VAT, GST and Sales Tax in Maldives

Summary

Names of the taxes Goods and services tax (GST) Tourism goods and services tax (TGST)
Date introduced 2-Oct-11
European Union (EU) Member State No
Administered by Maldives Inland Revenue Authority (MIRA)
Rates
Standard GST: 6%, TGST: 12%
Other Zero-rated, exempt
Number format GST: XXXXXXXGST501 TGST: XXXXXXXGST001
GST and TGST return periods Monthly if the taxable supply exceeds MVR1 million per month (USD64,851), Quarterly if the taxable supply exceeds MVR1 million per quarter (USD64,851)
Thresholds
Registration GST: taxable supply for the past or next 12 months exceeds MVR1 million (USD64,851) TGST: registration required irrespective of the taxable supply
Deregistration GST: taxable supply for the past or next 12 months is less than MVR500,000 (USD32,425) TGST: upon cancellation of the operating license
Recovery of GST by non-established businesses No

Scope of the tax

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

TGST applies to services supplied to tourist resorts, tourist hotels, guesthouses, picnic islands, tourist vessels and yacht marinas, as well as certain other services supplied to tourists in the Maldives.

Who is liable

The following persons are required to register for GST if the value of their taxable supplies exceeds MVR1 million (USD64,851) 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 (USD64,851)
  • The value of the person’s estimated taxable supplies for the fol­lowing 12 months exceeds MVR1 million (USD64,851)
  • The person provides tourism goods and services

Persons that import goods into the Maldives shall apply to regis­ter with the MIRA within 30 days from the date of commence­ment of import activity.

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.

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

Exemption from registration. Persons with a total annual turnover of less than MVR1 million (USD64,851) are exempted from GST. There is no exemption from registration for TGST.

Group registration. Not applicable. Non-established businesses. Not applicable. Reverse charge. Not applicable.

Tax representatives. A taxpayer may choose to appoint a tax agent to act on its behalf in relation to tax matters.

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

  • The person’s taxable supplies at the end of any 12-month period fell below MVR500,000 (USD32,425).
  • The person’s taxable supplies at the beginning of any 12-month period are forecasted to fall below MVR500,000 (USD32,425).
  • 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 cancelled or terminated must submit to the MIRA an account of the goods in his possession out of the goods imported by him. Goods specified in an invoice submitted accordingly shall be sold after a tax invoice is issued. Tax shall be paid on the sale of such goods, and a tax invoice shall be issued accordingly.

Late-registration penalties. According to the Tax Administration Act, the penalty for non-registration is MVR50 (USD3.24) per day of delay, up to a maximum of MVR5,000 (USD324).

Digital economy. Not applicable.

GST rates

In the Maldives, the term “taxable supplies” refers to supplies of goods and services that are subject to GST at any rate, including the zero rate.

The following are the GST rates:

  • Standard GST rate: 6%
  • Standard TGST rate: 12%
  • Zero rate: 0%
  • Other: exempt

Zero-rated goods and services. Zero-rated goods and services are the goods and services charged at the rate of 0% in accordance with the provisions of the GST Act.

Examples of goods and services taxable at 0%

  • Essential goods specified in the GST Act, such as:
    • Rice
    • Sugar
    • Flour
    • 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)
    • All kinds of fruits
    • Bread, buns and faaroshi (rusk)
    • Baby diapers
    • Baby food
    • Cooking gas
    • Diesel
    • Petrol
    • Adult diapers
  • Goods and services exported from the Maldives, including goods exported by an export license holder or re-export 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 the ownership of a business owned by an individual or individuals to a company at least 99% of the share capital of which is held by the same individu­al or individuals.

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

Option to tax for exempt supplies. Not applicable.

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. Irrespective of the amount received as deposit or prepayments, GST/TGST shall be declared on the full invoice value.

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

Imported goods. The time of supply of imported goods or ser­vices is identified based on the time-of-supply rules described above.

Goods sent on approval or for sale or return. Not applicable.

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

Reverse-charge services. Not applicable. Cash accounting. Not applicable.

Leased assets. Not applicable.

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.
  • The good or service is not supplied in the Maldives.

Input tax in relation to capital expenditure. 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 (USD32,425) or less: input tax deductible in full in the taxable period of supply
  • Between MVR500,000 (USD32,425) and MVR5 million (USD324,254): input tax amortized equally over 12 taxable periods from the taxable period of supply
  • MVR5 million (USD324,254) or more: input tax amortized equally over 36 taxable periods from the taxable period of supply

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. Not applicable.

Capital goods. Not applicable.

Refunds. Excess payments made to the MIRA shall be refunded when the taxpayer terminates all the taxable activities in the Maldives.

Preregistration costs. Taxable persons cannot claim GST/TGST on preregistration costs.

Write-off of bad debts. Irrecoverable GST/TGST on bad debts can be claimed as a deduction from the output tax.

The amount of tax paid on irrecoverable debts may be deducted from 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. GST incurred in the course of nonbusi­ness activities is generally not recoverable.

Recovery of GST by non-established businesses

The Maldives does not refund GST to businesses not established in the Maldives.

Invoicing

GST invoices and credit notes. 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.

Unless otherwise prescribed in the GST Act, a tax invoice issued by a registered person shall include the following:

  • “Tax Invoice,” written prominently
  • Name, address and TIN of the supplier of goods or services
  • Name, address and TIN of the recipient of goods or services
  • Invoice number
  • Date of issue
  • 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

If the value of the goods or services supplied by a registered person is lower than MVR5,000 (USD324) 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.

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

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. Not applicable.

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. Not applicable.

GST returns and payment

GST returns. Every registered person shall calculate the amount of tax payable for each taxable period in accordance with the GST Act and the regulations made pursuant to it, and shall file a tax return to the MIRA in accordance with the regulation.

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.

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.

Tax returns filed by registered persons shall contain the follow­ing particulars in accordance with a format determined by the Commissioner General:

  • Name of the registered person
  • TIN
  • Taxable period
  • Total value of goods and services provided by that person
  • Deductions
  • The amount of output tax payable
  • The amount of input tax allowed to be deducted
  • The amount of tax payable to the MIRA, after adjustments
  • Any other information determined by the regulations made pursuant to the GST Act

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.

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.

Electronic filing. 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 electronically.

Penalties

Penalties for late payment of GST. Penalties 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 (USD3.24) per day of delay; if there is tax liability, 0.5% of amount of tax payable
  • Failure to submit document or provide information to the MIRA by due date: if there is no tax liability, MVR50 (USD3.24) per day of delay; if there is tax liability, 0.5% of amount of tax payable

Penalties for errors made on GST returns. 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. Any errors made with an intention to evade tax shall incur penalties as described above.