Increasing the withholding tax rate for foreign contractors from 5 to 10 percent will create a more level playing field for Maldivian contractors, Minister of Infrastructure, Housing and Urban Development Dr Abdulla Muththalib has said.
According to the minister, local contractors previously faced a disadvantage compared with foreign contractors when the rate was reduced from 10 percent to 5 percent in July 2021 under former President Ibrahim Mohamed Solih. He said the 5 percent rate gave foreign contractors a tax advantage, resulting in them paying less tax than local contractors.
While an amendment has been proposed to the Income Tax Act to reinstate the previous withholding tax rate of 10 percent for foreign contractors, non-resident and foreign contractors receiving payments will be subject to 10 percent withholding tax instead of 5 percent.
The Maldives Inland Revenue Authority (MIRA) estimates the change could increase government revenue by an average of USD 16.2 million per year.
The amendment to the Income Tax Act was proposed by Member of Parliament Hassan Zareer on behalf of the government.