Parliament accepts bill to raise non-resident contractor tax to 10%

Parliament has accepted a government bill seeking to increase the withholding tax rate on non-resident contractors from 5 per cent to 10 per cent and has referred the proposed legislation to the Committee of the Whole House for further review.

The amendment to the Income Tax Act was submitted on behalf of the government by Mathiveri MP Hassan Zareer of the ruling People's National Congress (PNC).

Under the current Income Tax Act, a withholding tax rate of 10 per cent applies to several categories of payments made to non-residents, including real estate rent, royalties, dividends and technical service fees.

However, non-resident contractors are currently subject to a lower withholding tax rate of 5 per cent.

The proposed amendment seeks to increase that rate to 10 per cent and establish it as the final tax liability for non-resident contractors.

The bill was presented and debated in the People's Majlis on Monday following its submission the previous night.

After debate concluded, lawmakers voted on whether to accept the bill for consideration.

Of the 69 members present during the vote, 65 participated.

According to voting results:

With the support of 64 members, the bill was accepted and forwarded to the Committee of the Whole House for detailed examination.

According to projections included in the proposed legislation, increasing the withholding tax rate from 5 per cent to 10 per cent is expected to generate an additional MVR 251 million in annual government revenue, equivalent to approximately US$16 million.

The committee will now review the bill before it returns to parliament for further debate and a final vote.