Maldives VAT, GST, and Sales Tax Guide

Maldives

Malé GMT +5

EY G. Shafag

2nd Floor, Rahdhebai Magu

Malé

Maldives

Indirect tax contacts

Krishna Rengaraj +960 332-0742 krishna.rengaraj@lk.ey.com

Sulakshan Ramanan +960 332-6799 sulakshan.ramanan@lk.ey.com

Sumudu Wijesundara +960 332-6799 sumudu.wijesundara@lk.ey.com

Mohamed Iuzaaz +960 332-6799 mohamed.iuzaaz@lk.ey.com

A. At a glance

Names of the taxes

Goods and services tax (GST) Tourism goods and services tax (TGST)

Local names Goods and services tax (GST) Tourism goods and services tax (TGST)

Date introduced 2 October 2011

Administered by Maldives Inland Revenue Authority (MIRA)

GST and TGST rates

Standard GST: 6% TGST: 12%

Other Zero-rated (0%) and exempt

GST and TGST GST: XXXXXXXGST501 number format TGST: XXXXXXXGST001

GST and TGST return periods

Monthly if the taxable supply exceeds MVR1 million per month (approx. USD65,000)

Quarterly if the taxable supply exceeds MVR1 million per quarter (approx. USD65,000)

Thresholds

Registration

Deregistration

GST: taxable supply for the past or next 12 months exceeds MVR1 million (approx. USD65,000)

TGST: registration required irrespective of the taxable supply

GST: taxable supply for the past or next 12 months is less than MVR500,000 (approx. USD32,500)

TGST: upon cancellation of the operating license

Recovery of GST and TGST by non-established businesses No

B. Scope of the tax

GST applies to the supply of goods or services made in the Maldives by a taxable person.

TGST applies to the following:

• Goods and services supplied by tourist resorts, tourist hotels, guest houses, picnic islands, tour ist vessels and yacht marinas authorized by the Tourism Ministry

• Goods and services supplied by shops, diving schools, spas, water sports facilities and other such places in establishments specified in the law (subsection (a)(1)), excluding shops operat ing exclusively for the employees of such establishments

• Goods and services supplied by travel agency service providers authorized by the tourism min istry

• Goods and services supplied to foreign tourist vessels entering the Maldives by their agents

• Goods and services provided by domestic air transportation service providers to persons other than Maldivian citizens

C. Who is liable

The following persons are required to register for GST if the value of their taxable supplies exceeds MVR1 million (approx. USD65,000) per year:

• Companies registered under the Companies Act of Maldives (Act Number 10/1996)

• Nonresident companies that operate and earn profits from sources inside the Maldives

• Partnerships registered under the Partnership Act (Act Number 9/1996)

• Cooperative societies and associations

The following persons are required to register for TGST irrespective of their taxable supplies:

• Tourist establishments (tourist resorts, tourist hotels, guesthouses, picnic islands, tourist vessels and yacht marinas authorized by the Tourism Ministry)

• Diving schools, shops, spas, water sports facilities and any other such facilities being operated within the tourist establishments specified above

• Travel agency service providers authorized by the Tourism Ministry

• Agents providing goods and services to foreign tourist vessels entering the Maldives

Persons carrying on taxable activities in the Maldives must register with the MIRA within 30 days from the date of commencement of the business activity if:

• The value of the person’s taxable supplies during the past 12 months exceeded MVR1 million (approx. USD65,000)

• The value of the person’s estimated taxable supplies for the following 12 months exceeds MVR1 million (approx. USD65,000)

• The person provides tourism goods and services

Persons that import goods into the Maldives must register for GST in the Maldives (it is manda tory) and must apply to register with the MIRA within 30 days from the date of commencement of import activity. Please note that there is no separate import GST in the Maldives.

Persons who meet the above criteria shall submit a standard form called MIRA 105 to the MIRA, and the MIRA will confirm the registration by issuing a notification of GST registration.

