Income tax in the Maldives for employees: rates, withholding and who pays

For many years the Maldives had no tax on salaries. That changed on 1 April 2020, when employment income came within the scope of the Income Tax Act (Law No. 25/2019). Today, most employees, Maldivian and foreign, fall under the system, although a generous tax-free band means many pay nothing. This guide explains the rates, how employer withholding works, who counts as resident, and what you can deduct.

The income tax rates

MIRA's published rates for individuals apply to taxable income for the year, split into bands:

These are marginal rates. Each rate applies only to the part of income within its band; you do not pay 15% on all your income just because some of it is above MVR 2.4 million.

On a monthly basis, MVR 720,000 a year works out at about MVR 60,000 a month. Employees earning less than this generally pay no income tax on their salary.

You may see different brackets quoted on payroll and recruitment websites. Some of these do not match MIRA's published table. Use MIRA's figures, and check MIRA's website each year in case the rates have been updated.

Worked examples

These examples assume salary is the only income and ignore deductions, to show how the bands work.

MVR 50,000 a month

Annual income: MVR 600,000. All of it falls in the 0% band. Tax: nil.

MVR 90,000 a month

Annual income: MVR 1,080,000.

• First MVR 720,000 at 0%: MVR 0
• Next MVR 360,000 (720,000 to 1,080,000) at 5.5%: MVR 19,800

Tax: MVR 19,800 a year, about MVR 1,650 a month, or roughly 1.8% of total income.

MVR 160,000 a month

Annual income: MVR 1,920,000.

• First MVR 720,000 at 0%: MVR 0
• MVR 480,000 (720,000 to 1,200,000) at 5.5%: MVR 26,400
• MVR 600,000 (1,200,000 to 1,800,000) at 8%: MVR 48,000
• MVR 120,000 (1,800,000 to 1,920,000) at 12%: MVR 14,400

Tax: MVR 88,800 a year, about 4.6% of total income.

Employee Withholding Tax (EWT)

Employees don't usually pay income tax themselves. Instead, employers operate Employee Withholding Tax:

• Each month, the employer works out the employee's remuneration: total pay received in the month, after deducting the employee's contribution to the Maldives Retirement Pension Scheme (MRPS).
• Remuneration includes allowances and benefits, whether paid in cash or provided in kind (for example accommodation, food or transport provided by the employer).
• The employer calculates the tax due, deducts it from the salary and pays it to MIRA.

Withholding tax paid during the year can be credited against your final tax bill if you file an income tax return, whether by choice or because you are required to.

Benefits in kind

Because remuneration includes benefits in kind, employees who receive free housing, meals or other benefits should expect these to be counted in the withholding calculation, at the value set by the rules. This mainly affects higher-paid employees whose cash salary is near or above the tax-free band, such as resort managers who receive accommodation and meals.

Who is tax resident?

Under the Act, an individual is resident in the Maldives if:

• their permanent home is in the Maldives; or
• they are present in the Maldives for 183 days or more in any 12-month period.

Residents are taxed on their worldwide income. Non-residents are generally taxed only on income from Maldivian sources, such as a salary for work done in the Maldives. Most foreign employees on work visas will become resident through the 183-day rule. If you have significant income from abroad, such as rent or investments, get advice on how it is treated and on any tax treaty with your home country.

Deductions

The main deductions available to employees are:

• Pension contributions to the MRPS (employees contribute 7% of pensionable wages; the employer contributes another 7%); and
• Zakat payments made under Islamic principles.

Other expenses related to employment are generally not deductible from employment income.

Do you need to file a tax return?

Employees whose only income is a salary taxed through EWT often do not need to file a return. You may need to file if, for example, you:

• have income other than your salary, such as business, rental or investment income;
• worked for more than one employer during the year; or
• fall within the groups MIRA requires to file.

Check MIRA's guidance for the current filing rules and deadlines, and file through MIRA's online services if required.

For employers

Employers should register for withholding tax with MIRA, calculate EWT correctly every month (including for staff below the threshold, who will usually have zero tax), include benefits in kind, and pay and report on time. Mistakes can lead to penalties for the employer. Our guide to employing staff covers payroll obligations more broadly.

Business and other income

This guide focuses on employees. Self-employed people, sole proprietors and those with rental or investment income are also covered by the Income Tax Act, with their own rules on calculating taxable income and filing. Businesses pay tax on their profits under separate provisions. If your situation goes beyond a salary, talk to an accountant.

Bonuses and irregular pay

Because the bands are annual, a one-off bonus can change your tax picture. Take an employee on MVR 55,000 a month (MVR 660,000 a year, inside the 0% band) who receives a MVR 120,000 bonus in December. Their total income for the year becomes MVR 780,000, so MVR 60,000 falls into the 5.5% band, giving MVR 3,300 of tax for the year. How the employer spreads the withholding depends on its payroll method, so a bonus month can show a bigger deduction than you expect. It is not a mistake as long as the annual total is right.

Leaving or joining part-way through the year

If you start or stop working in the Maldives during the year, your withholding is based on the remuneration you actually receive here. People who change employers during the year should keep payslips from both, because each employer's withholding is calculated separately, and filing a return may be needed to settle the correct total.

Records to keep

• monthly payslips showing gross pay, MRPS and tax withheld;
• any year-end statement of earnings and tax from your employer;
• receipts for zakat payments, if you claim them; and
• records of income from other sources, such as rent or business income.

Checking your payslip

Your payslip should show your gross pay, allowances, benefits in kind where included, your MRPS contribution, the income tax withheld and your net pay. If your monthly pay is regularly above about MVR 60,000 and no tax is shown, or if tax is being withheld when you earn well below that, ask your employer to explain the calculation.

Tax in your home country

Paying tax in the Maldives does not automatically end your tax obligations elsewhere. Some countries tax their citizens or residents on worldwide income, and the rules on when you stop being resident at home vary. If you keep a home, family or income in another country, check that country's rules and whether a tax treaty applies, so you are not taxed twice or caught out on your return.

Practical tips

• Use MIRA's official rate table, not figures from overseas payroll websites.
• Remember that bands are annual: a bonus month can push your withholding up even if your normal salary is below the threshold.
• Keep your payslips and any year-end statements from your employer.
• If you leave the Maldives, make sure your final pay has been processed correctly before you go.