Introduction
While it’s true the Maldives is one of the world’s premier travel destinations, there’s a lot more happening beneath the surface. Over the past few years, this island nation has taken significant strides to position itself as a serious contender in the global business and investment landscape. Driven by investor-friendly policies and a clear vision for economic diversification, the Maldives is no longer just a luxury retreat, it’s becoming a destination for entrepreneurs, foreign investors, and companies looking for stable, long-term opportunities in the Indian Ocean region. This article dives deeper in the tax framework of Maldives Income Tax Act and the various requisites for businesses that entails with it.
A Shift Toward Economic Modernization
The Maldivian government has made a concerted effort to reshape its economy. This includes welcoming international businesses, supporting local enterprises, and reforming its legal and tax systems to better align with international standards.
Its strategic location situated along key shipping routes between Asia, the Middle East, and Africa offers logistical advantages. Add to that a stable political climate and an open, liberal economic policy, and the Maldives starts to look less like a vacation-only spot and more like a viable hub for regional and global operations.
One of the most important steps in this transformation was the introduction of a new income tax law in late 2019.
The Income Tax Act: Laying the Foundation
Ratified in December 2019, the Income Tax Act (Law No. 25/2019) marked a turning point in the country’s financial framework. It replaced older systems such as the Business Profit Tax and Bank Profit Tax, consolidating them into a more streamlined, transparent tax structure.
This reform was designed with two key goals in mind: align with international standards and create a simpler, more predictable tax environment for businesses. The Act applies to a wide range of taxpayers, including individuals, companies, partnerships, and foreign entities operating in the Maldives. It also clarifies how tax residency is determined and sets clear expectations around compliance and reporting.
Corporate Tax: Transparent and Competitive
One of the standout features of the new tax system is its clarity. The Maldives now uses a two-tier tax structure for corporate income under Section 9 of Income Tax Act:
| Tax bracket for taxable income derived in an accounting period | Tax Rate |
|---|---|
| Not exceeding MVR 500,000/- (Five Hundred Thousand Maldivian Rufiyaa) | 0% (Zero percent) |
| More than MVR 500,000/- (Five Hundred Thousand Maldivian Rufiyaa) | 15% (Fifteen percent) |
The zero-tax threshold provides room for small businesses to grow, while the flat 15% rate for higher incomes ensures simplicity and predictability for larger enterprises. This setup makes tax planning easier, transparent and appealing to start-ups, SMEs, and foreign investors looking for a stable tax environment.
Filing and Payment of Income Tax
Businesses and individuals are required to file their tax returns to MIRA no later than 30th June of the following tax year. The payments are generally made on 3 instalments.
- First Interim Payment – 31st July of the ongoing tax year
- Second Interim Payment – 31st January of the following tax year
- Final Payment – 30th June of the following tax year.
The first and second interim payments are generally based on half of the previous year’s tax liability. Any excess/ shortfall is adjusted during the final payment. However, the ITA allows taxpayers to make an estimate of the current year’s liability and make interim payments based on that estimate if they expect their current period’s liability to be less than that of the previous year (subject to certain conditions).
Further Section 49 of Income Tax Act removes the obligation of making the interim payments if the person’s total interim payment liability is less than MVR 20,000, or his/her previous year’s tax liability was less than MVR 20,000.
Registration Requirements Under the Maldives Income Tax Act
According to Section 64 and Section 65 of Income Tax Act of the Maldives, any person whether a resident, non-resident, or temporary resident, who derives income from the Maldives or abroad must apply for registration with the Maldives Inland Revenue Authority (MIRA). This registration must be completed through the submission of Form MIRA 117 (Registration and Change of Information), along with the required supporting documents via MIRAConnect. Additionally, a responsible person must be appointed to fulfil the company’s tax obligations.
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Registration within 60 (Sixty) Days
The following persons are required to register with MIRA within 60 (sixty) days from the date of entry into force of the Income Tax Act:
- Any person deriving income from the Maldives as of the date the Income Tax Act comes into force, regardless of whether or not the person is a resident of the Maldives.