Exemption from registration. Persons with total annual turnover of less than MVR1 million (approx. USD65,000) are exempt from GST. There is no exemption from registration for TGST. Importers of goods to the Maldives and suppliers of tourism goods and services are required to register even if the value of their supplies do not exceed the MVR1 million threshold.

Voluntary registration and small businesses. A person conducting an authorized trade or providing an authorized service may request permission of the Commissioner General to register with the MIRA.

Group registration. Group GST registration is not allowed in the Maldives.

Non-established businesses. A foreign business with no establishment in the Maldives that sup plies goods or services to customers in the Maldives is not required to register for GST. The rules are the same for supplies of goods and for supplies of services and irrespective of whether sup plies are made to business or private customers.

If the foreign business physically supplies goods or services via a branch or office, etc., or has the authority to conclude contracts in the Maldives, it will qualify as a permanent establishment in the Maldives. In this case if such permanent establishments meet the thresholds mentioned they will be obliged to register for GST.

There is no specific threshold for foreign businesses. The general threshold for GST registration applies, i.e., if the total taxable sales (including zero-rated goods and services) for the previous 12 months exceeded MVR1 million or expected taxable sales (including zero-rated goods and services) for the next 12 months is expected to exceed MVR1 million.

Tax representatives. A taxable person may choose to appoint a tax agent to act on its behalf in relation to tax matters; it is not compulsory to do so. The obligation of the tax agent is to review or file tax returns on behalf of the taxable person, but all payment obligations, fines and compli ance obligations would still fall upon the taxable person.

If the taxable person wishes to appoint a licensed tax agent, it must submit a completed “appoint ment of tax agent” (MIRA 114) form together with the information and documents specified therein, to the tax administration (MIRA). A tax agent cannot represent any taxable person prior to the submission of the necessary form to the MIRA. A taxable person may appoint only one licensed tax agent.

Reverse charge services. There is no reverse-charge mechanism in the Maldives, except in one specific circumstance for the digital economy (see below). However, a foreign business with no establishment in the Maldives that supplies goods or services to customers in the Maldives is not required to register for GST. The rules are the same for supplies of goods and for supplies of services and irrespective of whether supplies are made to business or private customers.

The only scenario where the reverse-charge mechanism would apply is for business-to-business (B2B) digital transactions, the customer is expected to self-assess GST and TGST on the pay ment to the nonresident business. See the Digital economy subsection below for more detail.

Domestic reverse charge. There are no domestic reverse charge in the Maldives.

Digital economy. For B2B supplies of e-commerce (i.e., electronically supplied services), the customer is expected to self-assess GST and TGST on the payment to the nonresident business. The self-assessed GST/TGST is eligible for an immediate credit to the extent that the customer’s business allows the customer to take input tax credits.

For B2C supplies of e-commerce, a nonresident business is required to register and account for GST in the Maldives where its income earned in the Maldives exceeds the registration threshold and the general GST rules and regulations apply.

There are no specific e-commerce GST rules for imported goods in the Maldives.

Online marketplaces and platforms. No special rules exist for online marketplaces and platforms in the Maldives. If registration rules are met, the service provider must register and declare GST on services provided. Registration is only compulsory for local online marketplaces/platforms.

Registration procedures. To register for GST, the taxable person must submit the GST registration form (MIRA 105) in person or by post to the tax authorities. Taxable persons must register before the end of the month following the month in which the threshold of MVR1 million was reached.

If registering for TGST, the taxable person must submit a copy of the relevant operating license or permit, together with the registration form.

Deregistration. Persons registered with the MIRA may apply for termination of registration under the following circumstances:

• Person’s taxable supplies at the end of any 12-month period fell below MVR500,000 (approx. USD32,500).

• Person’s taxable supplies at the beginning of any 12-month period are forecasted to fall below MVR500,000 (approx. USD32,500).

• The person has ceased taxable activities, with no intention to resume them during the following 12 months.

Registered persons are required to pay tax on goods in their possession at the time of termination of their registration if input tax on the goods has already been claimed.

