Director’s Remuneration No Longer Constitutes a Business Income
Pursuant to the first amendment to the Tax Ruling TR-2018/B65 (amended via TR-2019/B69 issued on 21 March 2019), amounts payable by a company, a trustee or a partnership as remuneration, as defined in Section 43 of BPT Act, no longer constitutes as a business income for the recipients. Additionally, the ruling also repeals Tax Ruling TR-2012/B8.
Prior to the Tax Ruling referred to above, the Maldives Inland Revenue Authority (“MIRA”) treated such income as income received from a Contract for Service. What this meant was, so long as an individual received business income other than such remuneration, it needed to be included in computing their taxable profit. However, as a result of this amendment, such income now falls within the definition of income from employment. Accordingly, such payments are not subject to the Business Profit Tax on the account for the director of a company, partner of a partnership or member of a trust or a body of persons, to whom the remuneration is made to.
Furthermore, businesses paying director remuneration to non-resident directors are no longer obligated to pay Withholding Tax (WHT) on such remuneration. Previously, director remuneration paid to a non-resident director was subjected to WHT at the rate of 10%.
Changes brought by Ruling TR-2019/B69 would be effective from 21 March 2019.