Tax on foreign contractors doubled to 10%

President Dr Mohamed Muizzu has ratified the Second Amendment to the Income Tax Act, increasing the withholding tax applicable to non-resident contractors undertaking construction projects in the Maldives from 5 per cent to 10 per cent.

Under the amendment, payments made to non-resident contractors carrying out construction projects in the Maldives will be subject to a 10 per cent withholding tax, with the amount serving as the contractor’s full and final tax liability in the country.

The change is aimed at creating a more level and competitive environment for Maldivian businesses, particularly local companies operating in the construction sector. By bringing the tax treatment of non-resident contractors more in line with the Government’s efforts to strengthen the domestic business environment, the amendment is expected to support fairer competition between local and foreign contractors.

The amendment also provides greater clarity on the definition of a “non-resident contractor” under the Income Tax Act. This clarification is expected to simplify the administrative requirements associated with tax return filings for non-resident contractors.

The revised tax framework also provides greater certainty for foreign contractors by establishing the withholding amount as their final tax liability, potentially making their tax obligations more straightforward and predictable.