A registered person who is an importer of goods into the Maldives whose registration is canceled or terminated must submit to the MIRA an account of the goods in their possession out of the goods imported by them. Goods specified in an invoice submitted after deregistration, accordingly, must be sold after the tax invoice is issued. Tax must be paid on the sale of such goods and a tax invoice must be issued accordingly.

Changes to GST registration details. A taxable person is required to inform the tax authority as soon as possible whenever its GST registration details change, either through email or in person.

D. Rates

The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of GST, including the zero rate.

The GST rates are:

• Standard GST rate: 6%

• Standard TGST rate: 12%

• Zero-rate: 0%

The standard rate of GST applies to all supplies of goods and services unless a specific measure provides for a reduced rate, the zero rate or an exemption.

All services provided by a business registered with the tourism ministry of the Maldives (unless otherwise exempted) is subject to the standard rate of 12% TGST.

Examples of goods and services taxable at 0%

• Essential goods specified in the GST Act, such as: Rice Sugar Flour

Note: rice, sugar and flour refer to such goods imported by the State Trading Organization at any given time and sold at controlled prices.

• Salt

• Milk

• Cooking oil

• Eggs

• Tea leaves

• Deep sea fish, reef fish, all types of fish packed in the Maldives and rihaakuru (fish paste)

• Vegetables such as potatoes, onions, carrots, cabbage, beans and tomatoes

• Ingredients used in making curry paste (cumin, fennel, coriander, turmeric, garlic, ginger, chili, chili powder, cinnamon, cardamom, peppercorn, any other such ingredient)

• Dhiyaahakuru, coconuts (kaashi, kurun’ba, kurolhi)

• Carrots, cabbage, beans and tomatoes among vegetables

• All kinds of fruits

• Bread, buns and faaroshi (rusk)

• Baby diapers

• Baby food

• Cooking gas

• Diesel

• Petrol

• Adult diapers

• Sanitary napkins, tampons, menstrual cups and other such products

• Goods and services exported from the Maldives, including goods exported by an export license holder or reexport license holder, goods supplied by duty free shops and services exported by a registered person. Services exported are services provided by a person in the Maldives to a person outside the Maldives and consumed outside the Maldives.

• Sale of a going concern. The disposal of a going concern shall be a zero-rated supply if the purchaser of the business is registered with the MIRA under the GST Act, or the purpose of the disposal transaction is to transfer ownership of a business owned by an individual or individuals to a company where at least 99% of share capital is held by the same individual or individuals.

The term “exempt supplies” refers to supplies of goods and services that are not liable to GST and do not qualify for input tax deduction.

Examples of exempt supplies of goods and services

• Electricity service

• Water facilities

• Postal service (not including courier services)

• Sewerage facilities

• Education

• Health services

• Medical devices and drugs

• Financial services

• Rent earned from lease of immovable property

• International transportation services

• Payments collected as fines

• Day care services provided by day care centers registered with the relevant Government author ity or State institution

• Flats, land and buildings sold by the Government or by the Government through a third party under social housing schemes in which the Government has the discretion to control the price of the property being sold

Option to tax for exempt supplies. The option to tax exempt supplies is not available in the Maldives.

E. Time of supply

The time of supply of goods or services is the time at which the tax invoice for such good or service is issued or the time at which the recipient of such good or service makes full or partial payment, whichever occurs earlier.

Where payment for supply of goods and services has been agreed to be made within a stipulated period under an installment agreement, payments made accordingly shall be regarded as separate taxable transactions. The time of supply of goods and services in relation to any such transaction shall be deemed as the date on which the installment payment was received or the date on which the installment payment would otherwise be due, whichever is earlier.

Deposits and prepayments. There are no special time of supply rules in the Maldives for deposits and pre-payments. As such, the general time of supply rules apply (as outlined above).

The tax declaration point will be identified based on the time-of-supply rules described above.

Continuous supplies of services. If services are supplied continuously and payment is made peri odically, a tax point is created each time a payment is made or a tax invoice is issued, whichever occurs earlier in each designated period.

Goods sent on approval or for sale or return. There are no special time of supply rules in the Maldives for supplies of goods sent on approval or sale or return. As such, the general time of supply rules apply (as outlined above).

