New Tax Ruling: Mandates foreign currency revenue tax in USD

Maldives Inland Revenue Authority (MIRA) has amended Income Tax regulations, to require foreign currency income to be taxed in US dollars.

The amendment, published in the government gazette on Thursday, states that if the functional currency of businesses is a foreign currency, the currency of presentation or tax returns, financial statements and documents filed with MIRA should be the USD.

The change will take effect from 2024.

Previously, the rule was that if the functional currency was the dollar, the presentation currency was the dollar. However, if the functional currency is not Rufiyaa or dollar, the choice of Rufiyaa or dollar as the presentation currency is left open.

The amendment states that:

• If the presentation currency of a business is Rufiyaa, the tax and interim payments due to MIRA on taxable income can be paid in Rufiyaa or dollars

• If the presentation currency is dollars, both this tax and interim payment will be paid in dollars

• Although the change will take effect from tax year 2024, it will not be apply when the first interim payment is made

• The same procedure applies to the payment of non-resident withholding tax, employee withholding tax and capital gains withholding tax; This change will apply to payments for periods ending on or after October 31

Previously, withholding tax statements had to be prepared in Rufiyaa.

These changes have been brought in accordance with a Cabinet decision last month, in response to the dollar shortage in the country. The cabinet also decided then that companies that earn in dollars must pay pension and customs duty in USD as well.

The government and central bank, Maldives Monetary Authority are currently exploring further ways in which dollars can be retained in the country.