Parliament passes bill doubling non-resident contractor withholding tax to 10%
The amendment seeks to bring the withholding tax paid by non-resident contractors to 10% and establish the amount as their final tax liability.
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Parliament on Sunday passed an amendment to the Income Tax Act doubling the withholding tax imposed on non-resident contractors from 5% to 10%.
The government-sponsored bill was introduced in parliament last Monday by PNC MP for Mathiveri Hassan Zareer.
The amendment seeks to bring the withholding tax paid by non-resident contractors to 10% and establish the amount as their final tax liability.
The government has said the change is also intended to address differences in tax treatment between Maldivian businesses and non-resident contractors competing for construction projects in the Maldives.
The bill was reviewed by the Committee of the Whole House, which approved it without changes. The committee report was presented to parliament during Sunday’s sitting.
The bill was passed with 54 members voting in favour.
Opposition Maldivian Democratic Party MPs Abdul Ghafoor Moosa, representing Hanimaadhoo, and Mohamed Niushad, representing Keyodhoo, voted against the legislation.
Under Section 53 of the Income Tax Act, withholding tax is applied through employee withholding tax and non-resident withholding tax.
Employee withholding tax is deducted by employers from remuneration paid to employees. It applies to monthly remuneration above MVR 60,000, with rates ranging from 5.5% to 15%.
Non-resident withholding tax applies to certain payments made to non-residents from the Maldives.
A 10% withholding tax already applies to several categories of payments to non-residents, including rent from immovable property in the Maldives, royalties, dividends and technical service fees.
Non-resident contractors, however, were subject to a 5% withholding tax. The amendment increases that rate to 10%.
According to projections included with the bill, the five-percentage-point increase is expected to generate an average of MVR 251 million, or about USD 16 million, in additional state revenue each year.
