Maldives: Expansion of treaty network
Country Correspondent: Asma Shafeeu
Since the establishment of Maldives Inland Revenue Authority (MIRA) in 2011, MIRA has been continuously working to strengthen the relationship with tax authorities of other jurisdictions to provide assistance in tax related matters. As such, MIRA has focused on expanding Maldives treaty network and over the past year, significant progress has been made on this front.
It has become increasingly important for Maldives to have comprehensive double tax agreements and treaties in place in order to help investors better assess their potential tax liabilities for international cross-border transactions and for MIRA to combat cross border tax evasion and avoidance.
With the intention of tackling cross border tax evasion and avoidance, along with facilitating exchange of information and assistance in tax matters, MIRA has entered into Double Tax Avoidance Agreements (DTAAs) and Tax Information Exchange Agreement (TIEA) with some of the major trading partners. Currently, MIRA has three bilateral DTAAs of which one is limited DTAA, two multilateral DTAAs along with two administrative agreements and one TIEA.
Bilateral Agreements
1. Tax Information Exchange Agreement
MIRA entered into a TIEA with India in 2016. The purpose of this agreement is to facilitate the exchange of information that is foreseeably relevant to both the administrations and enforcement of the domestic laws concerning all types of taxes imposed by the tax authorities of the respective jurisdictions. This is the only Agreement signed for the mere purpose of tax information exchange.
2. Double Tax Avoidance Agreements
Currently Maldives has three bilateral treaties ratified out of which two are in force. The details of the Agreements are stated below.
· Air Transport Agreement with India
Air Transport Agreement with India was the first tax agreement that was negotiated and ratified after the establishment of the Tax Authority in Maldives. The DTAA signed is a limited treaty, which provides relief from double taxation for airline enterprises operating between the two countries. Airlines operating in Maldives will be relieved from Indian tax arising from the operation of aircraft in India and vice versa. Furthermore, profits derived by the airline operators will only be taxed in their country of residence. The Agreement has been enforced in both countries during the year 2017.
· Double Tax Avoidance Agreement with United Arab Emirates
Maldives entered its first bilateral double tax avoidance agreement with the United Arab Emirates on 21 June 2018. This income and capital tax treaty signed between both countries covers Maldives Income Tax and UAE Income and Corporate Tax. Under this treaty, both countries applied the credit method of elimination of double taxation. Further, this DTAA allows both Maldives and UAE to circumvent gaps or overlaps in domestic laws and help both countries to eliminate double taxation.
· Double Tax Avoidance Agreement with Bangladesh
The most recent DTAA signed by Maldives was with Bangladesh on 23 December 2021. The Commissioner General of Taxation, Mr Fathuhulla Jameel signed the DTAA on behalf of Maldives, whereas, Senior Secretary of Internal Resources Division of National Board of Revenue, Mr Abu Hena Md.Rahmatul Muneem signed the DTAA on behalf of Bangladesh.
With the aim of making this DTAA more comprehensive, two rounds of negotiations were carried out between Maldives and Bangladesh during 2017 and 2019.
The purpose of this DTAA is to avoid double taxation of income from residents of both countries, to ensure taxpayers equal rights and security and to prevent evasion and avoidance of taxation. This DTAA includes detailed procedural articles that allows cooperation between tax administrations with the purpose of combating tax evasion and avoidance, exchange of information and assistance in collection of taxes.
Multilateral Agreements
In 2005, Maldives signed to become a member of the SAARC Limited Multilateral Agreement on Avoidance of Double Taxation and Mutual Administrative Assistance in Tax Matters. This was the first Agreement entered by Maldives, which was effective from 1 January 2012. This agreement was signed in 2005, prior to the establishment of MIRA. The aim of this DTAA is to address issues surrounding double taxation and promoting economic cooperation among SAARC Member States.
In August 2021, Maldives became party to the Convention on Mutual Administrative Assistance in Tax Matters (MAAC) at a signing ceremony held at OECD Headquarters in Paris. Subsequently, the Commissioner General of Taxation signed two Competent Authority Agreements specifying the modalities for exchange of information. These Agreements are the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS-MCAA) and Multilateral Competent Authority Agreement on the exchange of Country-by-Country Reports (CbC-MCAA).
The Agreement provides an international legal framework for exchanging information and cooperation in tax matters while respecting the fundamental rights of taxpayers. As a member of the Convention, Maldives will receive various forms of administrative cooperation that are provided between the signatories of the convention. This include exchange of information on request (EOIR), Automatic Exchange of Financial Information (AEOI) through Common Country-by-Country Report (CbCR) and Reporting Standard (CRS), Spontaneous Exchange of Information (SEOI), service of documents and assistance for conducting tax examinations which will help in combating non-compliance through tax evasion and avoidance.
Conclusion
MIRA has continuously worked to expand the treaty network in order to strengthen the participation of Maldives in the international tax arena. This has been an important factor in increasing tax transparency and creating a sustainable investment climate for taxpayers. Additional efforts are being made to expand the capacity of MIRA in the fight against international offshore tax avoidance and fiscal evasion.