?

10. How do I deal with payments for computer software?

11. What are management fees?

10

12. What are fees for technical services?

11

13. What are fees for personal services?

12

14. What does other commission or fee include?

13

15. How to determine whether the service is performed in the Maldives?

14

16. Who is associated with a supplier?

15

17. Who is a public entertainer?

17

18. How do I calculate the amount of WHT that I need to deduct?

17

19. When do I deduct WHT from the payments I make to a non-resident?

17

20. When must WHT be paid to the MIRA?

18

21. Do I have to file a WHT Return?

18

WHT GUIDE | MIRA

22. Do I have to file any document along with the WHT Return?

18

23. What documents do I have to give to the non-resident?

18

24. Does WHT apply to payments made by our permanent establishment in the
Maldives?

18

25. What is a Permanent Establishment?

19

26. If I pay a management fee to a PE in the Maldives, do I have to deduct WHT?

20

27. Is WHT deductible if our PE in the Maldives pays our overseas Head Office a
management fee?

20

28. Are on-charges of disbursements paid by a non-resident liable to WHT?

20

29. What happens if I am late paying the non-resident?

21

30. What currency do I use to pay WHT to the MIRA?

21

31. What exchange rate do I use to calculate WHT in Rufiyaa if I pay the non-resident in
a foreign currency?

21

32. What are the penalties for not paying the correct amount of WHT on time?

22

33. What are the penalties for not filing WHT return on time?

22

34. What happens if I do not deduct WHT when I should have?

23

35. Am I required to deduct WHT from payments made after 18 July 2011 that relate to
services provided before 18 July 2011?

24

36. Can I set off the WHT that I deduct from payments to non-residents against the BPT
that I have to pay on my profits for the year?

25

37. What happens if I deducted WHT before the recipient became a resident of the
Maldives, but later in the same tax year he became a resident?

26

WHT GUIDE | MIRA

1.

What is Withholding Tax?

Withholding Tax (WHT) is tax that you must deduct from payments that you
make to other businesses for particular services and the use of certain assets. You
pay the tax that you deduct to the Maldives Inland Revenue Authority (MIRA).

2.

What are the requirements to deduct WHT?

Two conditions must be met before you are required to deduct WHT from
payments that you make to other businesses. They are:
1. the payment must be made to a Person that is a non-resident; and
2. the payment must be for a purpose specified in section 7 below.

3.

What is the rate of WHT?

WHT is charged at the rate of 10% from the total amount subject to WHT.

4.

What is a Person?
A Person includes an individual, a company, a partnership, a cooperative society,
a trust, and a body of persons.

5.

What is a Non-Resident?
There are special tax rules to determine whether a Person is a non-resident and
they depend on whether the Person receiving the payment from you is (i) an
individual, or (ii) a company, or (iii) a partnership, cooperative society, trust, or
other body of persons.

WHT GUIDE | MIRA

(i) Individuals are non-residents if;

they are present in the Maldives for less than 183 days in a tax year,
i.e. the period from 1 January to 31 December; and
they come to the Maldives and they do not intend to establish a
residence here; and
they leave the Maldives in a tax year and they do not remain
ordinarily resident here.
(ii) Companies are non-residents if;

they are not incorporated in the Maldives; and

the central management and control of their business is not in the

Maldives.

(iii) Partnerships, cooperative societies, trusts and other bodies of persons

are non-residents if they do not carry on business in the Maldives.
You are responsible for determining, in terms of the above rules, whether or not
the Person that you are making the payment to is a non-resident.

6.

Who must deduct WHT?

Every Person that makes a payment listed in section 7 below to a non-resident
must deduct WHT from the gross amount of the payment and pay the WHT to
the MIRA except:

individuals who do not carry on business; and

the Government.

WHT GUIDE | MIRA

7.

What are the types of payments that require WHT to be

deducted?
You must deduct WHT from the following payments that you make to nonresidents. For convenience, we call these specified payments.

Rent of property, e.g. plant, machinery, equipment, or other property that

you use in your business.

Royalties (See Section 9 below)

Payments for carrying out research and development

Payments for the use of computer software (see Section 10 below)

Management fees (See Section 11 below)

Fees for technical services (See Section 12 below)

Fees for personal services (See Section 13 below)

Other commissions or fees for services that are not income from
employment (See Section 14 below)

8.

