Tax regulation amended to levy tax on USD-earners in USD

Maldives has amended tax regulations to levy tax on US Dollar-earners in US Dollars.

The changes were made via the fifth amendment to the Income Tax Regulation publicized by the Maldives Inland Revenue Authority (MIRA) on Thursday.

The amendment mandates taxpayers, including individuals and companies, whose functional currency is a currency other than Maldivian Rufiyaa to pay their taxes in US Dollars.  

It also mandates companies to formulate their financial statements in US Dollars starting from October 31st.

However, if the taxpayer’s functional currency is Maldivian Rufiyaa, it is at their discretion whether to pay their taxes in Maldivian Rufiyaa or US Dollars.

Additionally, non-resident withholding tax, employee withholding tax and capital gains withholding tax can also be paid in Maldivian Rufiyaa or US Dollars unless the taxpayer’s functional currency is a currency other than Maldivian Rufiyaa which therein would mandate the payment of taxes in US dollars.

This, however, will only apply to tax payments for periods ending on or after October 31st.

The amendment to the regulation is in effect following its publication in the government gazette on Thursday.

The cabinet approved measures aimed at boosting dollar revenue streams in order to alleviate the current dollar crunch, including collecting corporate income tax from companies that earn US dollars in US dollars, instead of Maldivian Rufiyaa back in August.

Commenting on the cabinet meeting, Attorney General Ahmed Usham cited the exchange of US dollars by taxpayers earning income in the currency at the black market as a common complaint received by authorities. Henceforth, he said the new measures were aimed at putting an end to this.

With Maldives in deep debt, it is also facing a shortage of foreign currency as a result of US dollar rates in the black market have skyrocketed.