Understanding the Goods and Services Tax (GST) system in the Maldives is essential for businesses operating within the country. Whether you are new to the Maldives tax system or seeking to ensure full compliance, this guide provides a comprehensive overview to help you navigate the essentials of GST.
What is GST?
GST is the tax imposed under the Goods and Services Tax Act (GST Act) on the value of goods sold and services supplied in the Maldives. Goods refer to the items sold by businesses in the Maldives, excluding rights or interests under a law or contract, and money. Services encompass everything other than goods.
Categories of GST
There are two categories of GST in the Maldives:
- General Goods and Services (GGST): applicable to goods and services supplied by businesses other than those in the tourism sector. GST is charged at the rate of 8% and must be paid in Maldivian Rufiyaa.
- Tourism Goods and Services (T-GST): applicable to goods and services supplied by tourist establishments, diving schools, shops (excluding those exclusively operated for employees on tourism establishments), spas, water sports facilities, and other such places established on a tourist establishment, travel agency service providers, agents to foreign tourist vessels, and domestic air transportation service providers to persons other than locals. GST is charged at the rate of 16% and must be paid in United States Dollars.
GST Coverage
All goods and services, other than zero-rated and exempt goods and services, are subject to GST.
Zero-Rated Goods and Services
Zero-rated goods and services are those for which the supplier must not collect any GST from the recipient and can claim input tax paid to other GST-registered persons in relation to the supply. Categories of zero-rated goods and services include, essential goods listed in Schedule 1 of the GST Act, goods and services exported from the Maldives, and the sale of a going concern.
Exempt Goods and Services
Exempt goods and services are not subject to GST, whereby the supplier must not collect any GST from the recipient and cannot claim input tax paid to other GST-registered persons in relation to the supply. Specific rules apply to each of the exempt goods and services, which can be found in Chapter 4 of the GST Regulation.
Exempt goods and services include, utility services (electricity, water, sewerage), postal services, education from registered institutes, health services from registered providers, approved drugs and medical devices from registered pharmacies, charitable organization sales received as donations, financial services, rent from lease of immovable property, international transportation services, goods and services exempt by other laws, payments collected as fines, flats, land, and buildings sold under a government social housing scheme, and daycare services from registered providers.
When Should GST be Charged?
GST should be charged upon the issuance of a tax invoice or when the recipient makes full or partial payment, whichever occurs first.
How Does GST Work?
The GST regime in the Maldives follows an input and output tax system similar to the standard VAT regime. Input tax refers to the tax payable by the recipient of the goods or services to the supplier of such goods or services. Output tax refers to the tax chargeable on the recipient of goods or services supplied by a registered person.
GST works by applying a tax to the value added at each stage of production or distribution of goods and services.
Setting Off Input Tax Against Output Tax
To set off input tax against output tax, the following conditions must be met:
- input tax incurred must be in relation to goods or services acquired after GST registration
- must not be paid in relation to exempt goods and services
- must hold a valid invoice issued by the supplier
- 12 months should not have elapsed from the end of the taxable period in which input tax could have been first claimed
Mandatory Registration
Businesses engaged in taxable activities must register for GST if either of the following criteria is met:
- total value of goods and services supplied in the past 12 months exceeds MVR 1,000,000
- estimated value of supply for the following 12 months exceeds MVR 1,000,000
- imports goods into the Maldives
- provides tourism goods and services
Voluntary Registration
Businesses with annual turnover of less than MVR 1,000,000 and businesses whose taxable sale is derived only from exempt goods or non-taxable activities are not required to register for GST. However, such businesses have the option to make a voluntary registration for GST.
How to Register for GST
Typically, a business is required to make a single registration for GST. However, there are certain circumstances under which each taxable activity carried out by a business may require a separate registration for GST. These are:
- if activities fall under different sectors, i.e., the general sector and tourism sector
- accounts for each sector is required to be maintained separately
- if activities are located on a different island or if they differ in nature from other taxable activities
To register for GST, MIRA 105 form must be submitted via the MIRA website, email or at the MIRA Counter.
Obligations after GST Registration
After registering for GST, businesses are required to:
- charge GST on all supplies except those which are zero-rated or exempt
- issue tax invoices to GST registered persons if requested
- file GST returns and make GST payments to MIRA by the due dates
- maintain records to support the figures declared in GST returns
- display the GST Registration Certificate at business outlets
GST Return Filing
- GGST: businesses carrying on taxable activities in the general sector must file tax returns using MIRA 205 form. GST returns must be filed online via MIRAconnect if annual turnover is MVR 2,500,000 or more.
- T-GST: businesses carrying on taxable activities in the tourism sector must file tax returns using MIRA 206 form via MIRAconnect irrespective of the annual turnover.
- Deadline: the deadline for filing a GST return varies based on the taxable period, which is determined by the total value of goods and services supplied. If the total value supplied is or more than MVR 1,000,000 per month, the taxable period is monthly. If the total value supplied is less than this amount, the taxable period is quarterly. GST return must be filed by the 28th day of the month following the end of the taxable period. Even if a GST registered business is inactive, filing a GST return is mandatory. In such a case, a GST Nil Return can be filed.
Paying GST
GST must be paid to MIRA by the 28th day of the month following the end of the taxable period.
- GGST: businesses with an annual income of MVR 20,000,000 or more, in the previous year must make online payments via MIRAconnect.
- TGST: businesses carrying out taxable activities in the tourism sector must make online payments via MIRAconnect or Maldives Real Time Gross Settlement.
Deregistering from GST
Businesses can apply for deregistration if they cease taxable activities and do not plan to resume operations for the next 12 months, or if the total value of goods and services supplied during the last 12 months is less than MVR 500,000, or if the estimated supply for the next 12 months is less than MVR 500,000.
To deregister, businesses can submit MIRA 106 form via the MIRA website or at the MIRA counter.