Payments for performances by public entertainers

Rent and royalties paid to screen cinematographic films in the Maldives.

What are the types of payments that do NOT require WHT to be

deducted?
You do not deduct WHT from payments for anything that is not a specified
payment under section 7 above. In particular, you do not deduct WHT from:

payments for the purchase of goods

payments of salary and wages to employees

installment payments made in terms of construction contracts, to the

extent that those payments do not include specified payments described
in section 7 above.

WHT GUIDE | MIRA

9.

What are Royalties?

Royalties are payments that you make for:

using, or obtaining the right to use, a:

o copyright of literary, artistic or scientific works
o patent
o trade mark
o design or model
o plan
o secret formula or process
o industrial, commercial or scientific equipment

information concerning industrial, commercial or scientific experience

rights to extract mineral or mineral oil deposits, or any other natural

resource.

Example 1

A Maldivian resident company manufactures an internationally popular

unique beverage under licence from an Australian company. The licence
allows the Maldivian company to use the beverage formulation to exactly
replicate the taste and features of the drink. In return, the Maldivian
company is required to pay the Australian company an amount every
quarter equal to 3% of its total sales in the quarter.
The payment to the Australian company is a royalty, and therefore
subject to WHT, because it is a payment that the Maldivian company
makes for the use of, or the right to use, a secret formula or process.

Example 2

A Hong Kong resident company provides a Maldivian resident

broadcasting company with satellite transponder capacity to relay
programme signals to the Maldives. The Maldivian broadcaster pays a
monthly fee to the Hong Kong Company for the use of the transponder.
The payment to the Hong Kong Company is a payment for the use of
equipment or other property, and therefore subject to WHT. Furthermore,
the payment is also a royalty since it is a payment for using, or the right
to use, a process or commercial equipment.

WHT GUIDE | MIRA

10.

How do I deal with payments for computer software?

The chart below indicates whether or not WHT applies to various payments to
non-residents for the use of computer software.

WHT
deductible

What the payment is for

1.

Off-the-shelf, boxed, non-modifiable shrink-wrap

software purchased by end-users and resellers

3.

deductible

End-user subscriptions to information services,

e.g. Bloomberg, CCH, Lexis Nexis, Reuters, etc.

2.

WHT not

End-user internet downloadable, non-modifiable

software and digitized products, i.e. images,

sounds and text, such as ring tones, music,
videos, logos, etc.
4.

Rights granted to exploit the copyright of

information or to copy, modify or adapt a

digitized product

5.

Customized software

6.

Pre-installed bundled software and hardware

sold as one product with no separate pricing for

each component with modifications and on-sale
prohibited
7.

Site

licence

where

on-selling

or

reverse

engineering is prohibited and software is not

customised
8.

Licence fee paid by a Maldivian computer

distributor to a non-resident for a master copy of
software for duplication and installation into the
computers assembled in the Maldives

WHT GUIDE | MIRA

9.

Rights to exploit the copyright of the software,

duplicate copies of the software, modify, reverse

engineer or decompile the software

10. Rights to manufacture software in the Maldives

11. Rights

to develop add-on

applications

by

building onto the existing software

Example 3

A Maldives resident diving centre operator installs customised software

supplied by a Singapore resident company. The operator must pay an
up-front cost of USD 25,000 for the software, which is uploaded onto his
separately purchased computer hardware, then pay an annual licence fee
to the Singapore Company of USD 10,000.
Since the software is customised for the diving centre, the operator must
deduct WHT from the initial payment of USD 25,000 and the subsequent
annual payments of USD 10,000.

Example 4

You purchase pre-installed bundled customised software and hardware

for USD 150,000 from a company resident in Bahrain. In addition, the
Bahrain resident company charges you an annual licence fee of USD
50,000.
Since the initial acquisition is pre-installed bundled software and
hardware, no WHT is deductible from the USD 150,000. However, WHT
is deductible from the subsequent annual payments of USD 50,000
because they are payments for the continuing right to use the customised
software component of the original purchase.

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WHT GUIDE | MIRA

11.

What are management fees?

