Parliament Backs 10% Withholding Tax on Foreign Contractors

The Parliament has approved a proposed amendment to increase the withholding tax charged on payments made to non-resident contractors involved in construction projects in the Maldives from 5% to 10%.

The amendment to the Income Tax Act was passed by the Whole House Committee with the unanimous support of all 64 members who took part in the vote. No member voted against the proposal.

The amendment was submitted on behalf of the government by Mathiveri MP Hassan Zareer.

The government said the main purpose of the amendment is to create a more level and competitive environment between Maldivian businesses and contractors that are not resident in the Maldives when competing for construction projects in the country.

Under the proposed amendment, businesses operating in the Maldives would be required to withhold 10% of payments made to non-resident contractors as withholding tax. Under the current law, such payments are subject to a 5% withholding tax. MIRA’s published Income Tax Act confirms that the existing withholding tax rate for payments to non-resident contractors is 5%.

The Maldives Inland Revenue Authority (MIRA) estimates that, once implemented, the amendment will increase state revenue by an average of MVR 251 million annually.