- 98yEmployers of individuals who are employed in the Maldives on the date of entry into force of the Income Tax Act. Such employers must register both themselves and their employees.
- Persons who are residents of the Maldives and derive income from outside the Maldives as of the effective date of the Income Tax Act.
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Registration within 30 (Thirty) Days
The following persons are required to register with MIRA within 30 (thirty) days from the occurrence of the specified events:
- Any person who begins to derive income from the Maldives after the Income Tax Act comes into force, from the date such income was first derived.
- Any person who commences a business in the Maldives under a business permit issued after the Income Tax Act comes into force, from the date of issuance of the permit by the relevant authority.
- Any person who becomes an employer of an individual working in the Maldives after the effective date of the Act, the registration must be made for both the employer and the employee, from the date the person becomes an employer.
- Any resident of the Maldives who begins to derive income from outside the Maldives after the Act’s commencement, from the date such income was first derived.
How the Maldives Stacks Up Globally
To better understand how the Maldives compares on the world stage, here’s a look at corporate tax rates in other regions:
| Country/Region | Corporate Tax Rate |
|---|---|
| Maldives | 15% |
| United States | 21% |
| Germany | 30% |
| Singapore | 17% |
| UAE (Mainland) | 9% |
While the Maldives doesn’t offer the lowest tax rates globally, it strikes a healthy balance, lower than the global and regional averages, yet still structured enough to support public services and infrastructure development.
What Makes the Maldives a Smart Bet for Foreign Investors?
Beyond its tax advantages, the Maldives offers several business-friendly policies:
- 100% Foreign Ownership: No requirement for local partners in key sectors.
- Long-Term Leases: Especially attractive for resort and infrastructure developers.
- Skilled Foreign Talent: Streamlined work visa processes make it easier to bring in expertise.
- International Arbitration: Legal disputes can be settled through internationally recognized arbitration systems, providing peace of mind to foreign businesses.
Why Businesses Are Taking Notice?
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A Friendly Start for Start-ups and SMEs
New businesses often struggle under the weight of early taxation. The Maldives addresses this by offering a 0% tax rate on income up to MVR 500,000, easing financial pressures during the critical early years. This encourages entrepreneurship, boosts innovation, and helps the informal sector transition into the formal economy.
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Simplicity for Larger Companies
For more established businesses, the consistent 15% tax rate makes long-term financial planning much more straightforward. This is particularly important in sectors like tourism, energy, and infrastructure, where capital investment is high, and predictability is key.
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Allowable Deductions that Support Growth
Companies operating in the Maldives can also benefit from a range of deductions that reduce their taxable income, such as:
- Contributions to retirement pensions.
- Charitable donations (up to 5% of taxable income).
- Religious alms (Zakat al-mal) paid to registered bodies.
- Loan interest (up to 6% annually).
- Head office expenses (up to 3% of income).
These deductions reflect a tax system that not only supports business growth but also encourages social responsibility and sound financial management.
Real Challenges – and Real Solutions
Of course, no market is without its difficulties. The Maldives does face some unique challenges:
- Small Domestic Market: With a population of under 600,000, consumer demand is limited.
- Geographical Spread: Operating across scattered islands adds complexity and costs to logistics.
- Climate Risk: Being low-lying, the country is highly vulnerable to rising sea levels and extreme weather.
That said, the government is actively investing in infrastructure, digital transformation, and climate adaptation measures, with support from international development partners.
Final Thoughts: More Than a Tropical Getaway
The Maldives may always be known for its pristine beaches and high-end resorts, but its evolution into a forward-thinking business destination is well underway. With a modern tax system, investor-friendly laws, and a welcoming environment for foreign capital, the Maldives is offering real opportunities beyond the tourism brochures.
For entrepreneurs, corporates, and international investors seeking a stable, strategically located, and transparent business environment, the Maldives is worth more than a second look, it might just be the next smart move.
Disclaimer
The information provided in this article is intended for general informational purposes only and should not be construed as legal advice. The content of this article is not intended to create and receipt of it does not constitute any relationship. Readers should not act upon this information without seeking professional legal counsel.
