Businesses allowed to offset unpaid govt bills against tax liabilities

The government has introduced a mechanism allowing Maldivian businesses to offset outstanding payments owed to them by state institutions against their tax liabilities.

In a statement issued on Sunday evening, the Ministry of Finance and Public Enterprises announced that arrangements have been established to deduct unpaid government bills from the taxes businesses are required to pay to the Maldives Inland Revenue Authority (MIRA).

Under the arrangement, businesses owed money by government institutions can submit details of their outstanding payments to MIRA to have the amounts offset against their tax obligations.

The ministry said the mechanism would apply to unpaid invoices submitted by micro, small and medium-sized enterprises (MSMEs).

Where a business's outstanding tax liability exceeds the amount owed to it by the government, the government payment will be deducted from the tax liability, with the business required to settle the remaining balance.

However, if the amount owed by the government exceeds the business's tax liability, the tax obligation will be settled through the offset mechanism, and the government will pay the remaining amount to the business.

The Finance Ministry requested businesses applying for the arrangement to submit details of outstanding government payments in accordance with the procedures published by MIRA.

The initiative follows concerns raised by businesses supplying goods and services to government companies over delays in receiving payments.

Several businesses had previously requested President Dr Mohamed Muizzu to introduce a mechanism allowing their outstanding tax liabilities to be deducted from payments owed to them by the government.

The requests were made as businesses sought solutions to prolonged delays in settling invoices for goods and services supplied to state-owned companies.

The new arrangement is intended to address these outstanding payments while allowing businesses to meet their tax obligations without making separate payments for amounts already owed to them by the state.