As a Micro, Small, and Medium Enterprise (MSME) in the Maldives, it is essential to understand the tax obligations and procedures to ensure compliance with the law.
This article provides a comprehensive guide to filing taxes for MSMEs, covering important aspects such as registering to pay tax, Business Profit Tax (BPT), Goods and Services Tax (GST), and Income Tax.
By staying informed, MSMEs can make the tax filing process a breeze.
Classification of SMEs & SME Act
The classification process considers specific company information such as the number of employees, total revenue, and net profit. In cases where a business does not meet all the criteria for a particular category, the classification is determined by assigning priority according to the following proportions: 40% for the number of employees, 30% for total revenue, and 30% for net profit. Similar to the SME Act, the Regulation specifies the formulas to be used in determining the classification based on the aforementioned weightings.
Registering to Pay Tax
When registering an MSME, simultaneous registration for tax with the Maldives Inland Revenue Authority (MIRA) can be done using the application to register the business with the Ministry of Economic Development.
This will result in the issuance of a Tax Identification Number (TIN) from MIRA. It is important to note that if new activities are added under an existing business structure, an application must be submitted to register the new activity with MIRA, resulting in a new TIN issuance. If the activity is registered with the Ministry, this process is done automatically.
Remember, failure to register with MIRA can result in penalties. For each day of delay, a penalty of MVR50 may be incurred, with a maximum penalty of MVR5,000.
Business Profit Tax (BPT)
Under the Business Profit Tax (BPT) regulations, any profession, vocation, trade, commerce, or manufacturing activity carried out with the intention of making profits falls under the definition of a ‘business.’ MSMEs are subject to the provisions of BPT.
Goods and Services Tax (GST)
If an MSME provides tourism goods or services, possesses an import licence, or the total taxable sales of the business over the previous 12 months exceed MVR1 million or are estimated to exceed MVR1 million in the next 12 months, separate registration for GST with MIRA is mandatory.
Similar to the BPT, failure to register for GST with MIRA can lead to penalties. A penalty of MVR50 per day of delay may be charged, with a maximum penalty of MVR5,000.
Every MSME registered in the Maldives is obligated to file an Income Tax Return annually. The requirement to file is not dependent on the level of income or profit generated by the business. The documents to be submitted vary based on the level of income derived.
To ensure a smooth tax filing process, it is important to stay organised, maintain accurate records, and consult with a tax professional or MIRA for any specific queries regarding the MSME’s tax filing process. Timely and accurate tax filing is crucial for the growth and success of businesses.