Management fees are subject to WHT regardless of where the management
services are performed.
Management fees are payments for management services, which may be
provided by independent third parties or by a company in the same group of
companies as the payer of the fee, e.g. the payers parent company.
Management fees include:

Fees paid by a resort owner to a resort operator to run a resort

Fees paid by a Maldivian subsidiary company to its non-resident parent

company as its share of central group costs (irrespective of how the fees
are described)

Fleet management fees

Example 5

International Bank Plc, a resident of the United Kingdom, charges its

subsidiary companies an annual management fee based on each
companys relative contribution to the groups worldwide sales. The
charge to each subsidiary company covers a proportion of the London
head office costs of executive management time, and group-wide IT, HR
and marketing services.
The fee paid by the Maldivian subsidiary company to International
Bank Plc is a management fee subject to WHT.

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WHT GUIDE | MIRA

12.

What are fees for technical services?

Fees for technical services are subject to WHT regardless of whether the service is
performed in or outside of the Maldives.
Fees for technical services are payments for any services of a technical nature,
including the provision of services of technical and ancillary personnel. The
services make available technical knowledge, experience, skill, know-how or
processes, or consist of the development and transfer of a technical plan or
technical design. They require special skills or knowledge related to a particular
technical discipline, such as techniques in the applied sciences, e.g. engineering
consultancy. To be treated as a technical service, special skills and knowledge
must be used in producing the service. Examples of technical services are:

Computer hardware and software installation and after-sales services

Software maintenance support services, e.g. upgrading of software,

correction of bugs and troubleshooting

Website and email maintenance

Other technical product support

Provision of internet connection services

Engineering consultancy and technician services

Architectural, drafting and technical design services

Marine survey services

Machinery inspection services

Laboratory testing and evaluations

Quality control services

Other technical assistance

Example 6
6

A Maldives-resident importer and distributor contracts a United Statesresident company to build and maintain a new company website.
The United States company therefore provides technical services to the
Maldivian company. The fee paid for the services is subject to WHT.

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WHT GUIDE | MIRA

13.

What are fees for personal services?

Fees for personal services are subject to WHT regardless of whether the service is
performed in or outside of the Maldives.
Fees for personal services are payments for industrial or commercial or other
advice by someone, such as a professional or consultant, who has special
qualifications allowing him or her to do so. They include payments to nonresidents for:

Management consulting services

Opinions and other services given by lawyers, accountants and other

professional advisors

Audit services

Medical and other health-related services

Interior design services

Training and instruction

Sales representation

Excursion guide services

Example 7
7

You are a resident of the Maldives who operates a number of water sports
activities. You engage an Italian-resident economic consultant to
investigate your customers price sensitivity to your proposed new scale
of charges.
The fee that you pay to the economic consultant is for personal services,
and is therefore subject to WHT.

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WHT GUIDE | MIRA

14.

What does other commission or fee include?

Other commissions and fees are subject to WHT if:

the service for which the commission or fee is paid is performed in the
Maldives;
or

the commission or fee is paid for a service provided to the supplier of

goods and services consumed in the Maldives and the service is
provided in connection with the supply of those goods or services.

Other commissions or fees are payments for services not specifically mentioned
already, which you make to non-residents for the purpose of your business.
However, they do not include payments you make to your employees who are
non-residents.
Payments for services that enhance sales revenue (e.g. commissions, marketing
fees and advertising costs, etc.) are subject to WHT, but a payment for services
related to back office functions is not treated as an other commission or fee.
However, the payment could be subject to WHT under another category (e.g.
computer software).
NOTE: in applying this broad rule in practice, you must deduct WHT if the payment
that you make to a non-resident is for something directly related to your supply of goods
and services in the Maldives.
Examples of other commissions and fees include:

Marketing or advertising fees

Travel wholesalers fees and commissions

Tour operators fees

Agency commissions

Fees to participate in trade fairs or to obtain sales or marketing-related

awards

Dive centre membership fees paid to PADI

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WHT GUIDE | MIRA

Example 8

A non-resident company operates a resort in the Maldives. It outsources

its marketing and advertising activity to a German-resident marketing
company, to promote the resort in the Maldives, and pays a fee to the
company for its services.
The fee paid to the German company is a payment for marketing and
advertising services provided to the supplier of resort goods and services,
which are consumed by resort guests in the Maldives, and the marketing
and advertising services are in connection with the resorts supplies. It
does not matter that the resort is operated by a non-resident company.
The non-resident resort operator must deduct WHT from the fee paid to
the German company.

