Gov’t Introduces New Income Tax Regulations for Foreign Currency Earners

The government has amended its regulations, requiring individuals and entities with earnings in foreign currency to pay their income tax in US dollars.

In a statement released by the Maldives Inland Revenue Authority (MIRA), it was announced that the updated regulations mandate that those earning in foreign currencies must submit their income tax statements in US dollars, in line with the Income Tax Act. Taxes owed under the Act must also be paid in dollars.

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The amendment specifies that if a taxpayer’s functional currency is foreign, their income tax statements, including interim statements and payments, must be prepared and settled in US dollars. Additionally, for foreign-currency earners, withholding tax, employee withholding tax, and capital gains withholding tax must be paid in US dollars if they are not based in the Maldives. This stipulation will take effect from November.

The changes come following a Cabinet decision last month aimed at addressing the ongoing dollar shortage in the country. As part of the broader measures, the Cabinet also mandated that companies earning in dollars must pay pension contributions and customs duties in US dollars.

The government and the Maldives Monetary Authority are currently considering additional strategies to retain more dollars within the domestic economy.