Tax Residency in the Maldives
1. Criteria for Determining Tax Residency
According to the Maldives Income Tax Act (ITA), an individual is considered a tax resident if they meet any of the following criteria:
- Physical presence in the Maldives for more than 183 days in a calendar year.
- Domicile in the Maldives, as determined by the Maldives Immigration Act.
- Employment in the Maldives for more than 90 days in a calendar year.
- Carrying out business or professional activities in the Maldives for more than 90 days in a calendar year.
The ITA also provides specific criteria for determining the tax residency of companies and other legal entities. A company is considered a tax resident if it is incorporated in the Maldives or if its management and control is exercised in the Maldives.
2. Impact of International Tax Treaties
The Maldives has entered into several double taxation agreements (DTAs) with other countries. These DTAs may modify or provide exceptions to the standard criteria for tax residency as defined in the ITA.
For example, the DTA between the Maldives and India provides that an individual is considered a resident of the Maldives if they are liable to tax in the Maldives by reason of their domicile or residence there. However, if an individual is considered a resident of both the Maldives and India under their respective domestic laws, the DTA provides a tie-breaker rule to determine their tax residency.
The DTA between the Maldives and the United Arab Emirates (UAE) provides that a company is considered a resident of the Maldives if it is incorporated in the Maldives or if its place of effective management is in the Maldives. However, if a company is considered a resident of both the Maldives and the UAE under their respective domestic laws, the DTA provides a tie-breaker rule to determine its tax residency.
These treaty-specific modifications aim to provide clarity and prevent double taxation by establishing clear rules for determining tax residency in cases involving cross-border activities. They reflect the mutual agreement between the Maldives and the other country to facilitate tax compliance and enhance economic cooperation.
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