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Maldives: Procedure for Business Tax Exemption for Ships and Aircraft

(May 15, 2015) The Maldives Inland Revenue Authority issued a tax ruling on May 3, 2015, that outlines the procedure to be followed for owners or charterers of ships or aircraft when they apply for exemptions from business profit tax. (Aiman Ibrahim, Maldives Government Issues Procedure to Exempt Business Profit Tax, TAX NEWS SERVICE (May 12, 2015), International Bureau of Fiscal Documentation online subscription database; Business Profit Tax: Application for Exemption Under Section 16 of the Business Profit Tax Act, TR-2015/B43 [The Ruling], Maldives Inland Revenue Authority (May 3, 2015).)

The exemption was itself authorized by the Business Profit Tax Act, under section 16, which states that if a company that owns or charters a ship or aircraft is not resident in Maldives and has no other business in Maldives, that company is exempt from business profit tax. The Act states that the tax authorities must be satisfied that a similar exemption is granted to Maldives businesses by the country in which the company in question is located. Further, the Act establishes that residence is defined by the location of central management and control of a company. (Unofficial Translation of Business Profit Tax Act, § 16 (Jan. 18, 2011), South Asian Association for Regional Cooperation website.)

The Ruling repeats the general requirements stated in the Act and further explains that the definition of relevant businesses includes those companies that lease ships or aircraft, their engines, or the essential spare parts to maintain them. (The Ruling, § 4.)

An applicant for the exemption must submit the following information to the tax authorities at the time of the application:

  • independent verification from external auditors that no division of the company carries on any other business in the Maldives;
  • independent verification from external auditors of the location of the applicant company’s central management and control; and
  • documentation of any transactions that resulted in the applicant being subject to withholding tax. (Id. § 6.)