Parliament passes amendment to double withholding tax on foreign contractors

Parliament has passed the amendment to double the withholding tax payable by foreign contractors working on construction projects in the Maldives.

The amendment to the Income Tax Act, submitted by PNC MP Hassan Zareer on behalf of the government, was approved with 54 votes in favour out of 56 members present. Two members voted against.

The government says the amendment is intended to create a fair and competitive environment among foreign contractors bidding for Maldivian construction projects.

Under the current law, foreign contractors are subject to a 5 percent withholding tax. The amendment increases the rate to 10 percent when a Maldivian business makes payments to a foreign contractor.

Withholding tax is deducted by the payer and remitted to the state before the payment is made to the recipient. It applies to income earned in the Maldives by non-resident persons, ensuring the state receives tax revenue from foreign entities operating in the country. The tax is typically charged on royalties, technical service fees, dividends and contract payments, preventing tax-free outflows and protecting state revenue.