The direct taxation system of the Maldives has been introduced for only a decade and a central tax administration authority - the Maldives Inland Revenue Authority (MIRA) was established in 2010, making Maldives completely new to the taxation practices compared to other well-established tax administrations around the world.
Over the decade, the tax system of Maldives has undergone many changes and developments over the years adopting the latest updates and trends of international taxes from all around the world including the general anti-avoidance practices and transfer pricing guidelines.
Transfer Pricing under the Business Profit Tax (BPT) regime
Under the BPT regime of Maldives effective from 2011 to 2019, transfer pricing and anti-avoidance was covered to a certain extent with many limitations and gray areas including as follows:
Transfer Pricing under the Income Tax (ICT) regime
On 3rd November 2017, Maldives joined OECD’s Inclusive Framework of Base Erosion and Profit Shifting (BEPS) and the Income Tax Act of Maldives was drafted to implement the action standards including the transfer pricing guidance.
Effective from 1st January 2020, the Income Tax Act of Maldives was put into effect repealing the BPT Act. Pursuant to the introduction of the Income Tax Act, the Transfer Pricing Regulation, the Transfer Pricing Documentation (TPD) Guide and Arm’s length Guide was published in line with OECD’s Transfer Pricing Guidelines.
The following sections of the Income Tax Act covers the implementation of transfer pricing guidelines in the Maldives:
Defined as the terms on which a transaction or an arrangement would have been made, or might reasonably be expected to have been made, if it had been made between persons that are not associates and in comparable circumstances.
MIRA recommends that taxpayers adopt the following three-step approach to apply the arm’s length principle in their controlled transactions as per the arm’s length guide:
Step 1 - Conduct comparability analysis
Step 2 - Identify the most appropriate transfer pricing method and tested party
Step 3 - Determine the arm’s length results
Transfer Pricing Documentation (TPD) required in Maldives
The Transfer Pricing Regulation and TPD Guide published by MIRA requires the following information to be incorporated in the TPD:
Master File
Local File
Country-by-Country Report (CbCR)
Schedule Four of the Income Tax Return – Reporting of International Transactions with Associates
TPD Requirements and timing of submission in the Maldives
TPD |
Responsible person to comply |
The expected time which MIRA may request the TPD |
Submission deadline |
Local File |
Taxpayers carrying out controlled transactions with associates and not exempt from TPD |
Any time after filing the tax return, typically during an audit |
Within 30 days from a request by MIRA |
Master File |
Taxpayers carrying out controlled transactions with associates and not exempt from TPD |
Any time after filing the tax return, typically during an audit |
Within 30 days from a request by MIRA |
Country-by-Country Report (CbCR) |
Ultimate parent entity of Group which is tax resident in Maldives |
Required to be filed 12 months after the last date of reporting of the fiscal year |
12 months after the last day of the Reporting Fiscal Year of the MNE group |
Schedule Four |
Taxpayers reaching the prescribed threshold to fill the schedule of the income |
Required to be filed with the annual tax return – 30th June of the following year |
On or before 30th June of the following year |
Exemptions from Transfer Pricing Documentation (TPD)
Entity level exemptions:
Transaction level exemptions:
Recent Developments
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