Minister: Withholding tax hike will create a more level playing field for local contractors

Doubling the withholding tax on payments to foreign contractors will create a more level playing field for Maldivian contractors, says Minister of Infrastructure, Housing and Urban Development, Dr. Abdulla Muthalib.

The remark comes as the government pushes legislature to increase the withholding tax on payments to foreign contractors from 5 percent to 10 percent.

In a post on X on Monday afternoon, Muthalib noted that the withholding tax had been 10 percent before then-President Ibrahim Mohamed Solih ratified an amendment to the Income Tax Act to have it reduced to 5 percent.

He said that this gave overseas contractors a significant tax advantage over local contractors, and that reverting it back to 10 percent would be an important step towards correcting the imbalance.

“Restoring the 10% rate is an important step towards correcting this imbalance and creating a more level playing field for Maldivian contractors,” he wrote.

The government bill to revert the 10 percent rate, sponsored by Mathiveri MP Hassan Zareer, was presented at the Parliament on Monday morning.

It states that 10 percent must be deducted as withholding tax from payments made by local businesses to overseas contractors.

The government states that the main purpose of the change is to establish a level playing field for local contractors when competing for construction projects in the Maldives.