Maldives has become a party to the Convention on Mutual Administrative Assistance in Tax Matters (MAAC) that would allow Maldives to exchange information with hundreds of other countries to curb attempts of tax evasion and under-declaration of income.
The Convention was signed at a special ceremony held at the OECD Headquarters in Paris yesterday by the Maldivian Ambassador to Belgium and the European Union Hassan Sobir.
Following this, two Competent Authority Agreements which provide the basis for the exchange of information under the MAAC was signed by Commissioner General of Taxation Fathuhulla Jameel today. These agreements are the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS-MCAA) and the Multilateral Competent Authority Agreement on the exchange of Country-by-Country Reports (CbCR-MCAA).
Since joining the Global Forum on Transparency and Exchange of Information on Tax Matters (Global Forum) on February 2016 – an international body comprising of over 160 countries and financial centers working together to increase the transparency of tax systems to curb tax evasion and avoidance on a global scale – Maldives Inland Revenue Authority (MIRA) has been continuously working on the implementation of the international tax standards with the assistance from Global Forum.
The Convention will allow various forms of administrative cooperation between the signatories such as exchange of information on request (EOIR), automatic exchange of financial information (AEOI), spontaneous exchange of information (SEOI), service of documents and assistance for conducting tax examinations – to combat non-compliance through tax evasion and avoidance.
As a party to the MAAC, MIRA will be provided access to financial information of Maldivian tax residents that hold financial accounts (whether in banks or other specified financial institutions such as trusts) in countries participating in this Convention under the Common Reporting Standard (CRS) – to include information of financial accounts of all individuals, and entity accounts with a balance or value more than USD 250,000 which are maintained by signatory members and institutions.
MIRA stressed this as important as Maldivian taxpayers are taxed on their worldwide income, and having access to financial account information that may be held in 143 other countries further supports will further enhance its efforts to prevent tax evasion. It will also help identify individuals who have under-declared their income.
Under the CbCR, MIRA will also be granted access to financial information of Multinational Enterprises (MNE) operating in the jurisdiction of member countries with consolidated revenue of €750 million – having constituent entities that a resident in the Maldives.
Moreover, Maldives will also be manded to provide pre-agreed information to tax authorities of participating jurisdictions. Accordingly, the information exchange will occur as follows.
The information exchanged with foreign jurisdictions will be submitted to MIRA by the financial institutions registered under CSR and entities that have notified MIRA under the CbCR. First filing deadline for MNE’s registered under CRS is before July 31, 2022. Entities required to file CbCR in the Maldives must file for Reporting Fiscal Years commencing on or after January 1, 2021, no later than 12 months after the last day of the Reporting Fiscal Year of the MNE.
MIRA reports having worked closely with Finance Ministry to formulate the necessary laws and policies required to implement this international commitment made by the Maldives. Accordingly, regulations and policies required for the implementation of these international standards are now publicized on the government gazette.
In addition to this, additional guidance pertaining to CRS and CbCR will be shared by MIRA through their website and social media platforms. MIRA will also conduct information sessions in collaboration with Global Forum for relevant government offices and financial institutions – detailing the obligations and responsibilities of each party involved. On-hand training will also be provided to financial institutions on the use of the information exchange system which will be used to submit information.
To successfully implement the standard, MIRA urges for the cooperation of financial institutions registered under CRS as well as entities that are required to CbCRs. Failure to provide information to MIRA will be faced with the penalties determined in Section 65 of the Tax Administration Act.