Sanken Lanka instructed to pay withholding tax

Sanken Lanka, a Sri Lankan construction company which operates in Maldives, has been instructed to pay withholding tax to the Maldivian government.

The instructions were issued in a letter signed by Finance Minister Ibrahim Ameer in late 2020.

Sanken Lanka was told in the letter that withholding tax is mandatory under Income Tax Act, and cannot be exempted.

The letter was sent in response to a request by Sanken Lanka to Finance Ministry seeking an exemption on withholding tax.

Withholding tax is required of non-residents who conduct business in Maldives. They are required to pay 10 percent of their income to the Maldivian government as withholding tax.

Withholding tax came into effect in January 2020, under revisions to the Taxation Act in 2019.

Sources report to Sun that Sanken Lanka owes the Maldivian government approximately USD 20 million in withholding tax. However, this has not been confirmed by Sunken Lanka.

When questioned by Sun, Sanken Lanka’s Manager – Finance, Priyanthi responded that Sanken Lanka is a private company, and declined to make a comment to the press. Priyanthi said that the company pays its taxes to the Maldivian and Sri Lankan government, but declined to comment when asked specifically about the withholding tax.

Sun has been informed that the withholding tax was introduced in Maldives to solve the issue of large international companies that secure contracts for projects in Maldives, but subcontract it to local contractors for a lower rate, and take large amounts overseas after evading tax.