Example 9

An airport operating company, which is a resident of the Maldives,

10

insures its air traffic liability with a Singapore insurance company and
makes quarterly insurance premium payments.
The Maldives company is not required to deduct WHT from the
insurance premium paid to the Singapore insurance company because an
insurance premium is not a commission or fee.

15.

How to determine whether the service is performed in the

Maldives?
A service is performed in the Maldives if the supplier of the service, or any of the
suppliers employees or agents, are present in the Maldives when performing
any activity in connection with the service for which the commission or fee is
paid.
Withholding tax is applicable only to the commission or fee attributable to the
work done in the Maldives, generally calculated on a daily basis.

15

WHT GUIDE | MIRA

Example 10

A resident airline engages a non-resident aviation consulting company to

investigate new routes for the AprilNovember season. An employee of
the consulting firm spends 3 days on preparatory work and a further 9
days preparing and investigating flight plans, airport access and resource
requirements for various potential routes, in his office in Sydney; 8 days in
Male meeting with the airlines staff to develop and refine the proposals;
and 4 days adding the final touches and writing his report at his office in
Sydney.
The total fee for the aviation advisory services is USD 87,000. WHT is
imposed on the fee on the basis of the proportion of the total time spent on
the assignment that is performed in the Maldives, as follows:
Total time spent on the assignment: 24 days
Time spent in the Maldives: 8 days
Proportion of work performed in the Maldives: 8/24
Fee attributable to work done in the Maldives: 8/24 x 87,000 = 29,000
WHT = 10% x 29,000 = USD 2,900

16.

Who is associated with a supplier?

WHT is imposed on a commission or fee if a non-resident supplies a service to a
person associated with the supplier of goods and services consumed in the
Maldives, and the non-residents service is provided in connection with the
supply of those goods and services. This is an anti-avoidance rule.
A person is associated with a supplier of goods and services consumed in the
Maldives if:

the person owns shares in the supplier (1)

the supplier owns shares in the person (2)

the supplier and the person are shareholders or debt holders of

another company (3)

the supplier and the person are relatives

the supplier and the person are partners in a partnership

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WHT GUIDE | MIRA

the person is an associate of another person who is already associated

with the supplier (4).

SHAREHOLDER (1)

Associates

Shareholding

SUPPLIER OF GOODS AND

SERVICES CONSUMED IN THE
MALDIVES

Associates

Associates

OTHER SHAREHOLDER (3)

Shareholding

SUBSIDIARY COMPANY (2)

Shareholding

Shareholding

SUB-SUBSIDIARY COMPANY (4)

Example 11

An internet service provider (ISP), which is a resident of the Maldives,

10

arranges for its overseas parent company (OP) to engage a New York
media company (NY) to film some video clips to promote ISPs business in
the Maldives. OP pays NY for its services.
Here, a fee is paid for a service provided to a person associated with the
supplier of goods and services which are consumed in the Maldives and
the service is provided in connection with those goods and services, i.e. OP
is associated with ISP (being ISPs parent company) and ISP supplies
internet services, which are consumed by its customers in the Maldives.
OP obtains NYs services and those services are provided in connection
with ISPs supply of internet services in the Maldives, viz. the video clips
are intended to increase ISPs sales of internet services in the Maldives.
Therefore, the payment to NY for its services is subject to WHT.

17

WHT GUIDE | MIRA

17.

Who is a public entertainer?

A public entertainer is a stage, radio or television artiste, a musician, an athlete,
or an individual who exercises any profession or vocation of a similar nature.

18.

How do I calculate the amount of WHT that I need to deduct?

WHT is calculated at the rate of 10% of the gross amount payable to the nonresident.
The gross amount is the amount payable to the non-resident before the deduction
of the WHT.

Example 12

You provide safari boat diving excursions to tourists. You have identified
a launch in Male, which you are considering adding to your fleet. You
engage a marine surveyor from Singapore to inspect the boat in Male for
seaworthiness and compliance with marine transportation regulations. On
1 November 2012, the surveyor sends you an invoice for his survey fee of
MVR 27,325. You pay the invoice on 14 December 2012.
Since the marine surveyor is a non-resident who supplied you technical
services, you are required to deduct WHT at the rate of 10% from the
gross amount of his fee. The gross amount is the amount that he billed
you for his services, i.e. MVR 27,325. The WHT is 10% of that amount, i.e.
WHT of MVR 2,732.50.