Reverse-charge services. There is no reverse-charge mechanism in the Maldives.

Leased assets. There are no special time-of-supply rules in the Maldives for supplies of leased assets. As such, the general time of supply rules apply (as outlined above).

Imported goods. There are no special time of supply rules in the Maldives for supplies of import ed goods. As such, the general time of supply rules apply (as outlined above).

F. Recovery of GST by taxable persons

A registered person supplying goods and services to another registered person shall charge tax on the value of such goods and services in accordance with the GST Act, and such tax shall be the input tax of the recipient of the good or service.

Input tax in relation to a good or service purchased by a registered person shall not be set-off against such person’s output tax if:

• The recipient of the good or service does not possess a valid tax invoice issued by the supplier

• Twelve months have elapsed from the end of the taxable period under such person’s accounting basis in which the input tax could have first been claimed Or

• The good or service is not supplied in the Maldives

For a company to claim GST, a tax invoice has to be obtained for the purchases from a supplier registered for GST. If a supplier is not registered for GST in Maldives, or if it is an offshore sup plier, GST input cannot be claimed for the purchases.

The time limit for a taxable person to reclaim input tax in the Maldives is 12 months. Any unclaimed input tax by the end of 12 months must be written off.

Nondeductible input tax. Expenses that are not related to the business or purchase of goods that are exempt from GST cannot be used to claim against output GST. A taxable person is only required to declare the purchases of goods and services subject to GST when filing the tax return.

Examples of items for which input tax is nondeductible

• All purchases relating to exempt supplies

• Private expenditure

Examples of items for which input tax is deductible (if related to a taxable business use)

• Expenses relating to taxable supplies

Partial exemption. GST directly related to making exempt supplies is not recoverable. A regis tered person who makes both exempt and taxable supplies cannot recover input tax in full.

GST that relates to making both taxable and exempt supplies must be apportioned using a method acceptable to the tax authorities to allocate the GST between taxable supplies and exempt supplies. Input tax related to taxable supplies may be deducted in full. GST related to exempt supplies may not be deducted.

Approval from the tax authorities is not required to use the partial exemption standard method in the Maldives. Special methods are not allowed in the Maldives.

Capital goods. If the capital expenditure incurred by a registered person for the supply of a good or service is directly attributable to such supply, input tax in relation to such expenditure shall be deducted from the output tax in the following manner based on the amount of gross capital expenditure:

• MVR500,000 (approx. USD32,500) or less: input tax deductible in full in the taxable period of supply

• If the gross capital expenditure incurred is less than MVR500,000, the GST input could be deducted within 12 months

• If the gross capital expenditure is more than MVR500,000, the GST could be deducted equally over 36 months

Due to COVID-19, MIRA has allowed excess GST input tax in relation to capital expenditure to be carried forward for more than 36 months.

Refunds. Excess payments made to the MIRA shall be refunded when the taxable person termi nates all the taxable activities in the Maldives. A taxable person may submit a MIRA 904 (an adjustment/refund request) form to request a refund. If the refund is granted, the amount due to the taxable person shall be deposited into the bank account, registered with MIRA.

Pre-registration costs. Input tax on pre-registration costs in the Maldives is not recoverable.

Bad debts. Irrecoverable GST/TGST on bad debts can be claimed as a deduction from output tax.

The amount of tax paid on irrecoverable debts may be offset against the output tax of subsequent taxable periods with the authorization of the Commissioner General. In requesting the Commissioner General’s authorization, the registered person shall submit the following documents:

• Copies of all tax invoices, receipts, credit notes and debit notes related to that supply

• Documents proving that the registered person has accounted for and paid tax on that supply

• Documents confirming consideration required to be paid for that supply has occurred

Noneconomic activities. Input tax on purchases that are used for noneconomic activities is not recoverable in the Maldives.

G. Recovery of GST by non-established businesses

Input tax incurred by non-established businesses in the Maldives is not recoverable.

