1. Introduction to the Maldives
Nestled in the azure waters of the Indian Ocean, the Maldives is an archipelago of over 1,000 coral islands, renowned for its pristine beaches, vibrant marine life, and laid-back luxury. With a population of approximately 557,000, the Maldives has a rich history dating back to the 5th century BC, with influences from Arab, Indian, and European cultures.
2. Recent Economic Developments
The Maldives' economy has been heavily reliant on tourism, which accounts for over 60% of its GDP. However, the COVID-19 pandemic severely impacted the tourism sector, leading to a sharp decline in economic growth. In response, the government implemented various measures to mitigate the impact, including financial assistance to businesses and individuals, and the introduction of new tourism products and initiatives.
As the pandemic subsides, the Maldives' economy is showing signs of recovery. In 2022, the GDP grew by an estimated 12.3%, driven by a rebound in tourism and increased government spending. The International Monetary Fund (IMF) projects a further growth of 8.5% in 2023, supported by continued tourism recovery and ongoing infrastructure development.
3. Tax Law Changes
In recent years, the Maldives has implemented several changes to its tax legislation, aimed at modernizing the tax system and improving revenue collection. These changes include:
- Introduction of Goods and Services Tax (GST): In 2011, the Maldives introduced a 6% GST on the supply of goods and services. The GST is a consumption tax levied on the value added at each stage of production and distribution.
- Amendment to the Income Tax Act: In 2018, the Income Tax Act was amended to introduce a progressive personal income tax system. The new system replaced the previous flat tax rate of 15% with a graduated tax rate ranging from 5% to 25%.
- Tax Incentives for Foreign Investors: The Maldives offers various tax incentives to attract foreign investment. These incentives include tax holidays, reduced tax rates, and exemptions from import duties.
These tax law changes have contributed to increased government revenue and have helped to create a more equitable and efficient tax system in the Maldives.
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