19.

When do I deduct WHT from the payments I make to a nonresident?

You must deduct WHT at the time that you make the payment to the nonresident. If you make an adjustment by offsetting the payment against an amount
owed to you, you must deduct the WHT at the time of the adjustment.

Example 13

In Example 12, you paid the Singapore marine surveyor on 14 December

2012. You must deduct the WHT of MVR 2,732.50 on that date and pay
the surveyor the balance of MVR 24,592.50

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WHT GUIDE | MIRA

20.

When must WHT be paid to the MIRA?

WHT must be paid to the MIRA no later than the 15th of the month following the
month in which it was deducted from your payment to the non-resident.

Example 14

In Example 12, you paid the Singapore marine surveyor, and deducted
WHT of MVR 2,732.50, on 14 December 2012. Therefore, you must pay
that WHT to the MIRA by the by 15 January 2013.

21.

Do I have to file a WHT Return?

Yes, you must file a WHT Return (MIRA 301) with the MIRA, together with your
payment of WHT, no later than the 15th of the month following the month in
which the WHT was deducted from your payment to the non-resident. You can
access the MIRA 301 Return Form here.

22.

Do I have to file any document along with the WHT Return?

No, you are not required to submit any additional documents when filing your
WHT Return.

23.

What documents do I have to give to the non-resident?

MIRA will supply you with a certificate stating the amount of WHT that you
have withheld from the payments to a non-resident. You must send this
certificate to the non-resident.

24.

Does WHT apply to payments made by our permanent

establishment in the Maldives?
Yes, a permanent establishment of a non-resident must deduct WHT from
specified payments listed in section 7 above that it makes to other non-residents.

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WHT GUIDE | MIRA

25.

What is a Permanent Establishment?

A Permanent Establishment (PE) is a fixed place in the Maldives where a nonresident carries on its business. A PE includes:

a place of management of business

a branch

an office

a factory

a warehouse

a workshop

a place of extraction of natural resources

a building or work site or construction, installation or assembly project

a person who carries on supervisory activities in connection with a

building or work site or a construction, installation or assembly project

the maintenance of plant and machinery for rental

a person in the Maldives who acts on behalf of a non-resident by

habitually exercising an authority to conclude contracts, or maintains a
stock of goods or merchandise for the purpose of delivery on behalf of
the non-resident, or habitually secures orders wholly for the nonresident or an enterprise controlled by the non-resident.

Example 15

A United States resident hotel management company manages a resort in

the Maldives. The resort pays a fee to another group company resident in
the British Virgin Islands (BVI) for use of the hotel chains brand name,
logo, and proprietary management and operational information.
The payment to the BVI company is a royalty. Even though the PE is a
branch of a non-resident taxpayer (the United States resident company), it
still must deduct WHT from the payment. It is irrelevant whether the
payer of an amount subject to WHT is a resident or a non-resident of the
Maldives.

WHT GUIDE | MIRA

26.

20

If I pay a management fee to a PE in the Maldives, do I have to

deduct WHT?
Since PEs are a part of non-resident companies, they cannot be considered as
separate legal entities. Hence, WHT must be deducted even if the management
fee is paid to a PE in the Maldives.

27.

Is WHT deductible if our PE in the Maldives pays our overseas

Head Office a management fee?
WHT is not deductible when your PE pays a management fee to its overseas
Head Office because the payment is not made to a separate non-resident; it is an
internal payment made to another part of your company. However, where the
management fee includes a recovery of specified payments in section 7 above,
which your Head Office has paid to other non-residents, WHT is deductible on
that part of the management fee. Where management fees are paid, we will
require for both WHT and transfer pricing purposes a detailed breakdown of
how the amount paid is calculated.

28.

Are on-charges of disbursements paid by a non-resident liable to

WHT?
It makes no difference to the amount of WHT to be deducted if a specified
payment in section 7 above made to a non-resident includes a separately
identified component for reimbursement of costs incurred by the non-resident,
e.g. photocopying, travel, accommodation, etc. WHT must be deducted from the
total amount that you pay to the non-resident.

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WHT GUIDE | MIRA

29.

What happens if I am late paying the non-resident?