H. Invoicing

GST invoices. A registered person that supplies goods or services to another registered person shall at the request of the recipient provide that recipient with a tax invoice within 28 days of the request. Only one invoice shall be issued in relation to a given transaction.

Credit notes. If the value of a transaction for the supply of goods or services falls or is reduced for any reason after a tax invoice has been issued, the recipient of such goods or services shall be issued a credit note including the following:

• “Credit Note,” written prominently

• Name, address and TIN of the supplier of goods or services

• Name, address and TIN of the recipient of goods or services

• Date of issue

• Credit note number

• Reason for issuing the credit note

• Original tax invoice number, date, amount of tax specified in that tax invoice, amount of tax calculated after the change in value and the difference between the two amounts

Electronic invoicing. Electronic invoicing is allowed in the Maldives, but not mandatory. An elec tronic invoice must contain all the details required when issuing a full tax invoice in accordance with the GST act. There are no other specific electronic invoicing conditions in the Maldives.

Simplified GST invoices. If the value of the goods or services supplied by a registered person is lower than MVR5,000 (approx. USD325) inclusive of tax, a registered person shall issue a tax invoice exclusive of the name, address and TIN of the recipient of goods or services.

Self-billing. Self-billing is not allowed in the Maldives.

Proof of exports. GST on exports is zero rated subject to following conditions:

• The service is supplied to a nonresident and the nonresident is outside the Maldives at the time that the service is performed.

• The actual physical flow of the service is not to a person in the Maldives that receives or benefits from that service.

• The services are not supplied directly in connection with any property in the Maldives at the time that the services are performed.

The export holder shall retain the following documents in relation to the export:

• Valid export/re-export license

• Proper tax invoice

• Documents supporting the export

Foreign currency invoices. Only taxable persons providing tourism goods and services may issue invoices in a foreign currency (such as US dollars) that is accepted by the Maldives Monetary Authority (MMA), as determined by the Commissioner General.

The rule for converting foreign currency on an invoice is that the rate used must be plus or minus 2% of the rate published by the MMA, at the time of supply.

All other supplies must be invoiced in the domestic currency, which is the Maldivian rufiyaa (MVR).

Supplies to nontaxable persons. A registered person may issue a receipt in relation to the supply of goods or services if the supply was made to a person other than a registered person. Such a receipt shall include the following:

• Name, address and TIN of the registered person

• Date of payment

• Receipt number

• Details of services provided or quantity and details of goods sold

• Total value of goods or services supplied, excluding the tax charged on the value of goods or services

• Tax charged on the value of goods or services supplied

• Value of goods or services inclusive of tax, or, if the amount of tax has been included in the price of the good or service, a statement to such effect

Records. Taxable persons are required to keep the accounting records in the principal place of business in the Maldives. If records are maintained online, they should be readily available for printing if and when required by MIRA.

Examples of accounting records that must be held in the Maldives include financial statements, ledgers, tax workings and supporting documents, such as invoices, etc.

Record retention period. Records should be kept for a minimum of five years in the Maldives. There are no special rules in addition to this.

Electronic archiving. Records can be kept archived electronically. There is no restriction on this matter.

I. Returns and payment

Periodic returns. Every registered person shall calculate the amount of tax payable for each tax able period in accordance with the GST Act and the regulations made pursuant to it and shall file a tax return to the MI-RA in accordance with the regulation.

Taxable persons registered for general sector goods and services (GGST) are required to file a GST return (MIRA 205). Taxable persons registered for tourism sector goods and services (TGST) are required to file a TGST return (MIRA 206).

A tax return must be filed on or before the 28th day of the month following the end of the taxable period or the date determined by the Commissioner General where the Commissioner General has decided to postpone the date for submission of tax returns due to any reasonable grounds.

The frequency of making payments and filing returns depends on the taxable person’s taxable period. The taxable period is mentioned in the letter issued to the taxable person with the GST Registration Certificate. If the taxable person’s average taxable sales exceed MVR1 million per month, the taxable period is a calendar month. If the taxable person’s taxable sales do not exceed MVR1 million per month, the taxable period is quarterly (based on calendar quarters, i.e., January-March, April-June, July-September, Octo-ber-December).

