Under the Income Tax Act 25/2019, the taxpayers who meet the filing requirements for Income Tax Return for the tax year 2023, are required to submit their final tax return by 30 June 2024.Understanding your obligations regarding filing and payment is crucial to maintaining compliance and avoiding penalties.
Let's delve into the key aspects of this obligation:
Who is Obligated to File an Income Tax Return?
The obligation to file an income tax return extends to all individuals earning income, including self-employed individuals, freelancers, and all business entities operating within the Maldives, unless exempt under Section 101 of the Income Tax Regulation.
Exemptions from Filing an Income Tax Return:
For the tax year 2023, you may be exempt from filing an Income Tax Return if you meet the following criteria:
Individuals:
- You are an individual earning income from only one employer; OR
- Your annual taxable income (taxable profit calculated under the Income Tax Act) for the tax year 2023 and 2022 is less than or equal to MVR 720,000 (for each year); and your annual total income for the tax year 2023 and 2022 is less than or equal to MVR 2,000,000 (for each year).
Business Entities (including Companies, Partnerships, Deemed Partnerships):
- Your annual taxable income (taxable profit calculated under the Income Tax Act) for the tax year 2023 and 2022 is less than or equal to MVR 500,000(for each year); and your annual total income for the tax years 2023 and 2022 is less than or equal to MVR 2,000,000(for each year).
However, certain individuals and entities are not eligible for these exemptions, including non-resident shipping or aircraft operators, persons conducting insurance business, non-residents conducting business through a permanent establishment in the Maldives, and individuals meeting certain conditions related to employment and income.
Companies that are exempt from filing the Income Tax Return for the year are still required under the Companies Act to submit their annual financial statements and directors report to the Registrar of Companies.
Income Tax: How Much Do I have To Pay as Income Tax?
According to Section 7 of the Income Tax Act, individuals with a taxable income of less than MVR 720,000 for the tax year are not required to pay Income Tax. Any income exceeding MVR 720,000 is subject to the following tax brackets:
- Taxable Income less than MVR 720,000: 0%
- Taxable Income between MVR 720,001 and MVR 1,200,000: 5.50%
- Taxable Income between MVR 1,200,001 and MVR 1,800,000: 8%
- Taxable Income between MVR 1,800,001 and MVR 2,400,000: 12%
- Taxable Income more than MVR 2,400,000: 15%
For persons other than individuals and banks (including companies, partnerships, and other entities), a flat tax rate of 15% applies to any taxable income exceeding MVR 500,000.
Accounting Basis
For businesses with an annual turnover not exceeding MVR 10,000,000 (Ten Million Rufiyaa), the accounts can be prepared either on cash basis or on accrual basis, whichever the person prefers.
Cash Basis: Revenue and expenses are recognized when cash is received and when cash is paid, respectively.
Accrual Basis: Revenue is recognized when earned, regardless of when cash is received and expenses are recognized when incurred, regardless of when cash is paid. This basis provides a more accurate picture of financial health, aligning income and expenses with the period they relate to.
Businesses with an annual turnover exceeding MVR 10,000,000 must submit their Income Tax Return on an accrual basis.
Audited Financial Statements:
Businesses with an annual income exceeding MVR 10 million are required to submit the auditor’s report together with their financial statements. The audit must be conducted by a licensed auditor by the Institute of Chartered Accountants of the Maldives. Here is a list of licensed auditors by CA Maldives.
Penalties for Non-compliance:
Failure to submit the Income Tax Return on time results in fines including a non-filing fine of MVR 50 per each day of delay and 0.5% of the tax payable for the period, and a non-payment fine of 0.05% of the outstanding amount per day of delay in making the payment.
Filing Your Income Tax Return:
The MIRA encourages to submit Income Tax Returns and related documents online via the MIRAs online portal “MIRAconnect”.
How CST Advisory Can Assist:
Navigating the complexities of tax filing can be daunting, but CST Advisory is here to help. Our team of seasoned tax professionals provides comprehensive support tailored to your unique financial situation. From understanding filing requirements to calculating tax liability and identifying potential exemptions and deductions, we ensure your tax return is accurate and compliant with the Maldives Income Tax Act.
Contact CST Advisory today for personalized services and a smooth, hassle-free filing experience.