An amount may be payable before it is actually paid, but WHT must be deducted
at the time of payment. A payment is the transmission of cash or a bank
transfer of an amount from you to the non-resident. A payment also includes
anything of value and does not have to be in the form of money.
Example 16

You organise Ronaldos visit to the Maldives to participate in an exhibition

football match between the Maldives and Qatar on 24 September 2012.
Your agreement with Ronaldos agent is that you will pay his fee of USD
200,000 on 30 September 2012. In fact, you make the payment on 2 October
2012.
The fee is payable on 30 September 2012, i.e. the date on which you are
liable to make the payment, but it is actually paid on 2 October 2012.
Since Ronaldo is a non-resident public entertainer (see section 17 above),
you are required to deduct WHT at the rate of 10% from the gross amount
of his fee of USD 200,000, i.e. WHT of USD 20,000, and to pay him the
balance of USD 180,000. WHT is to be deducted on the date of payment,
i.e. 2 October 2012, rather than the date that the fee is payable (30
September 2012). Therefore, you must pay the WHT of USD 20,000 to
MIRA by 15 November 2012.

30.

What currency do I use to pay WHT to the MIRA?

WHT must be paid in Rufiyaa.

31.

What exchange rate do I use to calculate WHT in Rufiyaa if I pay

the non-resident in a foreign currency?
If you pay the non-resident in a currency other than Rufiyaa, when making the
WHT payment, the amount should be converted to Rufiyaa using an exchange
rate within 2% of the rate published by the Maldives Monetary Authority on the
day on which you make the payment to the non-resident. In addition, the source
of the foreign exchange rates that you adopt must be used consistently.

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WHT GUIDE | MIRA

Example 17

In Example 16 above, you paid Ronaldo in United States Dollars. You

must convert the WHT of USD 20,000 into Maldivian Rufiyaa at the
Maldives Monetary Authoritys published reference rate at the date of
your payment to Ronaldo, i.e. the reference rate on 2 October 2012.
Assume that the reference rate on 2 October 2012 is USD 1 = MVR 15.42.
The amount of WHT which you must pay to the MIRA on 15 November
2012 is MVR 308,400, i.e. USD 20,000 x 15.42.

32.

What are the penalties for not paying the correct amount of WHT
on time?
Failure to pay tax by the due date;

a penalty of 0.05% of the outstanding amount per day, up to a

maximum of twice the outstanding amount of tax, or MVR 250,000
whichever is higher; and

interest on unpaid WHT at the rate of 1% per month from the due date
of payment until the date that the WHT is paid; and

offence penalties will also apply in cases of tax evasion or failing to

deduct WHT without reasonable excuse.

33.

What are the penalties for not filing WHT return on time?
Failure to file WHT return by the due date;

a penalty of MVR 50 per day, up to a maximum of twice the amount

of tax payable for the period.

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WHT GUIDE | MIRA

34.

What happens if I do not deduct WHT when I should have?

If you make a payment to a non-resident without deducting WHT when you are
required to do so, we treat the amount of the payment that you make as the net
amount after the deduction of the WHT that you were supposed to deduct. We
gross up that net amount to calculate the gross amount from which WHT
should have been deducted, and calculate the amount of that WHT, to arrive at
the net amount which you actually paid to the non-resident.

Example 18

A Maldivian subsidiary company pays a management fee to its German

parent company of USD 250,000, and fails to deduct WHT.
The USD 250,000 is treated as a net payment to the parent company after
the correct deduction of WHT, as follows:

USD

Gross payment (before deduction of WHT)

Less WHT

xxxxxx
(xxxx)

Net payment (after deduction of correct WHT)

250,000

The gross amount is calculated using the following formula:

Net amount .9

= 250,000 .9

= USD 277,777
Therefore, the WHT due is 10% x USD 277,777
= USD 27,777
and the correct position is:
Gross payment (before deduction of WHT)
Less WHT
Net payment (after deduction of WHT)

277,777
(27,777)
250,000

Note

The WHT is not USD 25,000 (10% x USD 250,000).

The WHT payable to the MIRA is the MVR equivalent of USD

27,777 calculated using the Maldives Monetary Authoritys
reference rate on the date of payment of the management fee to
the German parent company.

Penalties will apply if the correct amount of WHT is not paid by

the due date.

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WHT GUIDE | MIRA

35.