In the event a registered person is deceased or has ceased to carry out all taxable activities, the part of the tax return for the current taxable period up until the time of death or cessation of operations shall be filed by the legally obliged person on or before the 28th day of the month after the end of such taxable period.

Unless proven to the contrary, it shall be presumed that tax returns filed under the GST Act on behalf of a registered person have been prepared either by the principal or with the principal’s authorization.

Periodic payments. Registered persons shall calculate tax payable in respect of each taxable period and pay such tax to the MIRA before the deadline for filing tax returns attributable to that taxable period in accordance with the provisions of the GST Act.

GST due can be paid in person at the MIRA counter, through MRTGS forms or directly online.

Electronic filing. Electronic filing is mandatory in the Maldives for most taxable persons. The vast majority of GST-registered businesses (with some limited exceptions) are required to submit their GST returns online using the MIRA electronic GST service and pay any GST due elec tronically. Any business with an annual income of less than MVR5 million is allowed to file manual (i.e., paper) returns with the MIRA. Online and manual filing depends on the revenue of a company. There are no specific types of businesses that get such exemptions; it is on a caseby-case basis by MIRA.

Payments on account. Payments on account are not required in the Maldives.

Special schemes. No special schemes are available in the Maldives.

Annual returns. Annual returns are not required in the Maldives.

Supplementary filings. No supplementary filings are required in the Maldives.

Correcting errors in previous returns. If a taxable person wishes to correct an error in a previous month’s return, it shall be required to amend the return online. If the amendment results in the tax liability being reduced, the amendment shall be accepted after a review by MIRA. If the tax liability increases, the amendment shall be accepted, and late payment fines shall be applicable on the additional liability from the original deadline for the taxable period (see the subsection below on Penalties for late payment and filings).

Digital tax administration. There are no transactional reporting requirements in the Maldives.

J. Penalties

Penalties for late registration. The penalty for non-registration is MVR50 (approx. USD3.25) per day of delay, up to a maximum of MVR5,000 (approx. USD325).

Penalties for late payment and filings. Penalties for late payment and filings, apply as follows:

• Nonpayment of tax: 0.05% of amount outstanding per day

• Failure to file GST return by due date: if there is no tax liability, MVR50 (approx. USD3.25 per day of delay; if there is tax liability, both MVR50 per day of delay is due as well as 0.5% of the tax payable is due

• Failure to submit document or provide information to the MIRA by due date: if there is no tax liability, MVR50 (approx. USD3.25) per day of delay; if there is tax liability, both MVR50 per day of delay is due, as well as 0.5% of amount of the tax payable is due

Penalties for errors. If an error has been detected during a MIRA audit, fines will be applicable from the required date of filing on the excess amount of tax that has been assessed by MIRA. Any errors made with an intention to evade tax shall incur penalties as described above. Penalties may be reduced or eliminated if the business makes an unprompted disclosure to the MIRA. The degree of mitigation depends on the extent of the disclosure.

There are no set penalties for late notification of changes to a taxable person’s GST registration details.

Penalties for fraud. Fines are applicable on filing and payment, calculated from the date of the filing requirement. If a company fails to file or pay as per the deadline, fines shall be applicable on an accumulating basis.

Personal liability for company officers. General rules of liability are applicable for company offi cers. If a taxable person is a limited liability company, any GST due shall be attributable to the company itself. Shareholders or directors will not be personally held accountable.

Statute of limitations. There are no time limits specific to GST for the statute of limitations in the Maldives in terms of MIRA audits. However, the Tax Administration Act, which governs all taxes in Maldives, states that an audit notice may be issued by MIRA no later than the following dates.

• Return filing deadline (where the return is filed before the deadline)

Or

• Actual filing date (where the return is filed after the due date or has been amended)

• If a tax return is not filed, MIRA shall serve the audit notice at any time

MIRA is required to commence the audit within two years of giving the above notice. However, an extension of up to three years maybe requested by MIRA where there is sufficient cause to believe an audit may not be completed.