Am I required to deduct WHT from payments made after 18 July

2011 that relate to services provided before 18 July 2011?
Yes, WHT is deductible at the time that a specified payment is made. If a payment is
made on or after 18 July 2011 that relates to services supplied by a non-resident
before 18 July 2011, WHT must still be deducted because the payment was made
after the date that the BPT Act came into effect, i.e. 18 July 2011. Specified payments
made to non-residents before 18 July 2011 are not subject to WHT, even if they are
advance payments, which relate to services performed or rights used after 18 July
2011.

Example 19

Every quarter your company is required to pay a licence fee to a Canadian

company for the use of a master copy of software that you duplicate and
install on computers that you assemble in the Maldives. The licence fee
payment is due by the 28th day of the month following the end of a
quarter. You make payment of the licence fee for the period 1 April 2011
to 30 June 2011 on 27 July 2011.
You are required to deduct WHT from the payment which you make on
27 July 2011, because the licence fee was paid after 18 July 2011.

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WHT GUIDE | MIRA

36.

Can I set off the WHT that I deduct from payments to nonresidents against the BPT that I have to pay on my profits for the
year?
No, you cannot deduct WHT from your BPT liability. The WHT is not your tax. It
is a tax charged on the non-resident. You simply collect it from the non-resident
(by way of deducting it from the payment to the non-resident) and pay it across
to the MIRA.
However, if the non-resident has a PE in the Maldives and derives the specified
payment through the PE, the non-resident can deduct the specified payment
from the PEs gross income in calculating the PEs profit subject to BPT.

Example 20

A Hong Kong resident company with a 31 December balance date has a PE

in the Maldives, which leases pile driving and marine construction
equipment to a Maldives resident construction company. The construction
company makes a lease payment of USD 25,000 to the Hong Kong
company on 30 November 2012. The construction company must deduct
WHT of USD 2,500 (10% of USD 25,000) from the lease payment on 30
November 2012 and pay the MVR equivalent amount to the MIRA by 15
December 2012.
Because the Hong Kong company has a PE in the Maldives, it must pay
BPT on the PEs profits. In calculating its profits for the 2012 tax year, the
Hong Kong company can deduct the USD 25,000 from the PEs gross
income (which includes the USD 25,000). This deduction effectively
exempts the USD 25,000 from BPT and ensures that the USD 25,000 is not
taxed twice.

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WHT GUIDE | MIRA

37.

What happens if I deducted WHT before the recipient became a

resident of the Maldives, but later in the same tax year he
became a resident?
At the time of the payment to a non-resident, you must deduct WHT, even
though the recipient became a resident of the Maldives after the payment date.
However, where the recipient becomes resident after the date of payment, you
are entitled to tax refund or credit in accordance with Tax Administration Act.

Example 21

On 6 March 2013, Mr Liyanage, a resident of Sri Lanka, received a payment

from a Maldivian company for technical services provided by him. On 28
June 2013, Mr Liyanage arrives in the Maldives and stays for the remainder
of 2013. Applying the 183-day rule, his residence status is established on 27
December 2013 (i.e. the 183rd day after his arrival) and, for the 2013 tax
year, he is treated as a resident of the Maldives from 28 June 2013 until 31
December 2013.
Therefore, the payment made to Mr Liyanage on 6 March 2013 (and any
other payments described in section 6(a)(1)(6) of the BPT Act made to him
before 28 June 2013) are subject to WHT, but those made from (and
including) 28 June 2013 to 31 December 2012 are not subject to WHT.

Example 22

Assume that Mr Liyanage in Example 21, who arrives in the Maldives on

28 June 2013, received a payment of a fee for architectural and interior
design services from a Maldivian resort on 31 August 2013. Mr Liyanage
has arranged to stay in one of the resorts cheaper bungalows for 8 months
to provide his services while part of the resort is renovated. Applying the
183-day rule, his residence status for the 2013 tax year cannot be
definitively determined until 27 December 2013.
The resort must deduct WHT from the payment made to Mr Liyanage on
31 August 2013. If Mr Liyanage subsequently becomes a resident, the WHT
is refundable or creditable to the resort in accordance with the Tax
Administration Act.
If Mr Liyanage departs on 5 November 2013, he does not become a resident
of the Maldives in the 2013 tax year. No further action is required
(assuming that the resort paid the WHT to MIRA by the due date: 15
September 2013), because the WHT was deducted at the time of payment
of the fee to Mr Liyanage.